Journal

Brexit will not dull the gold standard that is English law

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What you see is what you get

London’s legal market is very diverse.

Its law firms operate in many different sectors and markets, with many different clients. This diversity gives it strength and dynamism. As such, when thinking about certain macroeconomic issues and how they will affect London as a legal hub it is difficult to come up with one universal answer that applies to all firms.

Take Brexit for example. The effect of Brexit on a London firm that focuses on the domestic M&A market or on practice areas heavily reliant on EU legislation and single-market principles will be different to the London office of a large international firm which predominantly works cross-border for global corporates.

To complicate matters further, nobody really knows what form Brexit is going to take. In parliament, proponents of a hard Brexit and proponents of a softer Brexit are fighting an ideological tug of war, each attempting to pull negotiation strategy in their favour, with those refusing to accept Brexit at all stood in the middle attempting to cut the rope with a plastic spoon.

However, among all the uncertainty of Brexit and its differing effects, one thing stands to remain unchanged: the strength of English law and its importance in international transactions.

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English contract law is considered a gold standard and is used to govern contracts for transactions around the world, even when neither party to a transaction is English. Similarly, some of the largest cases that go through the commercial courts in London involve Russian oligarchs, Middle Eastern businessmen, or multinational corporations. This helped the UK legal sector achieve £3.6 billion in net exports in 2014.

So why when Industrial and Commercial Bank of China bought a stake in the Argentine subsidiary of Standard Bank, a South African firm, was the deal made under English law?

One reason commonly cited for the prevalence of English law in international transactions is its predictability and certainty.

English law, from a private civil law perspective, is based on the principle of freedom of contract. This means that generally the bargain struck between commercial parties is upheld and there is little room for implied terms. With English law, what you see in a contract is often what you get.

There is also a much narrower view of the concept of good faith compared to other legal systems. There is no widely accepted definition of the concept of good faith, however it relates broadly to an obligation of honesty, trustworthiness, and fair dealing in a contractual relationship. The ambiguity as to the standard of behaviour required for contracting parties acting under good faith creates uncertainty, especially in cross-border transactions where cultural differences may exist.

As such, English law’s traditional hostility to the concept of good faith and its narrower application helps create certainty and predictability in a commercial contract. Clients take comfort in the thought that the terms in the contracts that they pay their lawyers large fees to create will be what governs the contractual relationship.

So the starting point for interpreting a contract is the natural and ordinary meaning of the words in it, but when the contract is open to more than one interpretation English courts have long accepted that the commercial purpose of the agreement should be taken into account. A common principle espoused by the courts is that it is generally more appropriate to adopt the interpretation of a contract which is most consistent with business common sense. This approach to interpretation makes English contract law inherently commercial and by extension well suited to governing commercial contracts.

English law is a common law system, based on judicial precedent as well as statute, and English contract law has a strong body of established case law.

Not only can this be relied upon by parties to assist in the interpretation and application of particular contractual terms or concepts, but it also allows for flexibility. The law can grow to keep pace with economic and societal changes, developing business practices and technology, and innovative deal structures. English contract law’s prevalence has aided the development of this body of case law; with more complex contracts being governed by English law, judges and arbitrators have resolved more disputes and jurisprudence has developed.

When English contract law is chosen as the governing law of the contract, it is sensible to also choose English courts to resolve any disputes relating to the contract.

The English court system is perceived internationally as being a reliable, independent and efficient forum for resolving disputes, teeming with judges and barristers whose legal knowledge spans multiple jurisdictions. It also has many attractive features which are absent in other court systems. The disclosure obligations in UK civil litigation ensure that key evidence is disclosed prior to a trial to allow parties access to the information they need to evaluate the strengths and weaknesses of their case. In English civil proceedings, the losing party generally pays the costs of the prevailing party. This deters weak and unmerited claims.

England and Wales has, as a result, become the jurisdiction of choice for many contracting parties to resolve their legal disputes, regardless of their location, and London, with its Commercial Court and as a centre of international arbitration, has been the main beneficiary of this.

None of the reasons behind the popularity of English contract law or the English court system internationally will be negated by Brexit. The key tenets of English contract law that students spend the first months of their university life grappling with — offer and acceptance, consideration, implied terms, breach and damages — all derive from common law. This will be unaffected by Brexit. English contract law will remain predictable, certain, commercial and flexible.

The Rome I and Rome II Regulations govern the choice of law in the Union. It requires EU Member States to respect governing law clauses in commercial contracts regardless of whether the governing law chosen is that of a Member State. As such, Member State courts will continue to respect a choice of English law to govern contracts post-Brexit.

The reputation that the English court system has developed will also be untarnished by Brexit.

The court system gets its independence from the way in which judges are selected (by an independent non-departmental public body that vets candidates to ensure they are free from any political involvement), its reliability from the power of judges to decide cases according to their own judgment, without outside influence, and its efficiency from its sophisticated case management system. None of this is related to Brexit.

Under the Hague Convention, Contracting State courts will “suspend or dismiss” proceedings brought before them which are in breach of a contractual clause that favours the jurisdiction of the courts of another Contracting State. By virtue of their membership to the EU, Member States (excluding Denmark) are party to the Hague Convention. When the UK leaves the EU it will no longer be a member of the Hague Convention, however, it is anticipated that it will ratify the Convention upon Brexit. This means that English exclusive jurisdiction clauses are likely to be respected across Member States post-Brexit.

This doesn’t mean that some of the constituent parts of London’s legal market will not be damaged by Brexit; some firms are already feeling the pinch . Other firms may even come out of Brexit in a more dominant position than they occupied before.

However, on the whole English law will remain a gold standard and will remain a popular choice for governing contracts and resolving disputes around the world. Where there is a demand for English law there will always be a demand for English lawyers. After all, there is one city that does English law better than all the rest — London.

