The common law system: Why London is the jurisdiction of choice

Trevor Tayleur, Associate Professor and Head of Design and Assessment at The University of Law, provides his expert view on the common law system used in England and Wales and explains why London is the jurisdiction of choice

The common law system used in England and Wales has spread to many parts of the world. Most states in the U.S. use it, as do many Commonwealth countries. Although the jurisdictions that use common law have adapted it to meet their own needs, familiarity with the common law concepts of the Law of Contract and the use of English as the language of international commerce has helped to establish London as a major seat of international litigation.

Major corporations entering into international commercial contracts will often choose English law as the law governing their contracts and the English courts as the forum for hearing any disputes arising out of the contract. The global spread of common law has also meant that corporations from countries using other systems, such as the civil law system used in much of continental Europe, are willing to choose English law to govern their international commercial contracts. Accordingly, two-thirds of the cases that the Commercial Court in London hears involve non-UK litigants. It is no stranger to hearing litigation between, say, American and German corporations.

As well as global familiarity with common law concepts, there are other reasons why the English courts are a popular forum for international litigation. The English court system has an excellent reputation for dealing with commercial disputes fairly and efficiently. The judges are held in high regard, as are the lawyers involved. International corporations, therefore, have confidence that the English courts will deliver sound judgments. However, a debate has arisen about whether the UK’s exit from the EU will jeopardise the position of English courts.

The EU Member States have signed up to the Recast Brussels Regulation, a piece of EU legislation agreed to by the Member States. This means that courts in all the EU Member States will uphold the jurisdiction of courts in the other the Member States. So, during the UK’s membership of the EU, courts in the EU 27 Member States would recognise any clause in a contract giving the English courts jurisdiction to hear cases arising out of that contract.

For example, if a contract between a French and Brazilian company gave the English courts jurisdiction to handle contractual disputes between them, a French court would refuse to hear the case. The Recast Brussels Regulation also requires courts in the EU Member States to recognise and enforce judgments issued by courts in other EU Member States.

A consequence of Brexit is that the UK will cease to benefit from the Recast Brussels Regulation. The EU 27 Member States are using the opportunity to try and attract some of the litigation that English courts handle. Thus, the Chief Justice of the Republic of Ireland, Frank Clarke, made a speech last September in New York extolling the advantages of Ireland as a common law English-language jurisdiction within the EU.

Belgium France, Germany and the Netherlands have set up, or are in the process of setting up, specialist English language commercial courts with the aim of attracting business from London. To what extent do these developments threaten the pre-eminent position of English courts as the jurisdiction of choice?

A consequence of Brexit is that the UK will cease to benefit from the Recast Brussels Regulation.

The reality is that the effect on English courts is likely to be small. Internationally English commercial courts have a good reputation for the quality of procedures and judgments, so London as a favoured choice of jurisdiction does not especially depend on the UK’s EU membership. Where all the parties to a contract are based outside the EU, there is little reason for them to move away from London. Even where one or more of the parties are based in the EU 27, London is unlikely to lose out significantly. The Hague Convention is an international agreement governing the international enforceability of judgments, and the UK has signed up in its own right to cater for Brexit.

Significantly, the EU is also a signatory. Although there may be some teething problems arising from the transition from the Recast Brussels Regulation to the Hague Convention, the latter will ensure that UK judgments remain enforceable in the EU Member States. There is accordingly unlikely to be a big exodus from London to Dublin or one of the new English-language commercial courts.

There are, though, some specialist areas that may be adversely affected, such as competition law. London is a popular forum for damages claims by victims of anti-competitive behaviour that has breached EU competition law. Suppose the European Commission has issued a formal decision that a corporation has broken EU competition law, for example by participating in a price-fixing cartel. That decision is conclusive proof in the courts of EU Member States that the corporation has breached EU competition law.

Victims of the cartel do not have to prove there has been a cartel; they only have to show that they have suffered financial loss. In the UK, decisions of the European Commission will no longer be binding this way, so in this example the victims would have to prove the existence of the cartel to the satisfaction of the English courts. They are, therefore, likely to choose the courts of an EU 27 Member State instead.

In the long-term it is possible that the UK will conclude some form of a partnership agreement with the EU that will allow the UK to participate in the Recast Brussels Regulation. Pending such agreement, the reputation of the English courts and the Hague Convention are likely to safeguard London as a popular venue for international litigation.

Trevor Tayleur

Associate Professor and Head of Design and Assessment

The University of Law
Tel: +44 (0)1483 216 000
Website: https://www.law.ac.uk/
Twitter: https://twitter.com/universityoflaw