Every year, thousands of multinational corporations, financial institutions and investors choose English law to govern their contracts. Their business interests are international, their offices span the globe, their deals are negotiated in multiple languages; yet, when it comes to recording the terms they have agreed, they repeatedly turn to English law. Moreover, when deciding the forum for determining their commercial disputes, time and time again they choose the courts of England and Wales.
Why do they make that choice?
It certainly is not just tradition. Of course counterparties who choose English law know that by doing so they will imbue their contracts with the cumulative weight of centuries of considered jurisprudence. But commercial entities are not beholden to history. If English law and the English court system did not work for them now, they would look elsewhere.
Key to its continued success is the fact that English contract law is simultaneously predictable and adaptable.
The strong, comparatively stable body of precedent in relation to complex commercial transactions means parties can be confident about how their contracts will be interpreted and applied in practice. The defining principle of English contract law is freedom of contract, and it is that which ensures its continued flexibility and commerciality.
The overriding aim of English contract law is to identify and uphold the parties’ actual commercial bargain. It does not overwrite the words on the page with a general duty on commercial parties to deal in good faith. Absent fraud, it leaves commercial parties free to allocate risk and liability as they see fit.
English contract law is also perceived as commercial and fair. It holds the parties to their bargain, and to an objective interpretation of the words they chose to use. If there is ambiguity, it seeks out the meaning which makes the most commercial sense in the context of the agreement as a whole. Where there is a breach of contract, damages are compensatory, not punitive: the remedy is designed to put the adherent party in the position it would have been in had the contract been properly performed, not to penalise the breaching party for its failures.
When commercial relationships break down and parties resort to litigation, the English civil judicial system is similarly prized.
It is difficult to overstate the importance of independent, professional judges who publish detailed, reasoned judgments. Justice can be swift: when necessary, commercial trials are expedited and judgments quickly published. Powerful interim orders can also be made to preserve the status quo between parties pending determination of the litigation, to ensure that justice can ultimately be achieved.
The courts themselves are flexible and commercial in their approach. The specialist courts under the ambit of the Business and Property Courts of England and Wales are presided over by astute judges who have significant experience of complex commercial transactions. The courts are embracing technology. As the Covid- 19 pandemic hit, they quickly shifted to virtual hearings even in the most complex, multi-party and document-heavy cases. The potential exposure of confidential information has proven to be no bar to effective litigation, with the courts having shown themselves willing to work with the parties to develop novel solutions such as multi-layered confidentiality rings to protect sensitive commercial information.
Commercial parties also see the benefits of the English civil dispute resolution procedures. The adversarial process, with professional advocates able to cross-examine factual and expert witnesses under oath, gives parties the opportunity to explore fully the arguments and to scrutinise thoroughly the evidence before the court. Parties use the robust disclosure regime and the English courts’ wide-ranging powers to force document production at relevant stages (including pre-action) from those who are party to the proceedings and, in appropriate circumstances, from those who are not.
English judgments are recognised and enforced in jurisdictions throughout the world. Moreover, the English civil courts have almost unparalleled powers to grant wide-ranging interim remedies (including worldwide asset freezing orders, search and seizure orders and passport delivery up orders). They have repeatedly demonstrated their willingness to wield those powers to ensure unscrupulous judgment debtors cannot evade justice by hiding themselves or their assets.
English law and the English judicial system have formed the backbone of international business and commerce for centuries. But it is the English legal system’s modern, commercial and agile approach that makes it the choice of many multinational corporations, and that will ensure its continued relevance into the future.
This article features in Prospect's new legal report in partnership with the Bingham Centre for the Rule of Law, Jones Day and the City of London Corporation
