While 2020 may have drawn to a close, marking the end of the transition period of Brexit, uncertainty remains over the future of the EU-UK trading relationship. With the likely introduction of border checks and additional tariffs compounded by the added risks relating to the COVID-19 pandemic, concerns over potential supply chain disruptions as well as rising equipment costs, loom large. Accompanying these changing trading conditions is the prospect of a surge in legal disputes, particularly concerning the enforceability of legal provisions, court judgments and cross-border contracts.

This article sets out to examine whether, and if so, how Brexit may affect arbitral practice in the EU and the UK. It will firstly consider the impact that the UK's withdrawal from the EU has on the enforceability and recognition of arbitral awards. Further, it will address how Brexit may allow English courts to grant anti-suit injunctions in relation to hearings before domestic courts of Member States. Lastly, the article seeks to assess the effect of the UK's exit from the EU on the arbitration market overall, particularly considering the perceived advantages the latter can offer parties over judicial proceedings when seeking to resolve cross-border commercial disputes.

Arbitral Awards Recognition and Enforceability

International arbitration will remain largely unaffected by the UK's withdrawal from the EU. The New York Convention ('Convention')1 will continue to be the key instrument for the enforcement and recognition of international arbitral awards.2

As an instrument of private international, rather than EU law, the Convention does not depend on European membership. By taking precedence over the Brussels I Regulation ('Brussels Regulation') 3 concerning the enforcement and recognition of arbitral awards, all proceedings are governed by Convention provisions and the relevant domestic law. 4 With 166 contracting state parties, arbitration judgments may be enforced globally, causing arbitral awards not to be impacted by the dissolution of the former UK-EU relationship.

Difficulties may, however, be encountered with regard to the concept of public policy, which may be invoked pursuant to Article V(2)(b) of the Convention as a ground for denying arbitral award recognition if considered incompatible with the respective national public interest.

Anti-suit injunction

While commonly used in common law jurisdictions, an anti-suit injunction ('ASI') remains a foreign concept to civil law countries. As a tool that enables domestic courts to prevent an opposing party from initiating or continuing to pursue legal proceedings in a different forum, it can influence the course of litigation abroad profoundly. 5 Contrary to English courts, which have demonstrated a tendency towards upholding existing arbitration agreements through ASIs, the Court of Justice of the European Union ('CJEU') has long adopted a contrary stance, deeming them irreconcilable with EU law. 6

In Turner v Grovit (Case C-159/02), 7 the CJEU considered whether an ASI issued against Spanish proceedings by the English court of first instance was valid if brought in bad faith. The CJEU held, that 'the rules on jurisdiction that [the 1968 Brussels Convention] 8 lays down are common to all courts of the Contracting States [and must] be interpreted and applied with the same authority by each of them' (para. 25). As such, since the issuance of an ASI undermines a Plaintiff's right of action, it 'must be seen as constituting an interference with the jurisdiction of the foreign court, which, as such, is incompatible with the system of the Convention' (para. 27).

In Allianz SpA v West Tankers (C-185/07), 9 the CJEU confirmed that: 'it is incompatible with [the Brussels Regulation] for a court of a Member State to make an order to restrain a person from commencing or continuing proceedings before the courts of another Member State on the ground that such proceedings would be contrary to an arbitration agreement' (para. 19). Rendering an ASI valid, would 'necessarily amoun[t] to stripping that court of the power to rule on its own jurisdiction under [the Brussels Regulation]' (para. 28). Rather, it is a matter of general principle that 'every court seised itself determines, under the rules applicable to it, whether it has jurisdiction to resolve the dispute before it' (para. 29).

This rational continued to find application in Gazprom OAO v Republic of Lithuania (Case C-536/13), 10 in which the CJEU emphasised that the Brussels Regulation 'must be interpreted as not precluding a court of a Member State from recognising and enforcing, or from refusing to recognise and enforce, an arbitral award prohibiting a party from bringing certain claims before a court of that Member State, since that regulation does not govern the recognition and enforcement, in a Member State, of an arbitral award issued by an arbitral tribunal in another Member State' (para. 44).

