Dispute Resolution Options Post-Brexit
Amidst all the uncertainty surrounding Brexit, the continuing relevance, power, and reliability of international arbitration as a dispute resolution mechanism remains a very welcome example of stability.
On 22 August 2017, the UK Government issued a paper containing proposals to establish a cross-border civil judicial co-operation framework between the European Union and the United Kingdom (the Future Partnership Paper). Because the framework of the future EU-UK relationship has yet to be defined, considerable uncertainties remain regarding certain aspects of cross-border litigation that are currently governed by EU Regulations.
In contrast with litigation and so many other areas, Brexit is, however, unlikely to affect the rules governing international arbitration proceedings. As a result, parties should opt for arbitration rather than litigation until such time as the rules applying to cross-border litigation involving the United Kingdom and the European Union post-Brexit are clarified.
THE UNCERTAINTY OF CROSS-BORDER LITIGATION
Numerous aspects of cross-border litigation within the European Union are currently regulated by instruments designed to facilitate access to justice by providing predictability and fostering judicial co-operation between Member States. The following are the main regulations that apply:
> EU Regulation Rome I provides rules to determine which law should apply to contractual obligations in crossborder disputes involving parties from different EU Member States (except Denmark, which opted out). Accordingly, if parties to a contract have not chosen a law to govern that contract, the Rome I regulation will designate the law.
> EU Regulation Rome II provides rules to determine which law should apply to non-contractual obligations in crossborder disputes involving parties from different EU Member States (again excluding Denmark).
> EU Regulation Brussels I bis prescribes which court in the European Union has jurisdiction to decide a given cross-border dispute between parties from different jurisdictions in the EU.
The rules set forth in these (and other) EU instruments play a fundamental role in intra-EU litigation, because they provide parties with predictability with respect to the law that should govern their disputes and which jurisdiction will be competent to hear them.
As long as the United Kingdom remains part of the European Union, cross-border litigation involving a UK component will continue to be governed by these EU regulations. Upon Brexit becoming effective, however, this framework will cease to apply to such litigation under Article 50(3) of the Treaty on European Union.
The United Kingdom will therefore have to choose whether it wishes to apply different rules to such litigation than those set forth in EU law, or to adopt rules aligned with EU law. Given its stance in the Future Partnership Paper, the United Kingdom appears to be leaning towards the second option. The result would be rules that “reflect closely the substantive principles of co-operation under the current EU framework” (paragraph 19 of the Paper). Needless to say, however, the choice is not the United Kingdom’s alone. The European Union will also have to agree to put in place rules that are aligned with EU law. The consequences of Brexit on crossborder litigation are likely to remain unknown for some time, but parties to contracts need some predictability now with respect to future UK-EU litigation. The lack of predictability created for the United Kingdom by Brexit has led a number of other EU Member States (including, most recently, Belgium) to propose changes to their own court systems (including the introduction of English-language courts) to try to attract cases that would otherwise have been destined for the UK courts. Such proposals may, however, ultimately face the same uncertainty in relation to disputes involving nationals of the United Kingdom and other EU Member States as a question mark hangs over what rules will apply to enforcement of their judgments in the United Kingdom post-Brexit.
INTERNATIONAL ARBITRATION AS A GUARANTEE OF LEGAL CERTAINTY
The better answer, we believe, is to rely on arbitration agreements. Unlike cross-border litigation, international arbitration is not subject to the EU instruments mentioned above. In particular, the Rome I and Brussels I bis Regulations expressly exclude arbitration from their scope.
International arbitrations conducted in London will instead continue to fall within the ambit of the English Arbitration Act 1996, which is not in any way dependent on EU law. In addition to providing a clear and comprehensive framework for international arbitration, the Arbitration Act 1996 is applied by English courts in a pro-arbitration fashion. This approach has contributed to establishing London as one of most successful locations for arbitration in the world. Accordingly, the legal framework that regulates arbitration proceedings and the enforceability of arbitral awards is unlikely to be adversely affected by Brexit. To the contrary, parties conducting international arbitrations in London may, post-Brexit, again be able to ask the English courts to issue anti-suit injunctions to prevent their contractual counterparties from litigating before other EU Member State courts in breach of an arbitration agreement. The English courts are currently forbidden from issuing such anti-suit injunctions because it is considered by the Court of Justice of the European Union to be contrary to the EU Regulation Brussels I. This may perhaps change post-Brexit.
Nor will Brexit affect the recognition and enforcement of foreign arbitral awards in the United Kingdom. These will continue to be governed by the UK Arbitration Act 1996 and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention), which provides a clear and favourable set of rules for the recognition and enforcement of arbitral awards in all 157 signatory States (which include the United Kingdom, and all EU Member States), and by other international instruments that are not subject to EU laws.
International arbitration is undoubtedly the best available dispute resolution mechanism in the drafting of international contracts involving the United Kingdom and the European Union for those seeking legal certainty. It is one of the few areas that companies can rely on amidst the potential uncertainty of the post-Brexit world.