Foreword
Summary
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A1
Acknowledgements
Figures and tables
Economic value of English law | Oxera

3.4: The choice of law and legal services for internationally mobile transactions

Published: October 5th 2021
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2.1: Introduction 2.2: Economic value is created by ‘gains from trade’—realised through transactions 2.3: The law underpins growth in the volume of transactions (and therefore the generation of economic value) 2.4: Considering the law as infrastructure on which transactions take place
4.1: Introduction 4.2: English law provides significant value to the UK economy -4.2.1: Maritime sector -4.2.2: Commodity trading -4.2.3: ISDA swaps and derivatives -4.2.4: International insurance contracts -4.2.5: The value of English law to the UK economy is significant 4.3: Risks and opportunities 4.4: Future opportunities for the use of English law represent significant potential value to the UK
5.1: Introduction 5.2: English law suffers from a type of ‘market failure’ 5.3: Solutions to the free-rider problem: coordination across private and public parties 5.4: How to manage the ‘provision’ of English law
A1.1: Maritime sector -A1.1.1: Size of the market -A1.1.2: Overview of governing laws -A1.1.3: Risks and opportunities A1.2: Commodity trading -A1.2.1: Size of the market -A1.2.2: Overview of governing laws -A1.2.3: Risks and opportunities A1.3: ISDA swaps and derivatives -A1.3.1: Size of the market -A1.3.2: Overview of governing laws -A1.3.3: Risks and opportunities A1.4: International insurance contracts -A1.4.1: Size of the market -A1.4.2: Overview of governing laws -A1.4.3: Risks and opportunities
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Chapter 3

3.4: The choice of law and legal services for internationally mobile transactions

Globalisation, trade and digitisation have enabled an increasing proportion of global transactions to be internationally mobile, allowing parties to choose the law that governs the contract. Whether these internationally mobile transactions involve the use of English law and/or UK legal services will determine the economic value that these transactions bring to the UK.

The value generated for the UK through the mechanisms discussed in sections 3.2 and 3.3 above will be maximised when both:

  • internationally mobile transactions are governed by English law;
  • UK legal services are used when the jurisdiction of the courts of England and Wales or a UK-seated arbitration are specified in the contract.

The figure below illustrates how different choices of law and the use of legal services deliver value to the UK economy in a number of ways. [1]‘Legal services’ here includes dispute resolution when England and Wales is specified in the jurisdiction clause of the contract or UK-seated arbitration is specified.

Figure 3.2 Value for the UK from internationally mobile transactions

Source: Oxera.

As presented in the bottom left corner of the figure above, when a transaction is neither contracted under English law nor using UK legal services, it does not generate any value for the UK. On the opposite corner (top right), transactions can be governed by English law and employ UK legal services: these provide the greatest value for the UK. In other cases, some transactions may be governed under English law without using UK legal services (see the bottom right-hand corner of Figure 3.2). At the same time, internationally mobile transactions that do not currently use English law offer opportunities to the UK (for example, foreign law-governed transactions adjudicated in English courts and UK-seated arbitrations, and foreign-seated arbitrations where legal services are provided either in the UK or abroad by UK lawyers and arbitrators).

In the next section, we explain and quantify the economic value of internationally mobile transactions governed by English law in four examples concerning: (i) the maritime sector; (ii) commodity trading; (iii) ‘International Swaps and Derivatives Association’ (ISDA) swaps and derivatives; and (iv) the insurance sector. We then consider several potential areas where English law could be used to govern internationally mobile transactions in the future, representing significant opportunities to generate value for the UK economy.

References

References
↑1‘Legal services’ here includes dispute resolution when England and Wales is specified in the jurisdiction clause of the contract or UK-seated arbitration is specified.