Internationally the preferred governing law for business

Internationally
the preferred governing law for business transactions is English Law. It is
prevailing all over the world because of it well established jurisprudence. Historically
English law connects to the period of the British Empire, which was one of the
largest empires in history. The former
colonies established their legal systems as a legacy of English Law. The System of Common law has been retained even to this day by several
British colonies; it has been used by respective
courts as a source of interpretation, guidance, rules and input. They refer to the judgments of the higher courts
of England for giving decisions on new and unusual issues. In the same manner the English courts also seek assistance from the judgments of courts
from other jurisdictions. One important point to note right away is that
freedom of contract is pivotal to both a pro-business environment and within UK
law.  

Historically, a
vital role in the development of international commercial law was played by the East India Company. A model
was established for modern corporations, such as we have today, by Queen
Elizabeth by granting a charter to the East India Company.  The Royal Charter
of 1600 set up the first English joint stock company to commence trade with East India, China and the Indian
Subcontinent. This was set up by Queen Elizabeth I when she used her sovereign
power to create trade by setting up the first ever joint stock company, which
involved investors holding shares in the
company. Based on their shares the company paid them a share of its profits. The liability of the investors of the East India
Company was also limited due to it being the world’s first limited
liability corporation, which granted protection
to the money of the investors as they could not lose any more money than their
initial investment. As a result,
if the company operated at a loss the
outstanding debts were not divided among investors. This is the first
historical evidence of English law being pro-business as this newly established
model would encourage people to invest in businesses’ knowing they would not be
liable for more than their initial investment. It is not just historically that
this can be seen as pro-business as today we have the concept of limited
liability. Starting in 1855 with the Limited Liability act and then a year
later with the Joint Stock Companies Act parliament had found a way to inspire
public confidence in the idea of investing into companies as investors knew
that they were only responsible for the value of their shares. The acts allowed
people to register companies as limited liability and quickly it became clear
that people were more interested in investing in limited liability companies.
Even more recently we have the Limited Liability Partnership Act 2000 which
allowed limited liability partnerships to be established which are highly
popular as partners are not able to limit their liability if they act
negligently. This has proved to be highly popular with investors. These more
recent acts show that English Law has built upon to historical foundations of
joint stock and limited liability to create a pro-business environment that
encourages economic growth and promotes the protection of investors, naturally
encouraging more investment.

The UK is famed for having some of the highest quality
Judges, Barristers and Law firms in the world. English Law also received fame
due to the provision of relative and speedy justice regarding commercial
disputes. HM courts and services allow businesses (or individuals) to bring
their claim forward, Arbitration claims, issues of banking and commercial
services, commercial agencies, matters of insurance, trade, contracts and
business disputes as well as financial conflicts are dealt with by the
“Mercantile court” (now Commercial Circuit Court). The independence of the
judiciary also strengthens English laws standing internationally as the judges
are equipped to deal with complex cases speedily, effectively and impartially.
This international fame has meant that between March 2012 and April 2013 81% of
cases before the UK commercial court involved a foreign party, with 49% of
cases ONLY involving foreign parties. To me this shows that UK law offers a
pro-business approach as why else would so many foreign businesses use the UK’s
courts to argue their claims.   

English Commercial
Law has four interrelated characteristics. Firstly, it is “pragmatic”,
commercial law is all about getting things done, solving issues1. It tends to deal with
meeting the requirements of the market,
formulating contract structures and many legal tools. Secondly, it is “responsive”. It provides a body of rules
developed in response to commerce needs. According to Professor Goodee, “the totality of laws with regards to
mercantile conflicts are represented by commercial law”.2, he further indicated that
trading is impossible without commercial laws. Thirdly, the role of commercial
law is to facilitate the efficient operations of transactions rather than emphasising upon the content and form of
transactions. Lastly, they are consequentialist
rather than normative. Commercial laws are said to be consequentialist because
they provide determinate results without
being concerned would it be achieved or not. These four characteristics are the
cornerstone of commercial laws and they offer a pro-business approach as their
very essence offers individuals/businesses quicker, easier and safer dealings.

