Brexit already turning businesses away from resolving contract disputes in UK

Brexit: Companies eyeing up arbitration

Brexit may result in a “substantial minority of businesses” changing from having their contractual disputes heard in the UK to being heard in EU courts, according to new research.

Some 35% of businesses surveyed by Thomson Reuters Legal said they have already changed jurisdiction and choice of law clauses so that any disputes are heard in non-UK courts.

Just over half (51%) have chosen for disputes to be heard in EU courts, such as those in France or Germany.

The research said this was caused by uncertainty over whether the UK would continue to be part of the regime for mutual recognition of court judgments with the EU.

Of those companies that have not made changes to contracts as yet, 39% said they intended to review this if there was no significant progress on mutual recognition before March 2019.

A fifth of these indicated that they would look at arbitration instead of a different jurisdiction.

The research said: “The number of businesses conducting a contract review may increase even further in the lead up to March 2019 if no progress is made in negotiations.

“Many businesses may be adopting a ‘wait and see’ approach for now before deciding on whether to review contracts nearer the time.

“On 3 July 2018, 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 solutions to address this risk associated with its English law version.”

Jim Leason, vice-president of market development and strategy at Thomson Reuters Legal, 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.”

All the 94 respondents in the research stated that their business includes contracts with an international aspect and 40% said that over half of their business was international. Over half the respondents were from the UK, a third outside the EU, and the rest inside the union.

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