Frankfurt eyes London's commercial litigation crown
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Brexit uncertainty, an underfunded civil justice system, and a less diverse judiciary are causes for concern
Complacency on the part of the government, its Brexit negotiators, and the courts could see London relegated from its position as the leading hub for cross-border disputes, with ambitious EU cities such as Frankfurt ready to take advantage of the situation.
Last month, the justice select committee backed the legal community in urging the government’s Brexit negotiators to safeguard the UK’s position as a leading centre for international litigation. Its report came just weeks after it was announced that the Rolls Building was to be rebranded the ‘Business and Property Courts of England and Wales’ from June in an attempt to shore up the jurisdiction’s reputation post-Brexit and to enhance the connection between the regions and the capital.
Just this week, Sir Brian Leveson, president of the Queen’s Bench Division, and Sir Geoffrey Vos, chancellor of the High Court, announced the forthcoming launch of the business and property courts in Birmingham, the dawn of ‘a new era for specialist civil litigation serving the Midlands region’. But just as the judiciary begins dispersing its power across England and Wales, moves are afoot to dethrone London as the preeminent dispute resolution hub.
On 30 March, ‘Justice Initiative Frankfurt’ was presented to German lawyers, judges, and business leaders with one aim: to attract more financial disputes to Frankfurt at the expense of London. The initiative launched by law professors Burkhard Hess, Thomas Pfeiffer, Christian Duve, a partner at Freshfields Bruckhaus Deringer, and Roman Poseck, the president of the Frankfurt Court of Appeal, is backed by the federal state of Hessen’s minister for justice, Eva Kühne-Hörmann, and will look to take advantage of the uncertainty surrounding the UK’s legal services market post-Brexit.
‘With the expected relocation of the financial centre from London to Frankfurt (and indeed, likely to other European locations) a relocation of the judicial hub is also to be expected,’ Hess told more than 120 stakeholders who attended the conference last month. ‘The Frankfurt civil courts already have a high degree of specialisation to hear financial and banking disputes.’
Ed Crosse, a partner at Simmons & Simmons and president of the London Solicitors Litigation Association, told Solicitors Journal that he was not surprised at the Frankfurt courts’ ambitions: ‘Overseas courts will certainly regard the UK’s vote to leave [the EU] as presenting an opportunity to erode the predominant role UK courts enjoy as a forum of choice for resolving international disputes. They are suggesting Brexit means “exit” for UK litigation and point to the potential loss of the Recast Brussels Regulation, which provides uniform and effective rules for determining jurisdiction and the automatic recognition and enforcement of member state judgments.’
Yet the position is by no means as stark as other EU-based lawyers would like to suggest, explains Crosse. ‘There is now a clear consensus as to what the UK government can and should do to ensure choice of court agreements and any resulting judgments are respected by the EU (through the signing of the Hague Convention on Choice of Court Agreements). Similarly, English governing law clauses will continue to be binding on member state courts, regardless of the fact that the UK will cease to be one.’
The Simmons & Simmons partner lists the reasons why so many international litigants choose London to resolve their disputes: an unrivalled record of impartiality; the world’s best commercial judiciary; an ability to obtain disclosure; rules allowing for adverse costs orders; assertion of privilege; a large pool of legal talent; and a legal system ‘uniquely attuned to the realities of international commerce and finance’. For these reasons, Crosse believes the UK will continue to attract litigants and remain largely unaffected by Brexit.
‘English contract law is also largely unaffected by Brexit and likely to continue to be widely used,’ he adds. ‘It respects freedom of contract and provides a high degree of certainty. By contrast, comparatively few commercial agreements between international counter parties are governed by German law and the suggestion that a party would be content for an English law dispute to be determined by a foreign court is ambitious to say the least.’
However, uncertainty over whether EU member state courts will continue to recognise and enforce English jurisdiction clauses and judgments will likely lead to nervous clients considering alternative jurisdiction clauses in their commercial agreements. ‘That, in turn, could lead to a gradual decline in workflows for the English courts and for those who practise in them over the coming years,’ says Crosse. ‘There is too much at stake for the UK government, our courts, and profession to be complacent.’
At the Frankfurt conference, a range of operational reforms aimed at increasing the attractiveness of the city’s civil and commercial courts to make it a ‘compelling place for dispute resolution’ were proffered. This could be achieved, say the initiative’s authors, by investing in a ‘well-equipped court’ and the design of modern procedural rules that deliver a ‘practical, user-friendly framework for the settlement of international commercial disputes’.
‘When designing new procedures, the Frankfurt courts, like many others such as the Singapore International Commercial Court, will undoubtedly select what they perceive to be the most attractive procedures used by other jurisdictions and avoid those that are receiving criticism,’ explains Crosse. ‘We cannot be complacent about such matters.’
Measures are already underway to tackle some of the less attractive features of High Court litigation, including the creation of the fast-track shorter and flexible trials scheme, taking a fresh look at disclosure, which, as Crosse explains, is widely perceived to be too burdensome and expensive, and breaking down divisional boundaries with the creation of specialist lists.
In addition to these welcome procedural reforms, however, Crosse says lawyers should not ignore the proverbial elephants in the room: ‘The woeful lack of funding of our civil courts service and concerns about our ability to attract and retain a high-quality diverse judiciary going forward. If these issues are not addressed, then over time the predictions coming out of Frankfurt may well turn out to be accurate.’
John van der Luit-Drummond is deputy editor of Solicitors Journal