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Brexit - what does it mean for governing law and DR options?

Last week’s UK referendum on EU membership leaves many things uncertain. The effectiveness of contractual provisions selecting English law to govern contracts, English court jurisdiction or London arbitration is not one of them. The result does not change English law in the immediate term, and for the reasons addressed below should not materially alter the reasons for choosing English law, English courts or London arbitration going forward.

Should I still choose English law after Brexit?
Yes.  English law has been chosen to govern business relationships between parties from all over the world for many years. The EU referendum result has not changed the factors which make it an attractive governing law. These include:
  • the doctrine of precedence, which ensures that different courts treat like cases alike, promoting commercial and legal certainty;
  • flexibility to respond quickly to changes in market practices, patterns of dealing and custom, as the law is not fully codified; 

  • settled rules on all aspects of contract law from contract formation to assessment of damages; 

  • judges taking a commercial approach, often because of their professional background; and

  • respect for the contractual agreement struck by parties.
Currently, EU law forms part of English law and will continue to do so until specific provision is made for its continued application or replacement in UK legislation. Equally the choice of English law will continue to be respected by courts in England and other EU member states.
Yes.  English courts have long been chosen by parties from around the world for reasons that are unaffected by the referendum result, including:
  • the independence and high calibre of the judiciary;

  • the availability of specialist courts, such as the Commercial and Admiralty Court and the Technology and Construction Court, with specialist judges who understand the background to the cases before them; and

  • procedural certainty and flexibility to deal with complex cross-border disputes.
The UK currently remains party to the EU-wide system of allocating jurisdiction among member state courts and the recognition and enforcement of foreign judgments. As part of the steps to implement the EU referendum decision, the UK will need to develop an alternative structure to address these issues. This might include acceding to the Lugano Convention (to which Norway and Switzerland are party and which broadly parallels the current Brussels Regulation regime), ratifying the Hague Convention on Choice of Court Agreements or entering into alternative bilateral or multilateral arrangements for the allocation of court jurisdiction and the recognition and enforcement of judgments.
Yes. Brexit does not affect the reasons London is consistently listed as one of the most popular seats for international arbitration, including:  
  • the pro-arbitration legislative framework enshrined in the Arbitration Act 1996;

  • the reputation of English courts for supporting and not unduly interfering with arbitrations seated in London;

  • the historical appeal and global reach of the common law;

  • the presence of a pool of experienced arbitrators, counsel and experts, as well as arbitral institutions such as the LCIA, based in London;

  • the popularity of the English language and English law in international business;

  • London’s geographical location, hearing facilities and transport connections;

  • the UK’s status as a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.

Whatever the shape of future UK/ EU relations, the robust legal framework for arbitration in England and Wales persists:  

  • The Arbitration Act 1996 will continue to apply.
  • The courts’ approach to interpretation of the Arbitration Act 1996 is unlikely to change following Brexit given the limited role EU law has played in the development of the courts’ jurisprudence relating to arbitration matters – although the ability of the English courts to issue anti-suit injunctions to restrain proceedings brought in breach of an arbitration agreement may expand.

  • Since the UK will remain a party to the New York Convention, Brexit has no impact on parties’ ability to enforce UK arbitral awards in any of the 156 states that have ratified the New York Convention, including all of the other 27 EU member states. 

Please contact any of us, or your other contacts at Freshfields, for more information on these topics or the impact of the Brexit vote more generally.