IMPACT OF BREXIT ON DISPUTE RESOLUTION CHOICE BETWEEN LITIGATION AND ARBITRATION
Impact of Brexit on Dispute Resolution Choice Between Litigation and Arbitration
Arbitration代写 In comparison to litigations, the circumstances for arbitration are clear since Brexit has little direct effect.
The United Kingdom voted to leave the European Union on 23rd June 2016¹ and on 29th March 2017. The government of the UK served formal notice to invoke Article 50² of the Lisbon Treaty to terminate it’s EU membership and initiate exit process. Since then, Brexit has been the most talked topic in political, social and commercial circles. However, there is little focus on the impact of Brexit on dispute resolution and co-operation. That is foundation of commerce and potentially the most significant in the bid to ensuring businesses do not suffer post-Brexit. This paper focuses what are the impacts of Brexit on the choice of dispute resolution in the United Kingdom, including international dispute resolution.
The main concern is the international commercial dispute resolution after Brexit. The reason being, after the exit, most businesses will be in disputes at one point or the other and the only recourse is dispute resolution so as investors can protect their rights and interests. The need to manage resources, costs, relationships, and time. Dispute resolution is a multifaceted area that covers conciliation, litigation, negotiation, arbitration, mediation, adjudication among others. Litigation and arbitration are the two main forms of dispute resolution concerned in post-Brexit.
¹ Matthew J. Goodwin and Oliver Heath, ‘The 2016 Referendum, Brexit And The Left Behind: An Aggregate-Level Analysis Of The Result’ (2016) 87 The Political Quarterly.
² Simon Wieduwilt, ‘Article 50 TEU – The Legal Framework Of A Withdrawal From The European Union’ (2015) 18 Zeitschrift für europarechtliche Studien.
As a member of the EU, the UK has comprehensive system of private international law that is applicable to all Member States. Some of the main instruments that bestow powers include: Recast Brussels I Regulation that deals with jurisdictions and recognition as well as enforcement of judgments in civil and commercial matters³; Rome I Regulation that govern contracts obligations⁴; Rome II Regulation that govern non-contracts obligations⁵; Service Regulations that govern judicial and extrajudicial civil or commercial issues⁶; and Taking of Evidence Regulation the govern the cooperation between member states on accessing evidence in civil and commercial issues⁷. These EU rules will not be applicable in post-Brexit.
In the event of a ‘no deal’ Brexit, the EU (Withdrawal) Act 2018 (EUWA) will be invoked to convert all the EU legislation into UK law. The UK government will have a choice on which of these laws to keep, change or remove. However, as for the principles or decisions contained in the case laws of the Court of Justice of the EU (CJEU). They do not bind the UK and hence have a choice refer anything to/from CJEU when the need arises.
In terms of jurisdiction, Recast Brussels Regulations will no longer be applicable to the UK because they require reciprocation. Arbitration代写
In response, the UK government has drafted Civil Jurisdiction and Judgement Regulations 2019 (CJJR) that repeal Recast Brussel Regulation. Also, it is likely that the UK may accede to the Hague Convention in Choice of Court Agreement 2005 or the Lugano Convention to govern matters on civil and commerce. The conventions offer the UK the most convenient and stability in the determination of commercial matters.
Whichever option that prevails, that is the UK government chooses not to accede to the Hague Convention on Choice of Court Agreement or the Lugano Convention or fail to apply. Commercial investors should know that national laws of the UK and the UE members on jurisdiction, recognition and enforcement apply. The laws are the same in all aspects as they are applied by non-EU countries.
³ Regulation 1215/2012, of the European Parliament and of the Council of 12 December 2012 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (Recast), 2012 O.J. (L 351) 1 [hereinafter Brussels Recast].
⁴ Regulation (EC) No 864/2007 of the European Parliament and of the Council 17 June 2008 on the law applicable to contractual obligations (Rome I)
⁵ Regulation (EC) No 864/2007 of the European Parliament and of the Council 11 July 2007 on the law applicable to non-contractual obligations (Rome II)
⁶ Regulation (EC) No 1393/207 of the European Parliament and of the Council of 13 November 2007 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters (service document), and repealing Council Regulation (EC) No 1348/2000.
