North Carolina Journal of International Law

"Connecting North Carolina to the World of International Law"

Brexit Effect on Dispute Resolution in London

By: Joshua Stephens

As a result of the historic June 23, 2016, vote by the citizens of the United Kingdom (UK) to leave the European Union (EU), the UK will be experiencing some very major and influential changes in its legal system.[1] In light of this, the UK intends to enact what is being referred to as the ‘Great Repeal Bill’, which would “convert the existing body of EU law into UK law”.[2]  This bill answers some key questions about the state of UK law post-Brexit. For example, the bill intends that new state level UK law enacted after Brexit will have precedence over old international level EU law, and that pre-Brexit case law of the Court of Justice of the European Union (CJEU) will be treated as if it was from the UK Supreme Court.[3]  Further changes will be addressed by the ongoing exit negotiations between the UK and the EU, which began on June 19. 2017.[4]  The action taken by the UK will have a profound impact on the nation, including the UK’s long-standing tradition of being a leader in dispute resolution.[5]

London as a Dispute Resolution Center

The full impact of the Brexit decision will remain unclear in the coming years, as the UK will not officially leave the EU until March 2019.[6]  This will not, however, keep citizens from speculating as to the many changes this landmark decision will bring. One area of interest is the effect Brexit will have on London as a dispute resolution center.[7]  The Lord Chief Justice of England and Wales, in a speech at the National Judge’s College in April 2017, was quoted as saying:

“A Commercial Court must also be prepared for political change. In London we are having to deal with such a change, given the decision of the UK to leave the European Union, known as Brexit. This decision might be seen, by some, as raising a question of the strength of London as a centre for commercial dispute resolution. In some quarters it has even been suggested that Brexit makes the law of the UK uncertain.”[8]

Although the Lord Chief Justice ultimately concluded that Brexit will have no impact on dispute resolution in London, he does point out that it is an issue with which the international community is concerned.[9]

London has long been a preferred destination for dispute resolution among international parties.[10] English contract law is favorable to businesses because it has the ability to require exact performance and has no general duty of good faith. The UK has one of the oldest legal systems in the world with a long history of arbitration, international corporations, commercial parties and as a result, states look to London for a neutral third party legal system.[11] The stats back this up, more international and commercial disputes take place in London than in any other city in the world, and 90% of commercial disputes handled by London law firms involve an international party.[12]  In terms of arbitration, English law is the law of choice for 40% of all global corporate arbitrations.[13]

The Brexit Effect on Dispute Resolution

So what effect will Brexit have on the viability of London as a dispute resolution center? The answer cannot be ascertained with one hundred percent certainty, but the factors that will determine the answer can. The ‘Great Repeal bill’ and the subsequent negotiations of the British government with the EU, will be the deciding factors on whether London remains an important player in the field.[14]

The British government has indicated that it intends to repeal the European Communities Act of 1972.[15] This action will make the regulations of the EU inapplicable to the.[16]  These include the regulations that determine choice of law and jurisdiction.[17] “The law applicable to contractual and non-contractual obligations is determined with the help of the Rome I Regulation (No 593/2008) and the Rome II Regulation (No 864/2007). Jurisdiction is governed by the Brussels Ia Regulation (No 1215/2012).”[18]  The effect of cutting ties with these regulations leads to gaps in the law where regulations used to be.[19]  Once the Brussels regulation  is no longer applicable to the UK, English judgements will not automatically be recognized in other EU Member States, making London a poor choice for dispute resolution.[20]

The lack of uniformity created by Brexit will make “it harder for parties to predict which law will apply to international disputes and which court will be competent to hear a case.”[21] Furthermore, parties can no longer bank on equal enforcement of choice of law and choice of forum clauses between the UK and the EU.[22] As Oxford law professor Giesela Rühl puts it, “the enforceability of such clauses will essentially depend on where a law suit will eventually be brought.”[23]

Possible Responses by the UK

The government has some serious issues that it must address in order to maintain London’s status as a go to location for dispute resolution. Scholars have proposed several solutions for how to properly address the situation. A first, and unlikely scenario is that the UK could do nothing after leaving the EU, not replace the EU regulations, and instead allow the system to revert back to English common law. Yet this result is unlikely. As Oxford law Professor Adrian Briggs puts it “it is hard to believe that there is a lawyer in full possession of his or her mind who would propose taking us back to these chapters of the common law”.[24] The problem with reverting back to common law to fill the gaps left by the regulations is a longer than this report has time to address, but this seems to be the least likely option.[25] Professor Briggs’ solution is to enact legislation that would mirror Rome I and Rome II, minus some references to the primacy of European Law.[26]  This fix would reduce uncertainty and allow for a smooth transition from the EU.[27]

