When an agreement is drafted, you can choose which jurisdiction’s law it will be governed by. Governing law is a standard “boilerplate” clause in contracts which becomes crucially important in the event of a dispute.
Even if you are resident in Dubai or operating through a Singapore company, and your counterparty is a Cayman Islands entity, you can choose for your important contracts and transactions to be governed by English law. English law is often used in international contracts and cross-border transactions, even if there is no geographical nexus to England or Wales, for reasons which we’ll set out below.
English law is an important historic influence on common law systems worldwide
A common law system is one where precedents for future decisions are set by the previous decisions of a court in addition to the rules made by lawmakers. Due to the UK’s colonial history, the English common law system has influenced the legal systems of many other jurisdictions, including most US states, Canadian provinces and countries such as Australia and India. English court judgments are often considered in the courts of other common law jurisdictions, especially where novel points of law are being considered.
The long history of the English legal system has also allowed a deep level of legal expertise to develop in the UK, which is widely considered to offer the best possible training to new lawyers, drawing on a centuries-old tradition. This has also established a strong protection of confidentiality for lawyers and their clients.
English common law offers certainty and predictability but also flexibility
The English common law system allows judges to draw on principles established through centuries of decisions in deciding matters before them. This means that English law, paradoxically, offers both predictability and flexibility. Judges consider relevant principles established by previous cases, but ultimately their focus is on the facts of the particular case at hand, and so they can distinguish new cases from old ones depending on those facts, thus establishing new principles in the process.
In this way, English law adapts and evolves constantly in response to changing business practices and technology, from email to blockchain and beyond.
Judges also have the responsibility of interpreting the law as written by legislators, helping to establish how laws written by politicians will actually be applied in practice. This, too, helps maintain a balance of certainty and flexibility within English law.
For example, English judges established that cryptocurrency was a form of property years before the issue was considered by legislators, and in 2021, the UK’s Law Commission published a report establishing that English law is able to accommodate and recognise smart contracts.
English law is known for its commerciality and pro-business outlook
English law offers its parties freedom of contract and autonomy, meaning that the courts will allow greater latitude to the parties to decide certain matters for themselves, such as what kind of losses should be recoverable, how claims should be brought and inter-party indemnification mechanisms. English law is also known for its a commercial and pro-business attitude, giving force to non-written contractual “bargains”, market disclaimers and non-reliance language .
One example of this is that, unlike in other jurisdictions, there is no overarching duty of good faith between parties to an English law contract. This helps reduce the burdens placed on a party by a contract and may protect you in the event of a dispute. In other jurisdictions, a good faith obligation requires a party to inform the other of any important information which it couldn’t discover on its own and to observe certain ethical standards of behaviour. This can create uncertainty as to what standards of behaviour are required.
Another example is that English courts are reluctant to impose punitive damages or compensate for consequential losses, in contrast to the US.
English courts are known for their independence, experience and reputation
English law is interpreted and administered by the English courts, which have a longstanding global reputation for their independence, experience and transparency. The English judiciary’s independence from the government is a cornerstone of the UK’s (unwritten) constitution and you can be confident that judicial decisions are not subject to government interference.
This independence sometimes rubs politicians the wrong way, but is protected by centuries of tradition. English judges are appointed by a non-governmental commission and are not permitted to have any active involvement with politics.
English law dominates certain sectors
English law is the customary choice in certain sectors and transaction types such as arbitrations, insurance, maritime, fintech, AI, shipping, banking and finance, mergers and acquisitions. If you are involved in such a sector or transaction, it might be that your counterparties will require or expect you to sign or draft an English law contract.
London is a key centre for international arbitration
As well as establishing a governing law, your contract can also specify a form of alternative dispute resolution which you and your counterparty agree on in the event of a dispute, to avoid bringing a case to court if possible. Arbitration involves an independent third party hearing the input of both parties and is often more flexible and efficient and less formal than litigation in court.
The London Court of International Arbitration is one of the world’s most popular venues for the arbitration of disputes.
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