Leigh Crestohl discusses Brexit and a new era for commercial arbitration in The Times

January 07 2021

This article was originally published in The Times and can be accessed here

Leigh Crestohl, Partner

Why London could be a leading international legal hub

In the haste to dispense with EU law and reclaim “sovereignty”, the UK may have thrown the proverbial baby out with the bathwater, at least where cross-border litigation is concerned.  Nevertheless, Brexit might herald the dawn of a new era for commercial arbitration.

The UK-EU trade agreement contains no framework for judicial cooperation in civil and commercial matters.  On 31st December, multiple private international law arrangements lapsed, dealing with matters such as jurisdiction of the UK courts over parties in EU member states, the service of court proceedings in EU member states, and the reciprocal enforcement of court judgments.

England & Wales has its own set of jurisdiction rules: the common law defines conditions under which a foreign court’s judgment can be enforced.  Many would argue that this is just as it should be in a sovereign nation.  However, one nation’s sovereignty ends where another’s begins.  Why should a French court be compelled to respect an English Court order?  Intended to resolve problems associated with cross-border litigation, bilateral or multilateral arrangements nevertheless have their limitations.

The Hague Convention (1965) facilitates service of court proceedings in many foreign states, including the EU.  Although a functional alternative to the previous regime, its cumbersome processes involve increased delays and transaction costs.  Regarding questions of jurisdiction and the reciprocal enforcement of judgments, the UK has applied to join the Lugano Convention (2007) to which the EU and some other European countries are signatories.  The UK’s accession requires unanimous consent of the existing parties. In the meantime, more onerous and costly common law rules apply in the UK. 

Students and practitioners of private international law will see these as very interesting times.  The business community, however, has legitimate concerns: uncertainty is notoriously bad for business. This provides a strong impetus in cross-border trading relationships involving the EU to avoid national courts altogether, and resort instead to arbitration.  Indeed, issues about service of proceedings and territorial jurisdiction have little or no relevance in most cases. Possibly its greatest appeal, however, lies in the relative ease with which international arbitration awards, unlike court judgments, can be enforced thanks to the New York Convention (1956), which most countries have ratified. 

The post-Brexit world creates an opportunity.  London is among the world’s pre-eminent “arbitration friendly” seats.  Geographic proximity to mainland Europe, a highly developed professional services “ecosystem”, and the pro-arbitration attitude and reputation of its courts stand it in good stead to become the leading venue for Europe-related commercial arbitration. 

The Government and the City of London should follow the example of regional arbitration hubs such as Singapore, where sizeable market share has been developed through aggressive marketing and support from government, business, and the legal profession. This is an opportunity to be seized. 

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