Brexit Day has come and gone. The Big Ben Bongs (try saying that after a few glasses of English sparkling wine) have sounded and Britain has broken the shackles of the European Union and entered a new era of free trade deals, blue passports and control of our borders. If this means paying a bit more for Chablis and camembert and waiting in line longer on our return from Marbella, these are small prices to pay, apparently.
In truth nobody really knows whether we will be better off outside of the European Union (or whether chlorine washed chicken is really worse than the European alternative). Some banks and multinationals have moved operations away from London and the fear in the City is that Britain will become a less attractive place to do business. Could this have a knock-on effect on businesses’ desire to settle their disputes in the High Court? Are these fears, combined with the potential uncertainties on enforcement likely to influence drafters’ choice of law and jurisdiction clauses in financial services agreements?
Again, no one can yet know the answers. Initial uncertainties surrounding the transition period to 31 December 2020 may drive an initial move away from choosing England and Wales as a forum for resolving disputes. However, medium to long term it really should not have an appreciable impact for the following reasons:
Enforcement of Judgments
Until the end of the transition period, the position is clear – Article 67 of the withdrawal agreement provides that outstanding UK Judgments will continue to be enforceable in EU member states and vice versa.
Things are more complicated if proceedings are commenced before the end of the transition period while the UK has not yet acceded to the Lugano Convention but judgment comes after the transition period has ended. Enforcement of such judgments not based on an exclusive jurisdiction clause will depend upon local rules in each member state.
If proceedings are commenced post-transition and there is no exclusive jurisdiction clause, then a judgment will be enforceable in other member states, provided that the UK has acceded to the 2005 Hague Convention on Choice of Court Agreements (the UK currently accedes to Hague by virtue of EU membership, but this will cease after Brexit). This had been the intention in advance of the planned exit in March 2019, so it is assumed that the UK will accede to the Hague Convention within the transition period. But if the exclusive jurisdiction clause was entered into after Brexit and before the end of the transition (before the UK has acceded to Hague) the position becomes more uncertain and we return to consideration of local rules on whether a Judgment will be enforceable.
Once these transitional wrinkles have been navigated, generally the expectation is that Brexit will not have much, if any, impact on the enforceability of UK Judgments and of the enforceability of EU Judgments in the UK. This fortunately does not depend on Boris’s negotiation skills but on whether the UK follows through with its intention to accede to the Hague and Lugano Conventions.
Brexit should not make English Law or the English Courts less attractive to foreign businesses
Brexit does not affect the English common law system or its settled principles. These make English law a predictable and largely fair system that has historically attracted foreign financial institutions to agree to settle their disputes in England. If anything, Brexit may make, for example, Russian businesses more likely to agree to settle their disputes in London. Brexit itself is also likely cause more disputes under existing financial services agreements.
The introduction of the Business and Property Courts in London bolsters the commercial expertise of the London Courts with high quality, specialist Judges sitting on every hearing. The adoption by the Courts of new technologies and an intention to be at the forefront of developing technologies such as AI and smart contracts is also a selling point.
The only reason financial services disputes may reduce is if less business is being conducted in the UK as a result of Brexit. Household financial services names such as Aviva, Barclays, Credit Suisse, Goldman Sachs, HSBC, JPMorgan Chase, Lloyds of London and UBS have all chosen to move assets away from London as a result of Brexit. If these moves have a knock-on effect on the amount of business that these companies do in the UK then we may see a short-term reduction in financial services disputes. However, the opportunities opened by Brexit could see an increase in business from firms based outside of the EU that want to capitalise on the new opportunities Brexit affords them in London.
London is the most popular arbitration centre
There are more arbitrations seated in London each year than in Singapore, Paris, Stockholm, Geneva, Dubai and Hong Kong combined. Arbitration awards are unaffected by Brexit, as are the availability of wide ranging Court awards in support of arbitration. English law upholds the principle of confidentiality of arbitral proceedings – this is not the case in all jurisdictions.
EU law had curtailed the English Courts’ ability to issue anti-suit injunctions where proceedings had been commenced in an EU member state in breach of an arbitration agreement. Post Brexit, this may change. Anti-suit injunctions are powerful weapons, so this may make arbitration in London post-Brexit even more attractive.
In conclusion, whilst the transition period creates some pockets of uncertainty, this impact should be limited and only short term. The overall impact should actually be to make London as a venue more attractive to regions outside of the EU and an increasingly popular seat for international arbitration.