Arbitration: a solution to the problem of enforcement post Brexit?

08.03.19

Manufacturers, suppliers and others often trade across multiple jurisdictions and contract with parties in various countries all over the world. If something goes wrong, and you need to pursue a claim, enforcing the eventual decision of a UK court in another country can be a challenge. Our recent briefing on commercial disputes in a no-deal scenario can be found here.

The post-Brexit future of cross-border commercial disputes

Brexit has ushered in a further layer of uncertainty in this area. At present, there is a simple regime whereby court decisions of EU Member States are mutually recognised and enforceable by the courts of all the Member States. This makes enforcing judgments against companies based in other EU countries relatively straightforward. The UK may (although there’s obviously no guarantee) be able to come to a new, similar arrangement with the EU post Brexit, but there’s no indication as of yet as to what that would look like, or when it might be agreed. The UK Government has published a no-deal technical notice on handling civil legal cases that involve EU countries.

Is arbitration the solution?

One way to mitigate against this uncertainty now is to include an arbitration clause in the dispute resolution section of your contracts. Such a clause would provide that any dispute would have to be referred to arbitration, rather than the parties proceeding (once other steps such as negotiation or mediation have been exhausted) to a traditional litigation under the jurisdiction of any particular court. Arbitration is a flexible, confidential process which allows parties to select their own ‘judge’ (an arbitrator) with suitable expertise to determine the issue. There are very limited grounds for court interference in decisions of arbitrators and generally no right of appeal to the Supreme Court. Parties can control costs by agreeing the extent to which the arbitrator can award costs against the unsuccessful party.

Crucially for those involved in international trade, arbitral awards are already recognised in most jurisdictions far more readily than ‘foreign' court judgments, under various international agreements that bind most countries in the world. At present this is most useful when dealing with countries outside of the EU, but that principle means that, if you include arbitration clauses in your contracts now, you can have confidence that it will be straightforward to enforce decisions in any EU country, regardless of whether the UK and EU reach an arrangement on enforcing court judgments post-Brexit.

For more information on international arbitration or advice on including an arbitration clause in a contract, please get in touch with Iain Rutherford or your usual Brodies contact.

Please do visit our Brexit Hub for regular updates on Brexit related issues, including our checklist of key questions businesses should be asking themselves to assess how ready they are for Brexit.