London's future as an international arbitration hub - easy as A, B, C
Next week I will be speaking to a group of parliamentarians about the challenges which London may face in the future in maintaining its status as a leading arbitration venue. This led me to look into the current state of arbitration in London and to consider what, if any, threats are on the horizon. Are we complacent about London? And if we are, should we be?
My conclusions? It’s all looking pretty good for London. According to one study, English law is chosen as the governing law for 40% of all arbitrations globally (The CityUK Survey on Legal Excellence, 2018). The same study concluded that there were approximately 4,300 international arbitrations and 27,000 domestic proceedings (including mediations, trade association arbitrations and adjudications) in London in 2017.
When things look rosy, it is often difficult to foresee challenges ahead, but in considering what London may face in the future I think there are two potential challenges - the possible amendment of the Arbitration Act 1996 and Brexit and one real and ongoing challenge - that of managing the costs of an arbitration in London.
The A word - Amendment
In 2016 the then Lord Chief Justice, Lord Thomas, gave a fairly inflammatory speech where he discussed the limited right to appeal under section 69 of the Arbitration Act 1996 and said that this had become a “serious impediment to the development of the common law”. Basically he was objecting to the fact that arbitrations do not contribute to the development of the law because they are decided behind closed doors. He argued for a far less restricted right of appeal to the courts from arbitration awards so that the appellate arbitration decisions could contribute towards the development of English commercial law.
Lord Thomas’ suggestion, if followed, would have serious repercussions for London as a leading hub for arbitration. Companies choose arbitration not so that they can contribute to English case law but so that they can keep their disputes private and away from the courts. The Law Commission announced in 2016 that it was considering reform to the Arbitration Act 1996 and for some time there was real concern that the right of appeal could be broadened. In its 2018 report the Law Commission seemed to have moved away from this approach however, so the threat of amendment of the Arbitration Act in this regard seems to have receded.
The B word - Brexit
Brexit is a challenge, that much is clear, but is it a challenge to London’s future as an international arbitration hub? The answer, as with everything Brexit, is not obvious.
One argument is that Brexit will Brexit will impact the ability of London to attract top talent lawyers from around the world. Perceived immigration restrictions may well affect the cultural diversity of London’s international arbitration community. In the recent Queen Mary Survey over half of the respondents (55%), thought that Brexit was unlikely to bring about any change as far as the use of London as a seat is concerned. Almost 1 in 10 respondents (9%) even expected Brexit to have a positive impact on the choice of London as a seat. The remaining 37% of respondents were more sceptical, anticipating that the use of London as a seat will suffer due to Brexit. Personally, I am not sure that Brexit will have much influence on London as a seat, the English legal system should continue to be perceived as neutral and impartial, the legislative framework applicable to arbitration and the English courts should continue to be supportive of arbitration, particularly if the limited right of appeal under section 69 remains limited, and the UK will continue to be a party to the New York Convention.
The C word - Cost
Perhaps a more realistic challenge to London’s pre-eminence as an arbitration hub is the cost of running an arbitration in London. Having practised extensively in the United States I am very alive to the higher fees charged by arbitrators in London, the higher costs of hearing rooms and the higher legal fees. That said, as my former boss liked to say “if you think good lawyers are expensive, you should try bad ones” and the quality of legal services in London is second to none. As long as London-based arbitrators, law firms and institutions remain conscious of the need to control costs then this challenge can be addressed.
So, on balance, I think London is pretty secure at the moment. I invite comments as to whether this complacency is merited.