The Litigation 2019 guide provides expert legal commentary on key issues for businesses. The guide covers the important developments in the most significant jurisdictions.
Last Updated: December 21, 2018
International commerce is undergoing a period of rapid, sometimes tumultuous, change. Globalisation has created new markets, new technologies, new competition and, with them, increased demand for effective mechanisms to resolve international disputes. At the same time, some of globalisation’s champions, the USA and the UK in particular, show signs of turning towards protectionism. International litigation reflects these contradictory trends.
In Europe, the United Kingdom’s decision to leave the EU has led some to question London’s continued dominance as a centre for cross-border disputes. The recognition of judgments in EU member states is governed by the recast Brussels Regulation and, at the time of writing, there is still uncertainty as to how this regulation will be replaced after the UK leaves the EU. That uncertainty may already be having an effect. In a 2018 survey of businesses, Thomson Reuters found that 35% of respondents had already changed contracts so that disputes would be heard in EU courts rather than English courts.
A number of EU member states are seeking to divert business from London, recognising the economic benefits that come from being a hub for international dispute resolution. Paris, Amsterdam, Brussels and Frankfurt have opened English-language courts or are in the process of doing so, while Dublin also seeks to position itself as an alternative to the English courts. Nevertheless, according to Portland Communications, the caseload of the English Commercial Court continued to grow in 2018, with almost 60% of litigants coming from outside the UK and the majority of foreign litigants from outside the EU. London also remains the leading centre for international arbitration in Europe.
The establishment of international-facing courts in Europe follows an earlier trend in the Middle East and Asia. The Dubai International Financial Centre Courts, the Qatar International Court, the Abu Dhabi Global Market Courts and, more recently, the Singapore International Commercial Court and China International Commercial Court seek to attract international disputes. Cases in these courts are decided by senior judges and lawyers drawn from multiple jurisdictions (except in the China International Commercial Court, where the judges are exclusively Chinese). The establishment of international courts in the Middle East and East Asia certainly reflects the eastwards shift in economic growth and opportunity. It remains to be seen, however, whether the new courts in Singapore and China can compete with more established courts in Europe and the USA or – perhaps more importantly – the already-successful arbitral institutions in Singapore, Hong Kong and China.
The USA has been increasingly hostile towards international trade treaties, which commit the USA to resolving disputes by arbitration or other means of international dispute resolution. Donald Trump pulled out of the Trans-Pacific Partnership, paused negotiations of the Transatlantic Trade and Investment Partnership with the EU and has signed a new agreement to replace NAFTA (which, at the time of writing, has not been approved by Congress). The replacement treaty – the United States–Mexico–Canada Agreement – contains more restrictive dispute resolution provisions than NAFTA.
State courts in jurisdictions such as New York and California nevertheless remain attractive choices when international litigants enter into jurisdiction agreements. Where no jurisdiction agreement exists, the US Supreme Court has scaled back US courts’ power to assume jurisdiction over foreign companies in disputes that arose outside the US (Goodyear Dunlop Tires Operations SA v Brown, Daimler AG v Bauman, BNSF Railway Co v Tyrrell and Bristol-Myers Squibb v Superior Court of California). The change is likely to be welcomed by foreign litigants anxious about the US courts exercising jurisdiction over disputes that have no connection to the USA. The US Supreme Court continues to be supportive of international arbitration (as in its unanimous decision in the recent case of Henry Schein Inc v Archer & White Sales Inc).
Despite attempts by newly formed courts to attract international business, arbitration remains the preferred form of dispute resolution for businesses operating across borders. In the 2018 White & Case and Queen Mary University of London International Arbitration Survey, 97% of respondents chose international arbitration – on its own or with other forms of ADR – as their preferred means of dispute resolution in international contracts. The cornerstone of international arbitration’s success is the New York Convention, ratified by 159 states, which celebrated its 60th anniversary in 2018. The Convention protects the enforcement of arbitration agreements and awards, ensuring, with rare exceptions, that arbitral awards can be enforced against award debtors. In its global reach and in its success, the New York Convention remains unparalleled in other forms of international dispute resolution.
Increased interconnectedness also brings new challenges. Data protection regulations, such as the General Data Protection Regulation (GDPR) introduced in the EU in May 2018, can cause serious difficulties to lawyers and their clients engaged in cross-border litigation. It may be difficult or impossible to reconcile disclosure obligations to a court or tribunal in one jurisdiction with data protection obligations owed in another jurisdiction. If the wrong balance is struck, serious financial penalties could result (in the most serious cases, GDPR permits fines of EUR20 million or 4% of global annual turnover, whichever is the greater). Cybersecurity issues also pose a threat to law firms, which hold sensitive commercial information. The UK’s National Cyber Security Centre found that 60% of law firms reported an information security incident in 2016 to 2017. Litigators must adapt to new ways of processing and protecting the vast amount of information generated by modern disputes.
The outlook for the coming year is uncertain: fears are not unwarranted that, after a long period of increased international co-operation in cross-border disputes, more countries are turning inwards. The demand among businesses for international dispute resolution is, however, unlikely to diminish any time soon. Litigators might also reflect that change – even tumultuous change – will always lead to disputes.