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Young ICCA calls for concrete actions to maintain London’s primacy in international arbitration after Brexit

Date: 9 November 2016
Time: 18:00 - 19:30
Topic: What Does Brexit Mean for the Future of International Arbitration in London?
Venue: Jones Day, 21 Tudor St, London EC4Y 0DJ from 6:00 pm to 7:30 pm

In a convivial debate on Brexit organized by Young ICCA and hosted by Jones Day on 9 November, the young attendants considered whether Brexit will harm London’s position as a global centre for international arbitration.  Sylvia Tonova, Jones Day (Young ICCA Co-Chair) and Camilla Gambarini, Debevoise & Plimpton LLP (Young ICCA Events Coordinator) report.

In the aftermath of Donald Trump’s election as the 45th president of the United States, the London office of Jones Day hosted a Young ICCA International Arbitration Debate on Brexit.  Keynote speakers, Sophie Nappert (3 Verulam Buildings) and David Brynmor Thomas (39 Essex Chambers), debated whether Brexit would affect London’s primacy as a global centre for international arbitration.  Hilary Heilbron QC (Brick Chambers) chaired the fictional Arbitral Tribunal composed of two co-arbitrators, Suzanne Spears (Volterra Fietta) and Rémy Gerbay (Enyo Law). The Arbitral Tribunal conducted the crossfire and opened the lively discussion to the audience composed of more than 45 practitioners under-40 years old coming from different jurisdictions.  The views of both keynote speakers and members of the Arbitral Tribunal expressed during the debate were neither personal nor attributable to the speakers’ firms and chambers.  At the end of the Debate, the audience voted whether Brexit will harm London as a centre for international arbitration.
 
Sylvia Tonova¸ Young ICCA Co-Chair and Senior Associate at Jones Day London introduced the debate noting that just as the political analysts failed to predict the vote in the U.S. election, they were dead wrong on the outcome of the Brexit referendum too.  A few months after this momentous decision, the climate remains uncertain and the main questions are as follows: what does Brexit bode for international arbitration in London?  Will London retain its leading position as an arbitral centre or will it be displaced by others?  More broadly, what do the recent votes both in the UK and in the US mean for globalisation, which is arguably the foundation on which international arbitration has thrived as a field?

Postulating, as invited, that Brexit will not harm London’s primacy as a centre for international arbitration, keynote speaker David Brynmor Thomas argued that Brexit is as much a political process as a legal phenomenon.  As with a phenomenon in physics or literature, the very act of observing it, changes it.  Brynmor Thomas argued that we are all part of Brexit as a political process.  So, if we conclude that Brexit is bad for London as an international arbitration centre, then this conclusion becomes self-fulfilling.  Moreover, the political context is connected to the perception of the UK from abroad and seemingly mundane matters such as the issue of visas, which may very well affect London’s centre as an international arbitration in a very tangible way.  Brynmor Thomas nonetheless maintained that Brexit’s legal phenomenon would not dramatically change international arbitration in London. The United Kingdom will still be a party to the New York Convention and the ICSID Convention. The Arbitration Act will remain unaffected as well as the United Kingdom’s BITs. 

Co-arbitrator Suzanne Spears asked whether London would be toppled from its preeminent position as an international arbitration hub if it were toppled from its preeminent position as a global international financial centre by the departure of financial institutions from London.  Similarly, co-arbitrator Rémy Gerbay reflected on London’s origin as a hub to arbitrate shipping and commodities disputes.  Challenging Brynmor Thomas’s “pro-Brexit” thesis, Gerbay asked whether EU membership was the main cause of London’s success as a centre to arbitrate general commercial disputes and whether London will become again a hub for small-time shipping and commodities arbitrations.  Gerbay further questioned whether London’s primacy might be undermined by the general perception of London as an unfriendly place to arbitrate after Brexit.  Specifically, he considered that the law governing the merits of the dispute is often the more important factor than the seat of the arbitration or the arbitral institution.  If these assumptions are correct, Gerbay questioned whether this means that we might first see a decline in the use of English law and queried what would be the incentive for two European continental law lawyers, for example, to agree to an English law clause in their contract.

