What is the value of English law and its reputation for fairness, flexibility and integrity? Most people would answer this question with a soundbite, not a number. The rule of law is assessed descriptively and not quantitatively. The word “value” translated in terms of respect for our traditions, providing a useful filler for any speech in the City or Whitehall—and a reference to Magna Carta normally follows in short order.
But if we are to secure a steady return from our rule of law brand, we must begin to understand the word “value” in its financial sense. How then might we put a valuation on English law?
One easy starting point is the existing valuations of the legal services sector—£60bn according to KPMG. But this is less than half the story. There are two blind spots that stand in the way of a full valuation of English law.
The first is that English law is not always recognised as the unique platform for commerce and trade that it is. This quality is most evident in City financial and insurance markets. Economists struggle to disaggregate and prioritise the range of factors which make London a global hub. Discussion of those factors will normally contain a passing reference to the fairness, predictability and incorruptibility of the English legal system, and it is undoubtedly true that many businesses over the last three centuries have come to London for these reasons. But there are deeper reasons why English law has a gravitational pull that keeps cutting-edge financial institutions in London. The ability of English law to adapt, as a common law system, more quickly than other rival systems to modern market requirements is clearly seen in swaps, derivatives markets and securitisation markets. English law should be one of the weapons we deploy in the struggle in coming years with Europe over the location of clearing activities.
The second blind spot is that English law is not explicitly seen as the global business language. Yet transactions around the world are widely entered into under English law, partly because of its flexibility, partly because there is a common understanding of English law concepts and partly because of the reliability and integrity of English law dispute- resolution processes. This results in a nexus between those transactions, the parties to them and the UK, which provides for the export of influence and services for the UK economy and powers London as a global hub.
Thus the British economy is currently being steered with inadequate appreciation of the value of English law as a platform and as a global business language. There is no hard information driving how we protect that platform and language or how we invest to grow it. There is no evidence that we even understand what the platform offers or that it is a key part of City financial and capital markets. We simply do not know how much it earns us or how much we will lose if it is allowed to wither. That is no longer tolerable for an open economy which hopes to lead the world.
English law is one of our nation’s great unrecognised assets, one that we must nurture if we are to maintain our competitive economic strength. Failure to invest in this asset could gravely prejudice our economic stability.
Legal UK’s mission is to promote the value and use of English law, for the benefit both of the UK and the global business community. We are commissioning a report from a leading economic consultancy, which will comprehensively address these issues for the first time. Reserve your copy now.
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