The aforementioned decisions commonly place emphasis on principles of mutual confidence and trust among EU Member States and reflect an increased willingness to uphold exclusive jurisdiction clauses. With the UK's exit from the EU, the CJEU will not be able to curtail the power of English courts to give effect to ASIs, which could make London a potentially even more attractive seat of arbitration in the future.

Arbitration's continued significance

Long perceived as one of the most efficient and effective routes for settling international disputes in a variety of sectors (e.g. construction or energy industry) arbitration will continue to be the preferable method for settling cross-border commercial disputes, not least for the following reasons:

  • 1. Enforceability

    Drawing on the above, arbitral awards will continue to be enforceable via the New York Convention, which finds international application. Additionally, London benefits from its long-standing history as a centre for the resolution of multi-jurisdictional commercial disputes. None of the features that have thus far contributed to London's success as a seat of arbitration, e.g. Arbitration Act 1996, reputation of impartiality of English judiciary etc., are likely to be diminished by Brexit.

    2. Speed and Ease of Resolution

    Arbitration offers parties the opportunity to make procedural decisions, which serves to streamline the process and reduce fees, including:

  • Adding opt-out provisions;
  • Limiting document production;
  • Deciding on use of technology;
  • Freely choosing individual arbitrator or technical expert;
  • Joinder or consolidation, bringing with it significant advantages such as savings in terms of time and ensuring all parties are bound by the award.

  • 3. Neutrality and Finality

    A commonly cited benefit of choosing arbitration relates to the finality of arbitral awards, which may only be challenged on narrow grounds, i.e. procedural impropriety. This is particularly attractive for reasons of certainty and minimising the chances for appeal. The binding nature of arbitral awards has been expressly incorporated in a number of arbitration rules, namely:

  • Article 28(6) International Chamber of Commerce Rules;11
  • Article 27(1) American Arbitration Association International Arbitration Rules; 12
  • Article 26.9 London Court of International Arbitration Rules; 13
  • Article 34(2) United Nations Commission on International Trade Law Arbitration Rules. 14

It is for these reasons that the popularity of arbitration is expected to remain intact even now that the withdrawal period has come to an end.

Conclusion

Brexit will have little immediate impact on the practice of arbitration. This is largely due to the fact that arbitral awards will continue to be enforceable via the New York Convention since they are not governed by the Brussels Regulation.

The international arbitration framework itself has long proved to be a suitable alternative to litigation and will continue to be in the future. Given London's history as a prevailing arbitral seat taken together with the willingness of English courts to support arbitration, the popularity of arbitration is unlikely to decline anytime soon.

Footnotes

1 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958).

2 Convention, NewYork. "The New York Convention." New York Arbitration Convention, www.newyorkconvention.org/.

3 Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters.

4 Varapnickas, T. [2018] Brexit and Arbitration: What happens next? Conference Papers of the 5th International Conference of PhD Students and Young Researchers. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3121532 [accessed 30.12.2020].

5 Bermann, G. A. [1990] The Use of Anti-Suit Injunctions in International Litigation, 28 COLUM. J. TRANSNAT'L. L. 589 Available at: https://scholarship.law.columbia.edu/faculty_scholarship/2105 [accessed 01.01.2021].

6 Rodgers, James, and Simon Goodall. "How Will Brexit Impact Arbitration in England and Wales?" How Will Brexit Impact Arbitration in England and Wales? , Norton Rose Fulbright, Sept. 2016, www.nortonrosefulbright.com/en-gb/knowledge/publications/a655ac50/how-will-brexit-impact-arbitration-in-england-and-wales.

7 Available at: http://curia.europa.eu/juris/liste.jsf?language=en&num=C-159/02.

8 Convention on jurisdiction and the enforcement of judgments in civil and commercial matters (Brussels, 1968), available at: https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A41968A0927%2801%29.

9 Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62007CJ0185.

10 Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62013CJ0536.

11 Available at: https://iccwbo.org/dispute-resolution-services/arbitration/rules-of-arbitration/.

12 Available at: https://www.intracen.org/International-Arbitration-Rules-of-the-American-Arbitration-Association-2001/.

13 Available at: https://www.lcia.org/Dispute_Resolution_Services/lcia-arbitration-rules-2020.aspx#Article%2026.

14 Available at: https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/arb-rules-revised-2010-e.pdf.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.