Brexit won’t affect London’s status as leading arbitration centre, say law firms

Leading law firms say there has been “no sign of London losing business” as a result of Brexit concerns. Credit: Getty Images
Leading law firms say there has been “no sign of London losing business” as a result of Brexit concerns. Credit: Getty Images

The position of London as the preferred centre for international arbitration will be unaffected by the departure of the United Kingdom (UK) from the European Union (EU) at the end of March next year, while English law will remain pre-eminent in maritime commercial contracts, despite some short-term concerns about the enforceability of English court judgments.

These are the clear views of lawyers at leading London law firms, including HFW (formerly Holman Fenwick Willan LLP) and Hill Dickinson, who spoke to IHS Markit last week.

George Eddings, a partner at HFW specialising in maritime and offshore energy law, told IHS Markit that Brexit would have “no effect whatsoever” on London’s dominant position in arbitration, a view endorsed by Julian Clark, the global head of shipping at Hill Dickinson, who returned recently from leading a UK trade delegation to New York.

Their views echo the more general, but equally robust, comments made to IHS Markit in October by John Hulmes and Jeremy Penn, the current and former chairmen of London International Shipping Week, about London’s prospects of remaining the leading maritime centre post-Brexit.

Earlier this year, HFW published the report The maritime arbitration universe in numbers, which provided estimates of the numbers of maritime arbitrations held in London and elsewhere. It showed that London hosted at least 80% of all arbitrations worldwide, more than 1,750 individual cases. By contrast, Singapore, in second place, saw fewer than 10% of this number with just 120 arbitrations. These figures, the most recently available, are from 2016, but, the HFW report confidently predicts, London’s dominance in arbitration is unlikely to be affected by Brexit.

Eddings confirmed that there has been “no sign of London losing business” due to the uncertainty surrounding Brexit and that “companies continue to incorporate London as their choice for arbitration when drawing up commercial contracts”. This is perhaps one of the clearest signs that London’s dominance will continue, which makes sense since the enforcement of arbitration is not supported by EU law but by the 1958 New York Convention to which the UK is a party in its own right. So too are most other countries in the world, including all EU member states.

Clark is equally upbeat. Commenting on his recent trip to the United States, he told IHS Markit, “Our colleagues across the pond remain committed to engagement with English firms,” something that is demonstrated by the existence of so many alliances between US and UK law firms. “Rather than seeing Brexit as an obstacle, it is clear they see it as an opportunity.”

Clark’s and Eddings’ view is also borne out by a more recent survey from the School of International Arbitration at University of London’s Queen Mary College (QMUL) in partnership with New York law firm White & Case. Their 2018 International Arbitration Survey published in May, which looks at trends in arbitration across all areas of law, not just the maritime sector, concluded that “London and Paris have managed to consolidate their dominance on the market, with London surging even further ahead”. The other centres making up the top five were Singapore, Hong Kong, and Geneva.

Asked whether Brexit would influence their choice of London as a seat, a majority of respondents to the QMUL survey said it would not, citing the “neutrality” and “impartiality” of the English legal system and “the arbitration-friendly legislation and court practice” as “reasons why London should remain at the top”. Eddings adds legal certainty, use of precedent, the concentration of legal and technical expertise, and the synergies between London’s financial and legal services to this list.

Karina Albers, a practicing arbitrator with the London Maritime Arbitrators Association and the Chartered Institute of Arbitrators, noted that “charterparties typically specify London in their arbitration clause” and that she “hasn’t heard of anyone wanting to change”. Albers gave consistency of decision making and the “wealth of knowledge” found in London as among the reasons that her clients will continue to choose London. Clark confirmed this, citing “maritime sector knowledge and the commercial awareness of the judiciary and tribunals” as key to London’s pre-eminence in maritime arbitration.

Brexit is also not expected to impinge on the continued ubiquity of English law as the governing law in maritime commercial contracts. Two EU regulations, known as Rome I and Rome II, oblige EU courts to give effect to the choice of English law in an agreement, regardless whether the UK is a member of the EU. In future, the UK may simply adopt the Rome conventions with similar results.

And as now, after Brexit, companies will still be able to specify English law in a contract but choose, say, France as the jurisdiction where a dispute would be resolved. “The French court will still apply English law,” explained University of Southampton academic lawyer Jenny Jingbo Zhang, when giving evidence before the first of two House of Lords Select Committee hearings about the key implications of Brexit on the maritime sector on 18 October. Zhang is one of the co-authors of a detailed 2017 Southampton University report on the impact of Brexit on UK shipping, maritime legal services, fisheries, and trade.

While the position of English law is clear, some lawyers have concerns that, after Brexit, uncertainties could arise over the ability of UK courts to exercise jurisdiction to adjudicate international disputes. Parties to an agreement may not be able to serve proceedings in the event of a claim and, most crucially, the enforcement of UK court decisions in EU member states could be stymied. As Zhang told the House of Lords Select Committee, “Jurisdiction and the enforcement of judgments are very problematic.”

Clark, however, challenged this “negative view”. In his opinion, very little will change. In support, he cited the commentary of Lord Justice Hamblen, a senior judge at the Court of Appeal, who has labelled these sorts of concerns “the myths of Brexit”.

According to Clark, “We have always faced certain issues of enforcement of UK court decisions where a bilateral treaty is not in place, but this is not worsened by a post-Brexit position. Will hundreds of years of judicial authority and respected expertise suddenly be lost and abandoned? Quite clearly not.”

What will be necessary, however, is for the UK to accede to two existing international treaties, the 2005 Hague Convention and the Revised Lugano Convention. The UK government has indicated its intention to do so, although this can only happen once the UK has left the EU, creating a potential hiatus of about three months.

This could still leave open a question about the enforcement of UK court judgments against a defendant resident in the EU. A new bilateral agreement between the UK and the EU would be needed to provide certainty, in the absence of which, such a judgment might need to be recognised by a court in an EU member state for it to be enforced. “The risk is that the EU court won’t recognise the UK decision,” said Eddings, meaning that new proceedings would have to be brought, potentially “giving the defendant a second bite at the cherry.”

Eddings pointed out that enforcement would not be a “one-way street” and that it would be in the interests of both EU member states and the UK to ensure continued legal certainty and enforceability of each other’s court decisions. Clark strongly supported this view.

But even if there is any potential short-term uncertainty about English court decisions, this may not be a negative for English dispute resolution. Instead, it could provide the impetus for even more disputes to be resolved via English arbitration instead of via the courts. As Zhang told IHS Markit, English arbitration could become “more popular under the uncertain circumstances in litigation caused by Brexit”.