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Brexit effect on dispute resolution clauses: the rise of EU court preference

Brexit has fuelled much debate around the future of the legal and commercial landscape for UK and European businesses, and whether it might result in changes to market practice.

Amidst the inherent uncertainty generated by Brexit, questions have been raised over whether London will retain its position as a global centre for dispute resolution and, consequently, trigger a shift in businesses’ and law firms’ decision making.

To provide insight into how lawyers are approaching jurisdiction and choice of law clauses as a result of Brexit, a survey was conducted to produce a new report: The impact of Brexit on Dispute Resolution Clauses, published by Thomson Reuters.

According to the survey results—which included responses from lawyers based at UK and international law firms, businesses, public authorities and academia—Brexit has affected the approach of 35 percent of respondents to the selection of jurisdiction and choice of law clauses, including arbitration.

Additionally, the report indicates that of the 35 percent of respondents that are changing their approach to dispute resolution clauses, 18 percent are selecting different jurisdiction and/or choice of law clauses, identifying countries such as France or Germany.

Meanwhile, 65 percent of respondents have not changed their approach in light of Brexit, and are instead adopting a ‘wait and see’ approach—and are monitoring the progress of the negotiations between the UK and the EU. However, 39 percent of the same group indicated that they intend to review contracts if there is ‘no significant progress’ in negotiations in relation to jurisdiction and the future regime that will apply post-Brexit.

Jim Leason, VP, Market Development and Strategy in the Legal UK & Ireland business of Thomson Reuters, said: “Brexit uncertainty is causing concern as businesses want clarity over their trading arrangements for the future. 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”.

“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”.

“London has a long-standing reputation as a global legal centre. However, a poor outcome from Brexit could result in work and talent pivoting away from the UK legal services sector”.

To read the report in full, click here.

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