⁷ Council Regulation (EC) No 1206/2001 of 28 May 2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters.
Rome I and Rome II are also applicable law if the UK chooses to retain them by virtue of Law Applicable to Contractual Obligations and Non-Contractual Obligations Regulation 2018 (LACONCO). The advantage of these laws is that they do not need reciprocity. On the other hand, for the service and evidence, The Service of Documents and Taking of Evidence in Civil and Commercial Matters Regulation 2018 will be used to revoke the Service Regulation and the Taking of Evidence Regulation.
The disputed parties opting for litigation will then be required to use the Hague Service Convention and the Hague Convention on the Taking of Evidence Abroad. Although the conventions are difficult in application and process compared to the Service Regulation and the Taking of Evidence Regulation. They provide the most appropriate alternative arrangements. The parties to a commercial contract are required to include in the agreement a clause that stipulates an agent to the service of the process where applicable.
Therefore, in the case of ‘no deal’, businesses need to have exclusive jurisdiction clauses. That outline the jurisdiction, recognition and enforcement under the terms specified in the contract. When the UK exits, the process of recognition and enforcement will be complicated and expensive. Although the applicable law, services and the acquisition of evidence might not change much, investors need to include a clause stipulating an agent for service when need arise.
In comparison to litigations, the circumstances for arbitration are clear since Brexit has little direct effect. Brexit will not have an impact on the UK’s substantive law on contract and tort. Arbitration is a procedural law contained in the English Arbitration Act 1996 and it remains unchanged by Brexit⁸. Arbitration on its own is not affected by the Recast Brussels Regulation. As such, any challenges in jurisdiction, recognition and enforcement will not affect the judgment made through arbitration.
In essence, the enforcement and recognition of arbitration awards are protected by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958⁹. Both the UK and EU members remain parties to the New York Convention in post-Brexit. Thus, Brexit will not change the relationship recognition and enforcement of arbitration awards between UK and other EU member countries.
While there are no direct impacts of Brexit on arbitration, there are some foreseeable elements of it that will be affected, however. Arbitration代写
For instance, the anti-suit injunctions which might have positive impact¹⁰. These are injunctions that prevent one party from commencing pursuit that is a breach of contract agreement. These are powerful forms of ancillary relief the English court use to in the bid to support arbitration practice. English court has discretion to grant relief to non-EU arbitrations but not able to issue injunction against proceedings. That are the breach of an arbitration agreement before the court of another EU member country.
According to the case West Tanker Inc. v Allianz SpA¹¹, European Court of Justice found it incompatible for the court of an EU member country to issue injunction against a person to continue with proceedings in another EU member country claiming to protect the arbitration agreement. The reason being that Brussel Regulation retained the position. This is supported by the case of Nori Holding Ltd v PJSC Bank Otkritie Financial Corporation¹² when the English High Court upheld the West Tankers law.
The Bank was declined to continue with Russian court proceedings.
But did not restrain Cypriot court proceedings against the arbitration agreements. Therefore, in post-Brexit, there may be revival of anti-suit injunctions against proceedings in EU member countries. In such cases, the parties to the contract need to check the recognition and enforceability of the contract and agreement under the national laws of both countries.
⁸ R. Shackleton, ‘The Applicable Law In International Arbitration Under The New English Arbitration Act 1996’ (1997) 13 Arbitration International.
⁹ United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517[hereinafter New York Convention].
¹⁰ Steven R. Swanson, Antisuit Injunctions in Support of International Arbitration, 81 TUL.L.REV.395, 412–15 (2006).
¹¹ Case C-185/07, Allianz SpA v. West Tankers, Inc., 2009 E.C.R. I-00663.
¹² Nori Holding Ltd v PJSC Bank Otkritie Financial Corporation, 2018 EWHC 1343 (Comm).