Jack Turner is a law graduate from the University of Manchester and a future trainee solicitor.

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Please bear in mind that the authors of many Legal Cheek Journal pieces are at the beginning of their career. We'd be grateful if you could keep your comments constructive.

34 Comments

Anonymous

VOTE LEAVE

TAKE BACK CONTROL

WINNING

Anonymous

Please bear in mind that leave the authors of many Legal leaveCheek Journal pieces are at the beginning of their leave career leave eu. We’d be grateful leave if you could keep your brexit subliminal.

Anonymous

Yeah fuck off Leave.EU. Then when you’ve got to wherever you fucked off, fuck off from there as well.

Ta (twats)

Pantman

What have you won? Can you tell us what ‘Brexit’ means? Or even what ‘leave’ means in the context of the EU?

Anonymous

Constructive comments:

1) “English” law is better termed “Anglo-Welsh law”;

2) There are 3 other jurisdictions exiting – Scotland, Northern Ireland, and Gibraltar;

3) London is not the only city in England.

Anonymous

Not constructive at all.

1) Nobody calls it “Anglo-Welsh law”. It’s called English law and everyone understand that it means the “law of England and Wales.”

2) The article is about English law. Not Scots law, or Northern Irish law, or Gibraltar law.

3) No, but it is far and away the leading provider of international legal services in every respect (international firms, (most of) the High Court and CoA / SC, the LCIA etc. etc.)

@nighthawkprof

“3) London is not the only city in England.”

even i laughed at this – or as you chums say “you wot mate!?”

Not Amused

Nonsense. I have been reliably informed that Brexit will kill us all.

Just consider all of the opinions of our Cassandra-like economists who didn’t at all just base their view on one flawed Treasury paper produced to save George Osborne’s political ambitions.

It’s simply not possible to have a functioning country that isn’t assisted by the wise men of Brussels.

Anonymous

You need to be quiet now Not Amused. You are well over your permitted “being wrong” quota !

Anonymous

Oh bore off.

Anonymous

sick of your anti European hate crime.

Anonymous

You’re a sh*te lawyer from a sh*te country and in the good old days they would have burnt you at the stake you horrible hag witch.

Anonymous

“It’s simply not possible to have a functioning country that isn’t assisted by the wise men of Brussels.”

Yeah, it’s not like half of our trade is with the EU or anything.

Pantman

I think we should not be drawn in by these trolls. When they can tell us exactly what form Brexit will take, and how that will (in reality) involve leaving the EU, then we can debate the issue. Until then it’s just smoke and mirrors… and Brextremist fantasy.

As an aside, I was asked a load of speculative questions about ‘Brexit’ a few days ago, I don’t think they liked being told that the answer was that ‘nobody knows’.

Anonymous

Isn’t the story of Cassandra that she was doomed for all eternity to have her warnings ignored *even though she was right* ?

Not Amused

Exactly our poor ecinomists who we foolishly ignored when we voted to leave and who were proved to be right in their predictions of instant doom.

Anonymous

No one predicted instant doom, just ongoing decline. If you cannot concede that the change in exchange rates was largely negative for the UK, then I think you need your head seeing to.

Not Amused

Just keep repeating ‘if someone doesn’t agree with me I should be offensive, that’s the way to win a referendum’

Anonymous

One should always write to their level – if you are a future trainee solicitor then write about that not about the legal implications of a brexit and the impact on English law governed transactions you have no experience of and the impact on global law firms you have never worked at. LC should source credible articles. What insight or expertise has the author got to justify writing this?

Anonymous

Classic ad hominem. A person could be right independent of the experience you stipulate.

Anonymous

Why not respond to the content of the article rather than criticise the author personally? Perhaps you have nothing much to say about the arguments.

Anonymous

get a life and get off your high horse

Anonymous

I’ve met Jack at my previous firm when he did his vac scheme there – solid lad with plenty of decent value bantz.

Good to see he’s now off to Paul Hastings as a future trainee, well deserved.

@nighthawkprof

jack – i would suggest you spend a day in a commercial division of a superior court in ny or ca before saying ew law is the gold standard – or spend a few years understanding how civil courts work and spend some time on the continent

you might be more impressed by other such “gold standards”

it is an interesting perspective you have and if there’s one thing for sure — it’s not a bad jurisdiction if you’re a plaintiff (in a libel matter) or a high profile defendant (e.g. no tort jury trials) — you don’t always get the choice

@nighthawkprof

holy (kjv)* downvote!

do not pull up the drawbridge, albionioi — least of all not on matters of justice

Anonymous

English law will flourish, unshackled from EU law.

The Common Law has always proved itself progressive and flexible, and has withstood the test of time.

Canada, Australia, New Zealand and half the Carribean and Africa can’t all be wrong!

@nighthawkprof

the yankees (and confederates) too — why omit them?

Pantman

And civil/EU law hasn’t been progressive? Surely that’s the whole issue with the Brextremists, they don’t like the progressive nature of EU law, from Van Gend en Loos onwards.

@nighthawkprof

my dear fellow – what is this “continent” you are referring to?

this is an englishman we are addressing, after all

we won the battle of waterloo i’ll have you know

do i need a /s?

i think not

Anonymous

Canada, Australia, New Zealand and half the Carribean and Africa can’t all be wrong!

Ha! All the places the British went out and forcibly colonised can’t be wrong!? Try thinking about what you are writing.

Anonymous

No good posting anonymously, we all that’s you Boris.

Anonymous

…and half the Carribbean…

You wot mate!? All those dodgy offshore tax havens!? We actually helped develop them!?

Anonymous

Bullshit.

Anonymous

Hahahahaha. Delusional hubris. No wonder the country is going to pots.

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