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CIArb Features

The Future of London-seated Arbitrations

3 November 2016 Features
By Sabina Adascalitei LLB, LLM, MCIArb, Research and Academic Affairs Coordinator

Choosing a suitable seat of arbitration is of paramount importance. The decision will play a vital role in how the arbitral proceedings are conducted, especially with regard to the involvement of domestic courts. According to the 2015 QMUL – White & Case International Arbitration Survey, London has led the way as the most popular arbitral seat for the past five years.

Crucially, parties choose to resolve their disputes via arbitration in London, even when they have no connection to the UK. The reasons underlying this choice are primarily based on the reputation and recognition of the seat, which, in turn, are linked to the features of the English legal system and its impeccable enforcement record.

Ad hoc Arbitration

The English Arbitration Act 1996 provides a comprehensive framework for dispute resolution. According to the Act, disputes should be resolved by a fair and impartial tribunal in a timely and cost-efficient manner. Parties play a key role in how the arbitral proceedings will be conducted, subject to public policy considerations.

The intervention of the court is limited to measures (usually injunctive reliefs), which allow the arbitral proceedings to run smoothly when either party causes delays.

Furthermore, the Arbitration Act as well as English law, more generally, support confidentiality of arbitral proceedings. This is a very important feature that appeals to parties when choosing London as their seat of arbitration.  

Institutional Arbitration

London-based arbitration institutions are well established. They enjoy world-wide recognition and offer extensive experience in dealing with multi-jurisdictional disputes and international parties. Their rules take into account current legal and economic developments, a direct consequence of London being an important international trade centre. Focusing on the institutional perspective,

The Chartered Institute of Arbitrators launched a set of guiding principles entitled The CIArb London Centenary Principles for an efficient and effective seat of arbitration. They encompass a modern arbitration law, an independent judiciary, legal expertise, commitment to education, accessibility and safety for parties, functional facilities, professional ethics, enforceability and arbitrators’ immunity.

 Commenting on the Principles, Professor Doug Jones AO C.Arb highlighted that they offer something unique, a “touchstone” against which established seats of international arbitration can measure their performance. They are also there to provide guidance for developing seats.

The Brexit Scenario

It has been argued that the UK’s withdrawal from the EU will not have a major impact on London as seat of arbitration. Aside the above-mentioned characteristics, the popularity of London as seat of arbitration also stems from the fact that English law is the preferred choice of governing law. English law has been used extensively in commercial contracts between international parties due to the fact that it promotes freedom of contract, without allowing for punitive damages.

Furthermore, there will be no enforcement issues relating to English arbitral awards in EU countries, as this is a matter that would be governed by the New York Convention 1958. All 28 EU member states are signatories of the New York Convention and thus, enforcement will not depend on any EU mechanisms.

A big change may occur with regard to the West Tankers case, where the CJEU held that an anti-suit injunction issued by the English courts, against a party who commenced court proceeding in Italy, in breach of an arbitration agreement, is incompatible with EU Law.

The ruling of the CJEU has further been confirmed in the Turner v Grovit case, where the court stated that it is prohibited to rely on anti-suit injunctions in respect of EU court proceedings, even though they were brought in breach of an exclusive jurisdiction clause. A departure from this position may make London-seated arbitrations more attractive to parties, as English courts would be able to grant anti-suit injunctions in respect of court proceedings commenced before EU courts.

The number of London-seated arbitrations will not decrease, because arbitration in England has enjoyed great success, irrespective of the UK’s EU membership. Furthermore, with the fluctuation of the pound sterling, parties may find London a less expensive place to settle disputes.