In this article, we consider some of the possible areas and impact Brexit could have, particularly in relation to investment arbitration, international trade and cross-border contracts. We also emphasise the importance of proactive guidance in dealing with some of the challenges to come.

1. Brexit: Some practical considerations for investment arbitration, international trade and
cross-border contracts
“How quickly the unthinkable became the irreversible”. 1
With the implications of the recent
Brexit referendum ricocheting through the continent and further afield, those with interest in
international trade will be paying close attention to the consequences that the situation may
trigger, with regards to their cross-border business. Whilst little has been said as to the
specificities of the proposed withdrawal, there are a number of areas where legal consultation
is advised for those conducting business affairs in the UK, Europe, as well as other countries
outside of the EU.
Can existing agreements to arbitrate hold?
Economic volatility, possible isolation from continental Europe and political instability could all
contribute to an increase in commercial disputes following the Brexit result. Never has there
been a time where staged ADR or arbitration agreements included in international contracts
have been more valuable, this is more so as any eventual arbitral award would not be affected
by the UK’s membership of the European Union. This is due to compulsory recognition and
enforcement mechanism in all 156 signatory states2
. That having been said even with the
agreement to submit future disputes to arbitration, there are however unfolding political,
economic and legal developments that need to be considered and closely monitored which may
give rise to unforeseen disputes.
Internal Company Restructuring
The moment the Brexit decision was announced, strategic plans for companies with
transnational business may require redrafting and reconsideration. With the short, mid and
long term future of the UK very much up in the air, many international investors will be hesitant
to pursue potential or existing investment opportunities in the UK. It is natural their search for
stable and profitable returns may take them outside of the political landmine that the UK is
now subject to. International business interests and investors will no doubt look at ways they
can structure or restructure investments within their desired jurisdiction, in order to gain
maximum benefits and protection for their investment. It is expected that those within the EU
1
http://www.economist.com/news/leaders/21701265-how-minimise-damage-britains-senseless-self-inflicted-
blow-tragic-split accessed on 24th June 2016
2
New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958

2. will be able to move their investment with ease, as we await the proposed 2 year negotiation
period to be triggered by the evocation of article 50 of the Treaty on the European Union.
Investment Treaty Shopping?
For those who are contemplating corporate restructuring or simply moving assets from outside
the EU, they must employ much greater caution. Investors from over 100 countries that
currently enjoy protection courtesy of the bilateral investment treaties (BIT) between the UK
and other countries outside the EU3
will need to identify and scrutinise the specific terms of the
BIT that covers the relationship between their home state and their host state.
Philip Morris Asia Limited v The Commonwealth of Australia4
represents a landmark
international arbitral decision which penalised an international conglomerate for ‘treaty
shopping’ in order to maximise investment opportunities. Whilst merely restructuring an
investment seemingly does not amount to an abuse of power, when such a manipulation of the
system is severe – there are grounds for action.5
The recent decision and conclusion of the
arbitral tribunal represents a pivotal development in investor-state arbitration. A blind reliance
on international bilateral agreements as a safety net is no longer a safe bet when it comes to
maximising international investment protections. This case highlights the importance of seeking
appropriate legal guidance prior to making such decisions so as not to lose the protection of the
specific treaty under consideration.
Following the economic uncertainty that Brexit has sparked, it is essential to seek timely legal
advice on the possible impact investment treaties will have on cross-border business dealings,
to take full benefit of the level of protection they offer. Therefore, some proactive engagement
and proper advice in this sophisticated area of the law is desirable in order to obtain protection
similar to that hitherto available in the UK, and that restructuring of existing or new investment
arrangements are subject to equal or superior protection previously available.
Variation, Frustration and Renegotiation of Contracts
As the pound sterling plummets and the UK stock market swings, there will no doubt be a
number of international companies who are reconsidering their ties to the UK. Not only will
Brexit result in potentially economic uncertainties, the volatility of the current situation is not
one to entice those wishing to initiate commercial activity. This might result in variation,
frustration and renegotiation of existing contracts.
3
http://investmentpolicyhub.unctad.org/IIA/CountryBits/221, accessed on 27
th
June 2016
4
Philip Morris Asia Limited v The Commonwealth of Australia (PCA Case Nº 2012-12)
5
Phoenix Action v Czech Republic [ICSID Case No. ARB/06/5];

3. It is suspected the situation may hit those who are already engaged in trade with the UK the
hardest. It is not inconceivable that many will have signed existing contracts taking into account
the UK being an economic hub at the centre of the EU. Following the victory of the ‘Leave’
campaign, the position of such parties may have been modified greatly. The reaction to this
may indeed be an increase in cross-border commercial disputes that will arise off the back of
imminent uncertainties, following such a major political and now economic upheaval.
Existing contracts may necessitate review or realignment in order to ensure that Brexit has not
fundamentally changed the nature of the commercial bargain of parties. If Brexit is seen to
have led to frustration of contracts, renegotiation may be on the cards. Renegotiation, variation
and strategic planning when it comes to transnational commercial contracts are all areas which
require close attention as disputes are prone to arise. As a result it stands recommended that
prudence and timely advice is important to avoiding the pitfalls that now seem inevitable in
cross-border commercial contracts that affect the UK.
Seeing firsthand the uncertainty in EU/UK domestic legal framework following the UK’s
imminent breakaway from Europe, it is highly advisable to include staged ADR and suitable
arbitration clauses within future contracts. For the next two years at least, it seems plausible to
assert that the laws governing cross-border commercial contracts in the UK will be a hybrid of
UK, European and international laws before there is an amalgamation of laws resulting in one
coherent system. In the meantime international traders could be left in the lurch, if they have
chosen to rely on a shape shifting legal body for legal protection. As has been previously
mentioned, arbitration de-risks some of these problems as arbitral awards enjoy recognition
and enforcement pursuant to the New York Convention on Recognition and Enforcement of
Foreign Arbitral Awards.
Authors:
Momoh Kadiri and Rosie Gibson
London, 29th
June 2016
Mitchell Simmonds Solicitors
www.mssolicitors.com
Email: kadiri@mssolicitors.com