The maritime sector comprises various interlinked industries such as shipping, ports, and marine and maritime business services. It covers the transportation of freight and passengers, the physical building of vessels, and the operation of ports. It also includes a large industry of maritime business services, from shipbrokers to finance providers and insurers. Many of these activities are internationally mobile, though currently the UK is the leading global maritime hub, and English law is the leading choice for shipping and associated commercial contracts.
The UK maritime sector as a whole has been estimated to contribute between £14bn and £17bn of direct gross value added (GVA) annually to the UK economy.[1]Eddings, G., Chamberlain, A., Colaco, H. and Philips, I. (2020), ‘The Shipping Law Review: United Kingdom – England & Wales’, June.[2]Maritime UK (2019), ‘State of the maritime nation report 2019’, September. The UK has a large industry supplying business services to the maritime sector, which contributes approximately £4bn to the UK economy.[3]CEBR (2017), ‘The economic contribution of the UK Maritime Business Services industry’, September. Many of these businesses provide services to international clients, and thus many of their transactions can be considered to be internationally mobile transactions. We provide more detail on the maritime sector in section A1.1.
The maritime sector particularly benefits from business ‘clustering’ due to the widespread use of sub-contracting and outsourcing, and the application of highly specialised skills.[4]For a more detailed analysis of the competitiveness of the UK maritime sector and a discussion of ‘clusters’ in this industry, see Oxera (2015), ‘International competitiveness of the UK … Continue reading The UK, and London in particular, has become a global hub of international maritime services.
There are many reasons for the success of the UK as a global maritime centre that attracts a large proportion of internationally mobile transactions. One important attraction of the UK maritime cluster is the widespread use of English law. Indeed, English law is the preferred legal framework for global commercial maritime contracts. As a report published by the City of London Corporation notes:[5]PwC (2016), op. cit., p. 21.
- Use of English law and UK arbitration internationally for maritime business is a cornerstone of the UK’s strength in maritime law.
The widespread use of English law as the industry standard in maritime contracts across the globe has historically given the UK an advantage and ‘unrivalled legal and judicial expertise’.[6]See: https://www.maritimeuk.org/about/our-sector/maritime-business-services/ (last accessed 5 May 2021). However, as other regional hubs seek to expand in the coming years, risks to the use of English law and the UK’s status as a global maritime hub may increase.
If competition were to cause UK maritime business to move elsewhere and possibly be governed by a law other than English law, this would represent a significant loss to the UK. A stylised illustration of potential impacts identifies the following.
- A 10% reduction in UK maritime business could mean a loss to the UK economy of approximately £400m each year.
- A reduction of 30% in UK maritime business could lead to a loss of approximately £1.2bn to the UK each year.
Due to the agglomeration effects described above, a reduction in size of this important part of the maritime cluster could have a much wider effect in the long run.
Nevertheless, there exist opportunities for the UK to promote English law in maritime transactions as the sector continues to expand globally. Continued success of English law would enable the UK maritime cluster to further attract internationally mobile transactions. For instance, if the UK maritime business sector were to expand by 5%, this could represent an additional £200m for the UK economy.
