The World’s Favourite Law

PuppetsLike most Leavers we want to ‘take back control’ of our money and borders but we also want to live under our own laws. While Britain remains in the EU (or leaves under some ‘soft-Brexit’ formula) we are subject to the judgements of a ‘superior’ court, especially for matters concerning trade and commerce, even when these matters are purely local. This is odd, given that the preferred governing law for business transactions worldwide is English law, including for those countries that don’t have any geographic connection with the UK. The reason for this popularity is not simply because of the historic reach of the British Empire, after all we are referring to English law, not one of its derivatives such as the American version. Here we focus on why this occurs but the reasons also apply to areas beyond commercial contracts; continued membership of the EU is progressively undermining our precious inheritance within our own country (see Law from April 2016).

LCIABetween 31st March 2012 and 1st April 2013, almost 81% of cases at The London Court of International Arbitration (LCIA) involved a foreign party, while 49% of cases were entirely between foreign parties, that is, companies incorporated outside of England. These include international commercial contracts, banking and financing, maritime and shipping, mergers and acquisitions, dispute resolution and international arbitration. London is one of the most popular arbitration venues in the world for such foreign parties even though proceedings may have to be translated into another language and settlements may be made in another country, which all adds delay and cost. Foreign lawyers often achieve dual qualification as English solicitors because of the extra scope it gives them when dealing with trade matters in their own countries and for complex cross-border transactions.

Independent judiciaryIn part this reflects the reputation of the judiciary for its independence plus the experience and high quality of barristers and law firms. Judges decide cases according to their own judgement, without outside influence or government control. Then there is the relative speed and efficiency with which commercial disputes can be resolved through the English courts or other dispute resolution mechanisms. And, very importantly, outcomes are more predictable than under Continental ‘civil law’, for a particular reason: under English law ‘what you see is what you get’. The bargain struck between parties is generally upheld without implied terms or notions of ‘good faith’ which can unexpectedly tilt the outcome. Under French or German law things are more subjective because they attempt to establish the actual intentions of the parties by looking at all aspects of the transactions and their relationship. It is this type of approach that enables ECJ judges to take account of the intentions behind the EU’s treaties and not simply what they actually say. That in turn takes the court into the ideology that infuses those treaties. (We have written before about the differences between the UK’s legal system and the EU’s; see above link and What this country needs is a benign dictatorship).

German law-1Article 133 of the German Bundesgesetzbuch (BGB) states that, when interpreting or construing the parties’ declaration of will, their real will or intention has to be ‘explored’, rather than adhering to the literal meaning of the declaration. That exploration often goes beyond the written agreement. The French Civil Code too states that ‘agreements are binding not only as to what is expressed therein, but also as to all the consequences which equity, usage or statute give to the obligation according to its nature.’ So under French law, the parties will be bound by reference to what they subjectively intended, but in addition, the law may impose further obligations on them by reference to what is fair or customary.

English law-1Under English law the court starts from the presumption that the parties knew what they were agreeing to. “It cannot introduce terms to make it fairer or more reasonable. It is concerned only to discover what the instrument means.” (Lord Hoffmann). Here’s an example of the down-to-earth manner of an English judge when refusing leave to appeal in a shipping dispute between two foreign companies: “… if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense …” (Lord Diplock, 1985 judgement, Antaios Cia Naviera SA v Salen Rederierna AB).

Precedent-1If a point is not covered an English court will make a decision and that decision will form a precedent. So English law can evolve quickly and flexibly to the needs of a rapidly changing world. Judges can also make interim rulings where urgency is required; in some jurisdictions litigation can be notoriously slow with crafty appellants able to get lengthy adjournments and multiple appeals. You may also remember the fuss caused when the UK Government attempted to extend detention without charge to 90 days (it failed); by contrast a UK citizen can be imprisoned in, say, Greece for a year, without an opportunity for bail, before charges are dropped for lack of evidence. European arrest warrant-2The European Arrest Warrant means UK citizens can’t be protected by British courts.

In England the courts regularly find in favour of parties against the government. The reputation of English courts for their independence, their expertise, and the commercial knowledge of its judges will be unaffected by the UK’s vote to leave the European Union. Brexit could lead to English law becoming even more attractive as the law of choice as the UK would no longer be required to incorporate those aspects of EU law that differ from our evolved, common law as we have described. English law offers stability and certainty, which won’t change because of Brexit. 

Common law-1

 

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