Reflections on the Monckton Chambers and Clyde & Co panel at London International Disputes Week 2024

Gin & tonic; fish & chips; Ant & Dec: all iconic combinations which naturally go well together. The same, one might think, cannot be said for arbitration and regulatory matters. This was the subject-matter of a panel for London International Disputes Week 2024 which was co-hosted by Monckton Chambers and Clyde & Co on 6 June 2024.

Chaired by Britain’s last judge at the Court of Justice of the European Union (CJEU), Christopher Vajda KC, a panel comprising Richard Power of Clyde & Co, Kassie Smith KC of Monckton Chambers, Camilla Macpherson of PRIME Finance and Richard Harry of Sports Resolutions considered whether arbitration is capable – and might even be best suited – to resolving regulatory disputes and issues. 

Richard Power began the session on a slightly sceptical note, pointing out that regulation in its widest sense is primarily imposed by the state, which has an interest in disputes concerning those regulations being resolved by the judicial arm of government, i.e. national courts, so as to ensure consistency and correct application. Arbitration, however, takes the dispute out of the courts. Richard discussed the CJEU’s approach in Achmea¹, which held that the arbitration provisions of intra-EU bilateral investment treaties are contrary to EU law.  The CJEU’s reasoning, extended subsequently to intra-EU investor-state claims under the Energy Charter Treaty in the Komstroy case², was that consistency and uniformity in the application of EU law is safeguarded by the CJEU pursuant to the various treaties governing the EU; and an arbitral tribunal (which would have to consider EU law in rendering its award) cannot refer questions of EU law to the CJEU.  This was contrasted to the UK Courts’ approach in Fulham FC v Richards³, in which the Court of Appeal pragmatically recognised public policy did not preclude a petition for unfair prejudice relief under s.994 Companies Act 2006 being referred to arbitration. 

Richard added that the private & confidential nature of arbitrations posed further problems, including the difficulty of joining interested third parties to arbitrations, the unavailability of appeals on a point of law, and the lack of precedent. Moreover, while many regulations aim to protect consumers, they often also exclude arbitration of consumer disputes⁴. However, Richard concluded on a positive note, arguing that a pragmatic balance between the need for state-administered public justice and the freedom of parties to choose arbitration can be found.

Kassie Smith KC followed on to explain why arbitration can accommodate regulatory disputes and issues, and is in some cases, the best forum. Kassie pointed out the important distinction that between investor-state arbitration and commercial arbitration recognised in Achmea⁵ and Komstroy⁶ - i.e. private arbitrations are not affected as private parties have the right to contract out of the national courts; and recognised that tribunals – especially sector-specialist tribunals – are perfectly capable of deciding complex regulatory issues, citing oil and gas supply / transit disputes and telecoms patent licensing. In particular, EU competition law – generally directly effective – is often used as both a “shield” and a “sword” in commercial arbitrations, for example concerning exclusive purchasing or take-or-pay requirements.

Kassie pointed out that public policy concerns regarding tribunals’ decisions concerning regulations can be addressed at the enforcement stage by the public policy defence to enforcement in the New York Convention⁷. Kassie considered in particular Mitsubishi Motors v Soler Chrysler-Plymouth⁸, and Eco Swiss China v Benetton⁹ which held that EU competition law in the form of Article 101 provides expressly that “any agreements or decisions prohibited pursuant to that article are to be automatically void ... [T]he provisions of [Art.101 TFEU] may be regarded as a matter of public policy within the meaning of the New York Convention”.

The next speaker was Camilla Macpherson, representing the heavily-regulated financial services sector. Camilla began by introducing PRIME, explaining its role in advancing alternative dispute resolution in the context of financial disputes. Camilla explored why the financial sector traditionally has had a general reluctance to arbitrate, primarily due to concerns regarding the absence of precedent and perceived issues surrounding cost and delay. She explained that banking and finance disputes are different from many commercial disputes in that they can be extremely complex and carry systematic risk of triggering major financial collapse, and therefore the risk of inconsistent outcomes and reputational backlash is significant. However, Camilla explained how PRIME addresses this through its Finance Arbitration Rules, which are now recognised by ISDA for inclusion in its master agreements as an alternative to litigation. Based on the UNCITRAL rules, key differences include a focus on transparency and the detailed emergency and expedited procedure provisions to tackle some of the particular concerns attaching to financial disputes. 

Finally, Richard Harry focussed on a sector where arbitration is not only commonly used in regulation, but actually holds many advantages over litigation; sport (to see Clyde & Co’s separate discussion on Sports Arbitration, click here). Richard explained the role that Sports Resolutions plays in facilitating this, and in particular operating disciplinary tribunals and providing ad-hoc panels for major sporting events. Recognising the importance in the sports context of there being an independent and impartial panel of arbitrators, Richard explained that Sports Resolutions nominates a panel of arbitrators to the parties, rather than the more usual approach in commercial arbitration of parties each choosing one arbitrator, who then appoint a chair.

Richard went on to consider some of the pros and cons of sports arbitration. Perhaps the most crucial “pro” is the ability of tribunals to be constituted and render an award exceptionally quickly, which can be crucial in the sporting context – for example, where the results of an event need to be confirmed, or squad selections finalised before cut-off dates for a major tournament. Richard recognised, however, that where party interests on speed are not aligned, there is scope for parties to cause delay, and in this context he cited the current charges of financial irregularity being faced by a high-profile English football team. Another potential “con” is the usual position that arbitration is private and confidential by default, whereas the concept of a fair and open trial requires a public hearing (as held in the Mutu and Pechstein v Switzerland case¹⁰). Richard explained how Sports Resolutions tribunals have published awards, for example in the Saracens salary cap breach case and the Yorkshire County Cricket Club matter. But overall, the experience of Sports Resolutions shows that arbitration can be the best way of administering the regulation of a sector.

So what did we learn? The panel raised important considerations about the suitability of arbitration to resolve disputes concerning regulation, and recognised that there are limits to arbitrability. However, the panel agreed that although arbitration and regulation are often seen as incompatible concepts, arbitral tribunals are more than capable of – and sometimes best suited for – resolving regulatory issues. So while arbitration and regulation might not be the new salt ‘n’ vinegar, they are also very much not The Odd Couple.

Clyde & Co has nearly 70 offices and associated offices worldwide and conducts large scale complex commercial and investor-state arbitrations all over the world, irrespective of the governing law, the arbitral rules or the language of the arbitration. The firm specialises in cross-border, multi-jurisdictional and complex international arbitration across a range of sectors which build, power, move and protect the global economy. If you wish to discuss your international arbitration needs, please contact the author below. 

¹C-284/16

²C-741/19

³[2011] EWCA Civ 855

⁴See Ss 89 – 91 Arbitration Act 1996, Consumer Rights Act 2015 Schedule 2, Part 1(20) and Article 6 of Council Directive 93/13

⁵C-284/16

^₆C-741/19

⁷Article V(2)(b)

^₈105 SC 3346 (1985)

⁹C-126/97

¹⁰European Court of Human Rights, applications 40575/10 and 67474/10