On 24 October 2016, Lord Goldsmith addressed an ACICA audience in Sydney about Brexit and arbitration. He set the Brexit scene: Theresa May is still tight-lipped about the nature of Brexit, following a Brexit campaign characterised by a lack of clarity on what Brexit would actually mean. Uncertainty abounds, except for in one aspect: indications are that negotiations will not be easy. The EU has made it clear to the UK that there will be ‘no negotiation without notification.’
First things first – the constitutional challenge: May plans to trigger Article 50 of the Lisbon Treaty next year but does she have the authority to do that under the royal prerogative? This issue is being hotly debated and is currently being tried in the London Courts. On 3 November 2016, the High Court delivered judgment finding that Article 50 could not be invoked without an Act of Parliament. Arrangements are in place for an expedited appeal straight to the UK Supreme Court and that case will be heard by December. Consequences for the UK and EU will be massive. Much of that is only dimly seen right now.
Impact on London arbitration
The thesis of Lord Goldsmith’s talk was that Brexit will not lead to a diminution of the merits or popularity of London as a seat of arbitration, nor damage the popularity of English law as the commercial law of choice for many international transactions. Why is this the case?
At the centenary conference of the Chartered Institute of Arbitrators (CIArb) in London last year, the CIArb published a list of ten features necessary to make for a safe, effective and successful seat of arbitration. These features are: (1) a clear arbitration law; (2) an independent judiciary; (3) legal expertise; (4) education; (5) the right of choice in representation; (6) accessibility and safety of the seat; (7) facilities; (8) professional ethics that embrace diversity of traditions; (9) enforceability; and (10) arbitrator immunity. London meets all of these requirements, none of which depend on UK membership of the EU. There is, therefore, no reason to believe that London will diminish in popularity as a seat of arbitration. Lord Goldsmith opined that despite the growth of arbitration and arbitral institutions in Asia, Brexit will not spark a ‘land grab’ for traditionally London-based work by other arbitration centres.
In addition to the challenges presented by Brexit, there are certain opportunities. First, there may be a substantive disentanglement of English law and EU law. European law has coloured English law, so if EU regulations no longer apply then English common law may see a resurgence. Secondly, the determination of jurisdictional issues in court cases may end up vastly different should the UK go down the path of abandoning the Brussels Regulation regime and return to common law forum non conveniens principles. The current regime means a UK commercial court can be seized of a matter in circumstances where it is not necessarily the most appropriate forum, but then have limited ways to decline jurisdiction. Right now though, it is uncertain what will happen in terms of UK court judgments until we know more about how the UK will proceed in relation to its private international law framework with respect to the EU. This might push some users towards arbitration, which has a reliable enforcement regime under the New York Convention. Another advantage of Brexit might be that UK courts will again be able to issue anti-suit injunctions directed at European courts. UK courts once commonly issued anti-suit injunctions to prevent proceedings brought in breach of arbitration agreements. This was, however, put to an end in 2004 when the European Court of Justice held that the practice was incompatible with the Brussels Convention.
Thirdly, Brexit might influence the debate about investor-State dispute settlement (ISDS). The EU has proposed an ‘Investment Court System’, a permanent investment court with an appeals process for the Transatlantic Trade and Investment Partnership (TTIP). The competence for negotiating EU treaties currently rests with the EU, and the EU has been firm that the UK is not free to negotiate its own treaties whilst it remains in the EU. The question is, would being freed from the EU give the UK a negotiating advantage? Only time will tell.
In the meantime, it is plausible even if the USA agrees to the an investment court system that it will still opt for conventional ISDS mechanisms in its other trade deals, in which case we might not see the inexorable rise of the Investment Court System. The UK’s decision to opt for one model or the other will influence the course of the debate particularly as the UK will become one of the more active trade negotiating countries over the coming years.
In his concluding remarks, Lord Goldsmith stated that it may now be time for Australia and the UK to grow a new and invigorated cooperation in the field of common law. This is also the time for lawyers to examine closely the opportunities for collaboration in training, development of the law and finding better ways to serve clients.
Marina Kofman is Assistant Editor of the ILA Reporter. A version of this article was originally written for and published by ACICA. It is partially reproduced here with permission.