The shock effect of Brexit has drastically reduced as the months following the December 31st dissolution continue to increase. However, the impact of the decision and the after effect on dispute resolutions in relation to international trade still lingers. As expected, there were major changes in UK courts’ abilities to enforce laws in other former EU member countries as they formerly did.
As it stands, all Bilateral Investment Treaties (BITSs) that EU members enjoy are now alien to the UK, and this has raised concerns among the law and dispute resolution community in the UK and EU countries on how disputes can be resolved.
Jurisdiction and Enforcement Situation Concerns
Arbitration and the National courts before Brexit have enjoyed a good relationship when it comes to enforcing court rulings. The UK was a benefactor of the Lugano Convention and the Brussels Regulations that gave its courts the power to:
• Wade off proceedings from EU courts that breached an Exclusive Jurisdiction agreement in the form of a clause.
• To enforce judgments in any of the EU countries.
These rights enjoyed by the UK no longer exist as of January, 1st 2021, when Brexit became official. To counter the obvious litigation gap, the UK sought to accede to the Lugano Convention in April to give its court an edge to enforce court Judgment as provided in its framework. However, The EU, whose consent is needed, has refused to provide support and may never will.
The UK, for now, has an agreement with Norway that allows each country the power to enforce court judgments across their Jurisdiction, but this bi-lateral agreement is still minimal and does very little to mitigate the challenge that UK courts now face when it comes to enforcing judgments in former members’ countries.
The Hague Convention, which was signed into agreement in 2005, is the only form of juristic relationship the UK has with the EU. But, unfortunately, it does not deal with the enforcement of court orders wholly and is limited. And most times, local laws are usually enforced by the country that has the power to enforce, undermining the ruling of the other.
Effects of Brexit in international arbitration
For the National courts, the situation is pretty clear. Judgments and rulings carried out in the UK may not stand if they will need to be enforced in another EU country, and that goes a long way to affect dispute settlement. However, while the situation seems like a serious law for the UK court, the Effects of Brexit in international arbitration are non-existent and, at worse, extremely minimal.
For the International arbitration community, Arbitration after Brexit doesn’t seem bad at all, and that can be credited to the universalized nature of the system. The New York Convention has not been set aside with Brexit and won’t be. This means that states, be it the UK and EU, signed into a contract to use arbitration as a dispute resolution mechanism must hold on to the agreement on which arbitration is made valid.
Unlike court proceedings, International Arbitration rulings are expected to be respected in the UK or any EU country whenever disputing parties have ties to the duo. Foreign awards will still be recognized and enforced according to the New York Convention. The Convention has over 160 contracted state parties, including the UK and all other EU member states (27). Every state party is obligated to enforce awards except on the grounds of misconduct or any other arbitrary existing laws that support the setting aside of awards.
The possibility of an award being enforced at all EU countries and the UK despite Brexit now makes arbitration a more desirable option for the resolution of international commercial disputes instead of the National Courts. Before Brexit, Arbitration has always posed a strong case as the best option for energy and commercial disputes in the UK, EU, and most civil law and common law states. Hence Brexit seems only to be a blessing in disguise as far as the International arbitration community is concerned.
However, it is essential to note that arbitration as a dispute resolution method will most likely be successful when it is embedded in a contract such that the Brexit effect does not significantly affect it. Parties across Jurisdiction must ensure that they both unanimously agree to arbitration as a resolution mechanism in the possible situation of dispute arising. This will make enforcing rulings and awards easier and reduce the risk of it being set aside.
Clearly, the effects of Brexit in international arbitration are not in any way negative, thanks to the system’s universality. Also, due to the system’s autonomy and how much power parties can decide to surrender, Arbitration after Brexit still looks good. Parties will only need to adjust how a case will be resolved and ensure that it can be enforced with respect to the Jurisdiction fit to do so.
Brexit and international arbitration are undoubtedly a serious discussion as enforcing an award is a very important part of the system. If you or your firm have a lingering dispute involving the UK and former EU members and you believe that the Brexit effect may play a role, it is very important that you seek professional help.
Many arbitration firms offer international commercial dispute resolution services. However, you should stick to a firm with a reputation for helping clients get the best out of a dispute.
Rattsakuten is a major arbitration institution that has some of the most skillful professionals for handling disputes. You can call the firm and inquire about their service to know how they can help you get the best out of a dispute.