In this article, we consider the current and potential effects of Brexit on investment treaty arbitration. Likely implications concern: the negotiations of the trade and investment agreements between the European Union and some third countries, the approach of the European Commission to intra-European bilateral investment treaties, the possible role of the United Kingdom as a potential hub for investment corporate structures, and the possible emergence of treaty claims against the United Kingdom. This analysis necessarily requires the outlining of alternatives, as political decisions will have a material bearing on possible outcomes.

Brexit and trade treaties
The United Kingdom’s exit from the EU will most likely have an impact on the negotiation of trade and investment agreements currently being held between the European Union and those states that have particular business or historic ties with the United Kingdom, such as Canada (CETA), the United States (TTIP) or India. Some seemingly agreed provisions may need to be re-visited.

Future of the intra-European bilateral investment treaties
Following the Lisbon Treaty, the European Commission took the view that bilateral investment treaties concluded between Member States of the EU are generally inconsistent with the law of the European Union, and should be terminated. More recently, the Commission has intensified its approach, e.g. calling on certain Member States to terminate their investment treaties with other Member States of the EU. These requests have met with a variety of reactions from Member States.

UK - an investment hub?
If the European Commission pushes for more integration and prompt termination of intra-European investment treaties, the United Kingdom, which is party to 12 intra-European investment treaties (with Bulgaria, Czechia, Croatia, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia), may become a hub for incorporation of companies, whose objective would be to offer prospective investors from EU Member States protection under the UK bilateral investment treaties with respect to their investments made in Central and Eastern Europe.

Furthermore, the UK may become one of the most important jurisdictions regarding the enforcement of investment treaty awards in intra-European disputes. Though this could depend on, whether the UK manages to maintain its leading role in the world’s financial markets, and whether sentiment against intra-EU arbitration in the EU grows stronger.

Potential claims against the UK
Brexit might expose the United Kingdom to claims of foreign investors (including investors from EU member states), e.g. for frustration of these investors’ alleged legitimate expectations that the UK would remain a member state of the European Union and would continue to enjoy benefits provided by EU law. This will depend on the specific terms of the British exit from the EU.

It is conceivable some investors may argue that Brexit may deprive their investments of a significant part or the entirety of their value, because the operations or activities of the UK-based establishment can no longer be exported to the other Member States of the European Union.

It is conceivable that claims will result from the acts and omissions of the British Government, resulting from the need to rebuild administrative capacity in those area which were hitherto the domain of EU competence. The novelty of the situation poses an increased risk of intentional or unintentional measures that may adversely affect foreign investors in the United Kingdom.