Advantages and Disadvantages of Arbitration and Litigation
In international trade and commerce, arbitration is a common dispute resolution. Research has shown that more than 90 percent of international trades are governed by arbitration clause¹³. As international trade increases so do clauses provide for international arbitration. In the context of Brexit, arbitration has some advantages and disadvantages.
In essence, commercial arbitration is a way of preserving neutrality, expertise, confidentiality, and co-ordination as well as certainty in the dispute resolution. Arbitration is also a less costly and fast way of resolving disputes. The reason being, the parties can customize certain procedures to save on time and money. It is protected by the New York Convention and parties have liberty to choose the agents for the recognition and enforcement should the need arise. Brexit will not affect the UK member to the New York Convention.
However, arbitration is faced with certain limitations. First, the resolution is binding and both sides have no right to an appeal. It means that there is no room for one party to correct the wrong in the arbitration decision. Secondly, the arbitration process lacks cross-examination of testimonies given by witnesses. Thirdly, where parties only choose arbitration as the only method of dispute resolution then they relinquish flexibility to use other methods in dispute resolution. Lastly, there are no standards for use by the arbitrator even though is supposed to follow the law.
¹³ Hunter, ‘International Commercial Dispute Resolution: The Challenge Of The Twenty-First Century’ (2000) 16 Arbitration International.
Traditionally, litigations have been the most preferred method in dispute resolution. However, with the growing demand for the court’s time, parties began to consider other options. Although there are notable advantages that accrue to litigations, the disadvantages outweigh them and hence create preference for alternative dispute resolution such as arbitration. The most notable ones include time-consuming, lack of flexibility, and costly. Commercial trades do not require expensive proceedings that are complex and take longer to be solved. Long court processes and costs may hurt the business and relationships.
Overall, it is important to note that Brexit impact on dispute resolution frameworks between the UK and the EU member countries. Since at present time there is no certainty of the ultimate deal, businesses should be prepared for the worst-case scenario that is the ‘no deal’ Brexit. If the parties choose litigation under no-deal situation. Then the contracts should have exclusive jurisdiction clauses as well as recognition and enforcement. However, owing to the issues that might arise in litigations parties to a contract can choose arbitration. There is greater certainty regardless of the Brexit course and effect especially regarding enforcement.
Council Regulation 44/2001, of 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, 2001 O.J. (L 12) 1 (EC) [hereinafter Recast Brussels I]
Council Regulation (EC) No 1206/2001 of 28 May 2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters.
Regulation (EC) No 864/2007 of the European Parliament and of the Council 17 June 2008 on the law applicable to contractual obligations (Rome I).
Regulation (EC) No 864/2007 of the European Parliament and of the Council 11 July 2007 on the law applicable to non-contractual obligations (Rome II).
Regulation (EC) No 1393/207 of the European Parliament and of the Council of 13 November 2007 and repealing Council Regulation (EC) No 1348/2000.
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517 [hereinafter New York Convention].
Case Laws Arbitration代写
Case C-185/07, Allianz SpA v. West Tankers, Inc., 2009 E.C.R. I-00663.
Nori Holding Ltd v PJSC Bank Otkritie Financial Corporation, 2018 EWHC 1343 (Comm).
Goodwin MO Heath, ‘The 2016 Referendum, Brexit And The Left Behind: An Aggregate-Level Analysis Of The Result’ (2016) 87 The Political Quarterly
Hunter M, ‘International Commercial Dispute Resolution: The Challenge Of The Twenty-First Century’ (2000) 16 Arbitration International
Shackleton S, ‘The Applicable Law In International Arbitration Under The New English Arbitration Act 1996’ (1997) 13 Arbitration International
Wieduwilt S, ‘Article 50 TEU – The Legal Framework Of A Withdrawal From The European Union’ (2015) 18 Zeitschrift für europarechtliche Studien
Swanson Steven R, Anti suit Injunctions in Support of International Arbitration, 81 TUL.L.REV.395, 412–15 (2006).