To
fully understand contemporary commercial law and why it is pro-business we
must look at the historical origin of commercial law. Researchers believe that ancient laws that govern merchants and traders’
disputes and practices formerly “credited or borrowed, absorbed and
incorporated by common law” which was initiated
in the 17th century.3  Hence, it laid down the foundation of current
modern commercial law.4 It is described by John Braithwaite and Peter Drahos that this ancient
law that would eventually form the basis of common commercial law is “Medieval
Lex Mercatoria”. These laws were formulated by merchants and established policies to regulate commercial relations. In
the domain of commercial life, the role
of the court was to operate in a declarative model.5 Significantly, the law of the
merchant was applied internationally due to its’ composition, the ability of adaptability, flexibility and
freedom from technical rules of evidence and procedure.
According to Gunther and Teubner, the merchant law comprised of broader
principles which possess the potential of changing their application case to
case. Indeed it is more about the law of values rather than the law of rules and structure and procedure.6 Thus, the most important
feature is the “commitment to good faith” which is the superseding need of
making agreements.7
Hence all these features are useful to comprehend the meaning of commercial law. In
1889 the barrister responsible for the Bills of Exchange Act 1882 and the Sale
of Good Acts 1893, Mr Mackenzie Chalmers augmented that mercantile laws are not
meant for lawyers, though they are made by lawyers or laymen to regulate the
conduct of business with relation to rules mentioned by the law8. Nowadays commercial law is perceived as important and practical,
meaning it is the law for getting things done. Lex Mercatoria was first applied
in the common law by Edward Coke and then later Lord Mansfield (the founder of
commercial law in England9). Lex Mercatoria’s ability
to adapt and flex is the key reason that commercial law became pro-business as
Mansfield understood that for this happen the law would need to be constantly
changing and adapting, just as Lex Mercatoria could. Mansfield lay down that
commercial law should be based upon the commercial practices of the day10. This is another example
as noted above that the law was not meant to guide business but instead
business was meant to guide the law. Now if business is guiding the law and not
the other way around, it is clear to me that that law must be pro-business. The
Sale of Goods act 1894, followed by the Sale of Goods act 1979 (an updated
version of the pervious act with modern developments) show perfect examples of
lex mercatoria rules and customs being implemented into law, thus showing a
pro-business approach. One slight counter to this argument that it is worth
mentioning is that when lex mercatoria was incorporated into international commercial
law, it lead to the creation of various regulatory bodies such as “the united
nations commission on uniform trade law” and “the international chamber of
commerce”. These bodies imposed more rules and regulations upon the market
which hindered freedom of contract and a pro-business approach. Despite this,
this is a minor point that does little to suggest that UK is not weighted
towards a pro-business environment.

There are many
different business organisations within the UK such as: corporations, sole
traders and partnerships. As a result of this, individuals have a wide choice
of orginisations so they may choose the one that is suited to the needs of
their venture. This is pro-business as allows choice and freedom to individuals
when starting a venture. On top of multiple organisation choices there is also
methods of finance. Equity finance and debt finance are the main two. Equity
finance allows you to sell shares in your company, raising finance while
maintaining control of the company. Also allows you to bring in additional voices
to the company that can aid in decision making and general running of the
company.  Debt finance is a safer investment
compared to equity finance but does not offer such a pro-business approach.

With the
increasing globalisation of business, companies are tasked with choosing
governing law for cross-border construction contracts. English law is
frequently chosen because English courts are amenable to permitting and
enforcing limitation of liability causes, waivers of consequential loss,
liquidation of anticipated damages, time and procedural bars on claims, “knock
for knock” indemnities and “pay when paid” clauses. English law dictates that
discussions with your lawyer are confidential and covered by legal privilege. English lawyers are bound
by professional rules to keep the affairs of their clients, and former clients,
confidential. Legal professional privilege is established in English law as a
basic human right and provides comfort to parties that they can freely and
frankly discuss issues and strategies with their legal counsel without this
prejudicing the case or leaking into the public domain.

