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What does Brexit mean for arbitration?

What does Brexit mean for arbitration?
Brexit has shaken up the international commercial world in a manner that has yet to be determined.

 

Aregulation in European financial market law prohibits financial service providers from third countries from agreeing a place of jurisdiction or arbitration procedure in third countries. Any agreement with London as the place of jurisdiction or arbitration should be amended in favour of other places of jurisdiction.

It has immediate effect in the market segment of banking, capital markets and insurance law where London courts were a hub for the majority of disputes in the European judicial area . Moreover, judgements of the British courts will no longer be automatically enforceable in the European Union, as Art. 36 of the Brussels I Regulation 1215/2012 only applies to “a judgment given by the courts of a Member State”.

Brexit-Banking

Furthermore, Brexit signifies a loss in European legal culture. Civil law tradition and legal practice, inter alia, of the Court of Justice of the European Union (CJEU), were faced with the concepts of common law. That to a great extent (apart from laws) is based upon previous court rulings – precedents – and is developed by judicial interpretation.

“The power of argument of British lawyers will represent a loss, and the dogmatic but equally pragmatic approach of common law for achieving feasible solutions will leave gaps” .

What does Brexit mean for International Commercial Arbitration?

International arbitration is safe from the legal uncertainty created by Brexit as EU legislation does not apply to international arbitration: the area has never been regulated or harmonised at the EU level.

The Brussels Regulation on Jurisdiction and the Recognition and Enforcement of Judgements has excluded arbitration from its scope of application. The New York Convention on the Recognition and Enforcement of Foreign Awards remains in place even within the EU.

CJUE-COUR DE JUSTICE DE L'UNION EUROPÉENE
Jurisprudence of CJEU has impact on international arbitration in the EU. After Brexit, English courts will not be bound by CJEU’s case law:

  1. Anti-suit injunctions that prevent a party from pursuing abusive court proceedings in an EU Member State will be available in the English courts (Allianz SpA and Others v West Tankers Inc, Case C-185/07). However, some argue that injunctions are already permissible under the recast Brussels Regulation and
  2. Like the Swiss courts, the English courts will not be bound to sanction an arbitration award that is contrary to EU law. EU public policy will no longer form part of English public policy for the purposes of Article V of the NY Convention.(EcoSwiss v Benetton, Case C-126/97)

Section 46 of the English Arbitration Act 1996 will be unaffected and to the extent that tribunals have to revert to English national law (i) there will be little change to the choice of law rules in contract, and (ii) reverting to the 1995 Act and the location of the damage for tortious claims is, potentially, to be welcomed . A Brexit does not provide an incentive not to pick English governing law for arbitral disputes: English law is usually chosen due to reasons unconnected with the UK’s present membership of the EU.

All in all, the impact of Brexit on arbitration practice is likely to be minimal.

By Beata Kozubovska

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