Brynmor Thomas rebutted the co-arbitrators’ questions recalling that English law is well understood and developed notwithstanding London’s close relationship to financial institutions.  In his view, the recent judgement of the High Court in Miller is positive evidence that there is a strong rule of law and high respect of the judiciary in the United Kingdom.  In other emerging centres of international arbitration, the idea of reviewing a powerful Executive would be difficult to imagine.  Accordingly, the alleged existing negative perception of London would not affect London as a seat for international arbitrations.  Brynmor Thomas concluded that exiting the EU might benefit both London and English law because English courts will not be constrained by West Tankers when ordering anti-suit injunctions nor will they use EU competition law as part of public policy. 

Sophie Nappert took the view that Brexit would likely impact London as a centre for international arbitration.  She remarked that, in the short term, Brexit’s impact on international arbitration in London does not concern legal talent, the judiciary or the Arbitration Act.  She claimed that Brexit hits something much more fundamental, namely the tenets of the rule of law that politicians with populist sentiments have undermined.

As an immigrant from Montreal, Quebec, Nappert recalled that the two referenda on Quebec’s secession from Canada contributed to the creation of the so-called “Montreal effect” among Quebeckers of her generation.  Nappert warned the audience of the “Montreal effect”, namely the diversion of energy on self-defeating issues of nationalism resulting in Montreal’s consequential loss of its status as the financial and business capital of Canada, which it had enjoyed for over fifty years by the time the 1980 referendum took place. 

Nappert explained that Montreal was home to 96 of the headquarters of Canada’s top companies in 1990.  By 2011, it had 75.  Even the Bank of Montreal now has its headquarters in Toronto.  Although the referenda did not even come out in favour of separation, the emotiveness and volatility of Quebec nationalism were sufficient to worry businesses and financial institutions.  This also had consequences on international arbitration in Canada.  Today, Canada’s global centre for international arbitration is Toronto, despite Montreal boasting top legal talent, a sophisticated legal system and an enlightened judiciary.

Nappert argued that London’s international arbitration community should no longer take for granted London’s position as a worldwide arbitration hub.  She suggested three proactive measures that London’s international arbitration community may take to avoid and prevent the “Montreal effect”.  First, global law firms should keep their arbitration practices centred in London and not seek to relocate them elsewhere.  Second, taking a long hard look at the criticisms voiced by users – time, costs, diversity deficit, transparency deficit, the perceived reluctance of tribunals to engage in proactive procedural handling – and addressing them in a practical and commercial manner.  Finally, more dialogue with the judiciary is necessary to address Lord Thomas’s concerns highlighted in his controversial speech on arbitration.

The President of the Tribunal, Hilary Heilbron QC, summing up the debate, stated that, the view expressed was that whilst we still do not know what Brexit will bring, London’s uncertainty as to its future as a centre for financial services may well impact London as a seat to arbitrate international disputes.  In the short term, however, she added that Brexit’s impact on dispute resolution clauses will hopefully not be at the forefront of corporate lawyers’ minds when rushing to close a deal.  So, the primacy of English law as applicable law and London as seat of arbitration may remain unaffected, at least for the time being.  Heilbron closed the debate by calling on the arbitration community to continue to be vigilant and act to maintain London’s primacy and perception as a cosmopolitan centre for international arbitration and not to be complacent.

The results of the Young ICCA “Brexit Debate vote” came shortly after the Arbitral Tribunal had closed the “arbitral proceedings”.  Remarkably, 48 per cent of the attendants voted that Brexit will likely harm London’s position as a global centre for international arbitration; 25 per cent voted the opposite; and the remaining 27 per cent voted that it is too early to tell. 

When asked why they voted that Brexit will likely harm London, the participants expressed their concerns about the negative impact of Brexit, driven by the uncertainty and unfavorable perception associated with Brexit.  When pushed, however, if they would choose a different seat of arbitration or a different applicable law for contracts, participants did not necessarily offer ready alternatives.  Some of the participants, particularly foreign lawyers, expressed the view that Brexit might have a negative impact on the long-term influence of London and the United Kingdom in a globalized world if it becomes more difficult for students to study in the UK or to work in the UK following their studies.  In their view London benefits tremendously from the influx of foreign students and foreign workers and from the connections with the English legal community, which are developed and maintained after these students or foreign workers return to their native countries.

A lovely cocktail reception followed the debate. Participants and speakers had the opportunity to continue discussing the outcome of the Debate’s vote and potential solutions to safeguard London’s primacy as a centre for international arbitration.