Commercial risk
exists throughout the world but how a country deals with the commercial risk
determines its effectiveness as a pro-business state. One aspect of commercial
risk is the risk sellers undertake when selling on credit without collateral.
This issue has potential to undermine a pro-business approach because
businesses risk a great deal which in turn may affect their profits if they are
not paid. However, the UK has many statutes and regulations in place to try and
protect business in this scenario, one being the Sale of Goods Acts 1979. Despite
offering much protection to consumers/buyers the act does also help
businesses/sellers when it comes to mitigating commercial risk. Section 39(1)
states that even if the goods have passed to the seller (as they would have if
sold on credit) the unpaid seller has by implication of law a lien on the
goods, a right of stopping the goods in transit and a right of resale as
limited by the act. The most important right here is the lien as it offers
protection to sellers, usually a lien is for when good haven’t been delivered
and allows the seller to retain the goods however for the purpose of this act
the fact that the seller must normally retains the goods is presupposed. This
helps support a pro-business environment as the act is offering protection to
sellers. The act also supports buyers in business to business transactions which
promotes pro-business as it encourages and protects businesses when buying.
Quick examples of this are section 14 and section 30(1) which place a duty on
the seller to supply the correct quality and quantity of goods. Despite this
placing more duties on the seller, which could be argued hinders business, as
this is in business to business transaction it actually promotes pro- business as
it promotes a transparent relationship between buyer and seller. Despite, so
far, the sale of goods act helping to counter commercial risk and promote
pro-business, it, coupled with a few other factors could be used as a counter argument.
The SGA (and now the consumer rights act) offers protection to consumers as the
very same protection it offers buyers in business to business transactions is
also afforded to consumers. This protection does not promote pro-business as
business have more duties they must comply with when selling to consumers. On
top of this some rule-making has been delegated to the “Financial Conduct
Authority”, they have then implemented rules such as “Prospectus rules” and “Disclosure
and transparency rules”, business must follow these rules even though they have
not even been created by the central law-making body and they hinder freedom of
contract. This is possibly further evidence that UK law is not pro-business.
However, I feel these are weak arguments as it is not unfair and it necessary that
consumers are offered protection and a few extra rules governing business does not
greatly impede upon all the other factors that make UK law pro-business.

There are other
various wide categories of commercial contract risks such as Liability risk, breach
of contract, problems of warranty; terminations, disputes and allegations. Many
of these are negligible and do not impede upon a pro-business stance, the only
one I will mention is liability risk, this is greatly counter by limited
liability (mentioned earlier).

English law is
predictable and transparent; it provides
freedom of contract and a pro-business approach. There is no implied rule of
duty of good faith in commercial law, unlike other jurisdictions. Both historical
and contemporary evidence supports the idea of a pro-business environment where
the individual/business has great freedom to contract as they wish speedily,
easily and safely. Commercial risk is countered well by laws and regulation. Finally,
despite some possible counters to pro-business (including certain laws and
regulations that help counter commercial risk), they are not strong enough to
defeat the many strong arguments as to why UK law is pro-business.

1 Ziegel,
“The Future of Commercial Law in Canada” (1986) 20 University of British Columbia Law Review 1 at 2.

2
Ibid at 8; and also Goode, above n.33, at
23)

3 Leon Trakman, The Law Merchant: The Evolution of
Commercial Law (Rothman & Co 1983)

4
Giles, above n.4, at
16; Goode, above n.33, at
3-6; and W. S. Holdsworth, A History of
English Law, vol. 1 (1969 ed., Sweet & Maxwell, London) at pp. 569-572.

5 Braithwaite, J., & Drahos, P.
(2000). Global business regulation. Cambridge university press.

6 Teubner, G. (1983). Substantive and
reflexive elements in modern law. Law and society review, 239-285.

7 Leon Trakman, The Law Merchant: The
Evolution of Commercial Law (Rothman & Co 1983)

8 Chalmers, B. D., Mackenzie, C. A.,
& Kapoor, K. K. (1989). U.S. Patent No. 4,890,174. Washington,
DC: U.S. Patent and Trademark Office.

9
Lickbarrow v Mason

10 Edward L. Rubin, Learning from Lord Mansfield: Toward a
Transferability Law for Modern Commercial Practice, Idaho L. Rev, Vol31 pp.775,
802 (1995)