Another possible solution, is a negotiation between the EU and the UK which would leave the regulations in place, effectively maintaining the status quo.[28]  This solution would be the most straightforward, however it is complicated, as the EU would have to agree to it.[29]  It is not hard to imagine why the EU might be reluctant to consent to this. For example, acquiescence in this scenario could set a dangerous precedent for member states who may be thinking of leaving the EU in the future.[30]  Nevertheless, at the very least, this option would give the EU a very powerful bargaining chip in the ongoing exit negotiations. A third and more lengthy solution would be to sign new treaties with the EU or other non-EU states regarding “issues of choice of law and jurisdiction and, of course, recognition and enforcement.”[31]

Conclusion

No matter what the UK decides to do, it is hard to imagine a scenario in which London based dispute resolution is not at least marginally affected. At the very least, Brexit has already caused uncertainty in the minds of the international corporations, commercial parties and states that have chosen London in the past for dispute resolution. A swift action by the UK to remove the uncertainty seems to be in the best interest of the nation. A plan that lets the law of the UK remain as close to the law of the EU, like the ones Professor Rühl and Briggs have proposed, would allow the UK to remain as a dominant player in dispute resolution.

 

[1] Alex Hunt & Brian Wheeler, Brexit: All you need to know about the UK leaving the EU, BBC News (Sep. 26, 2017), http://www.bbc.com/news/uk-politics-32810887 [https://perma.cc/8WE2-ADDF].

[2]Raphael Hogarth, Brexit and the European Court of Justice 2 (Institute for Government 2017).

[3] Id.

[4] Alex Hunt & Brian Wheeler, Brexit: All you need to know about the UK leaving the EU, BBC News (Sep. 26, 2017), http://www.bbc.com/news/uk-politics-32810887 [https://perma.cc/8WE2-ADDF].

[5] Dan Bodle, The “Brexit effect” on London as a dispute resolution centre, Lexology (Jul. 20, 2017), https://www.lexology.com/library/detail.aspx?g=3b0c7752-971e-4d1b-92a3-3b66996049c9 [https://perma.cc/82GF-Z478].

[6] Id.

[7] Dan Bodle, The “Brexit effect” on London as a dispute resolution centre, Lexology (Jul. 20, 2017), https://www.lexology.com/library/detail.aspx?g=3b0c7752-971e-4d1b-92a3-3b66996049c9 [https://perma.cc/82GF-Z478].

[8] The RT HON. The Lord Thomas of Cwmgiedd, Speech at The National Judges College, Beijing (Apr. 6, 2017).

[9] Id.

[10] Lucy Scott-Moncrief, President, The Law Society of England and Wales, Speech at the International Arbitration Centre (Nov. 15, 2012).

[11] Id.

[12] Neil Hodge, The Rolls Building, London’s trump card, The Law Society Gazette (Feb. 9, 2012), https://www.lawgazette.co.uk/analysis/the-rolls-building-londons-trump-card/64169.article [https://perma.cc/7S9D-CZEU].

[13] See Julian Makin, Speech on Brexit – Jurisdiction, Enforcement and Conflict of Laws at the Brick Court Chambers (Oct. 17, 2016)

[14] See Adrian Briggs, Secession from the European Union and private international law: The cloud with a silver lining 1 (Jan. 24, 2017).

[15] Id. at 2.

[16] Id. at 3.

[17] Giesela Ruhl, Brexit Negotiations Series: ‘The Effect of Brexit on the Resolution of International Disputes – Choice of Law and Jurisdiction in Civil and Commercial Matters’, University of Oxford Faculty of Law (Apr. 13, 2017), https://www.law.ox.ac.uk/business-law-blog/blog/2017/04/brexit-negotiations-series-%E2%80%98-effect-brexit-resolution-international [https://perma.cc/TJC6-U2QX].

[18] Adrian Briggs, Secession from the European Union and private international law: The cloud with a silver lining 1 (Jan. 24, 2017).

[19] Id. at 3.

[20] Id. at 15.

[21] Giesela Ruhl, Brexit Negotiations Series: ‘The Effect of Brexit on the Resolution of International Disputes – Choice of Law and Jurisdiction in Civil and Commercial Matters’, University of Oxford Faculty of Law (Apr. 13, 2017), https://www.law.ox.ac.uk/business-law-blog/blog/2017/04/brexit-negotiations-series-%E2%80%98-effect-brexit-resolution-international [https://perma.cc/TJC6-U2QX].

[22] Id.

[23] Id.

[24] Adrian Briggs, Secession from the European Union and private international law: The cloud with a silver lining 7 (Jan. 24, 2017).

[25] Id.

[26] Id. at 13.

[27] Id. at 13.

[28] Giesela Ruhl, Brexit Negotiations Series: ‘The Effect of Brexit on the Resolution of International Disputes – Choice of Law and Jurisdiction in Civil and Commercial Matters’, University of Oxford Faculty of Law (Apr. 13, 2017), https://www.law.ox.ac.uk/business-law-blog/blog/2017/04/brexit-negotiations-series-%E2%80%98-effect-brexit-resolution-international [https://perma.cc/TJC6-U2QX].

[29] Id.

[30] Id.

[31] Id.

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