Businesses are already changing contracts so that disputes are heard in the European Union rather than the UK, according to a survey published today. Research from Thomson Reuters Legal found the UK’s decision to leave the EU is making business leaders questions whether London is still the best option as a global centre for dispute resolution.
Around 35% of the businesses surveyed have changed dispute resolution clauses in their contracts in the past two years, with around half of those having chosen for disputes to be heard in EU courts, such as those in France or Germany, rather than in the UK.
Of those businesses yet to alter their arrangements, two-fifths say they intend to review contracts if there is no significant progress in negotiations before March 2019 on the future regime that will apply after Brexit for the mutual recognition of court judgments.
Thomson Reuters said there is likely to be more appetite amongst businesses to change their approach to future contracts than to revise existing arrangements given the administrative burden this would place on in-house legal teams.
Jim Leason, Thomson Reuters’ market development and strategy group, said: ‘The fact that a third of businesses are revising dispute resolution clauses away from the English courts should be a concern for the UK’s legal profession. It is this initial selection in a contract that drives an entire industry of legal advice that supports transactional work, ongoing contract management and dispute resolution.
‘If nothing concrete comes from Brexit negotiations soon or if there is a no-deal Brexit scenario, then more and more businesses will consider taking legal disputes elsewhere.’
Earlier this month, the ISDA (International Securities and Derivatives Association) announced that it had introduced Irish and French law versions of the ISDA Master Agreement to offer its EU/EEA members both common law and civil law options.
This comes at a time when London courts have become increasingly international and reliant on litigants from around the world. Research from communications firm Portland has found that of 158 cases heard in the commercial courts in 2017/18, 59% involved litigants from outside the UK. This helped contribute to a 22% increase in the total number of litigants using the commercial court.
‘Brexit uncertainty is causing concern as businesses want clarity over their trading arrangements for the future,’ added Leason. ‘The English legal system and professions that support it are major contributors to the UK economy. Selecting English law and the English courts has long been the preference for international commercial arrangements.’
All the respondents in the research stated that their business includes contracts with an international aspect and 40% said that over half of their business is currently international.
The 94 respondents comprised a cross-section of UK and international law firms and businesses, public authorities and academics. Just over half the respondents were from the UK.