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BREXIT: impact on London as international arbitration centre likely to be minimal, expert says

Out-Law Analysis | 20 Jul 2016 | 1:13 pm | 2 min. read

FOCUS: Commercial agreements between parties in the UK and those based in another EU member state should include international arbitration with a seat in a New York Convention country as their dispute resolution method of choice in order to protect the ability to enforce decisions post-'Brexit'.

This is part of Out-Law's series of news and insights from Pinsent Masons experts on the impact of the UK's EU referendum. Watch our video on the issues facing businesses and sign up to receive our 'What next?' checklist.

Despite the uncertainty created by the result of the UK's recent vote to leave the EU, enforcement of rights under contracts between parties from the UK and those in other EU member states which provide for resolution of disputes by international arbitration seated in London, Paris, Geneva, New York or other New York Convention states will be unaffected.

The New York Convention, which governs the ability to enforce international arbitration awards, has nothing to do with EU law. This means that the impact of the referendum result on London as an international arbitration centre is likely to be minimal. Arbitration clauses in existing contracts will remain valid whatever the outcome of the Brexit process, and inclusion of an arbitration clause will combat any uncertainty in contracts currently being negotiated.

The New York Convention has long been valued as one of the great advantages of international arbitration over litigation in resolving international disputes. If you have a New York Convention award - which will be the case where the designated 'seat' of the arbitration is in one of the over 150 states that have signed the convention to date - you can enforce it in any of the other signatory states worldwide. There is simply no equivalent convention that applies to enforcing court judgments.

Currently, judgments of EU national courts in civil and commercial proceedings are enforceable in other member states under the Brussels Regulations. 'Brussels 1' applies to judgments in proceedings initiated before 10 January 2015, while the 'Recast Brussels 1' regulation applies to judgements in proceedings initiated after that date.

Depending on the outcome of the Brexit negotiations and the UK's future relationship with the EU, this reciprocal enforcement of judgments between UK and EU courts may cease to apply once Brexit is complete. From a dispute resolution perspective, this is easily the most significant change that may arise from the Brexit process. However, a party with an arbitral award rather than a court judgment in its favour will not need to worry about whether that award can be enforced in other jurisdictions.

Other factors which contribute to the success and attractiveness of London as an international arbitration centre will continue to apply. English courts will still have supervisory jurisdiction over UK-seated arbitration, and will continue to apply English arbitration legislation in the shape of the 1996 Arbitration Act. Both the courts and the 1996 Act are perceived around the world as arbitration-friendly, and there is no reason why this would change after Brexit. The UK will continue to benefit from the expertise of its judges, arbitrators and arbitration lawyers. Even the low value of the pound has a silver lining in this context: it will make London arbitration services cheaper, at least on a temporary basis.

Existing agreements specifying London as the seat of arbitration remain valid and enforceable. It also remains the case that parties can specify a jurisdiction as the arbitral seat, while holding the hearings at a different geographical location for reasons of convenience. In a statement on the referendum result, issued on 24 June, the president of the London Court of International Arbitration (LCIA) confirmed that the result would not affect the workings of the LCIA or its conduct of cases.

Mark Roe is head of international arbitration at Pinsent Masons, the law firm behind Out-Law.com.