Brexit will not dull the gold standard that is English law
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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