Businesses look to EU courts

Large businesses are abandoning English law in favour of EU courts for dispute resolution because of Brexit, research shows.

In a survey of 94 UK and international law firms and businesses by Thomson Reuters Legal, 35% said they have changed the jurisdiction in their dispute resolution clauses since the EU referendum. More than half of these have switched their dispute resolution clauses from a UK to an EU jurisdiction, with France and Germany the most popular choices.

Of those yet to make any changes to their contracts, two-fifths say they intend to review contracts if no significant progress is made in negotiations before March 2019 on a post-Brexit regime for the mutual recognition of court judgments.

However, there is a silver lining for English lawyers in the shape of arbitration. One in five of those yet to make a change are considering opting for arbitration rather than the courts in their contracts, and England is the most popular destination for this.

The report, The impact of Brexit on dispute resolution clauses, published this week, may heighten lawyers’ fears that Brexit could undermine London’s position as a global centre for dispute resolution.

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

‘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.’

In recent years, some EU countries have been stepping up their efforts to challenge London’s legal crown—projects to open English-speaking courts are currently underway in Brussels, Paris, Frankfurt and Amsterdam (see ‘EU lawyers court expansion’).