While there may be risks to the use of English law internationally, there are opportunities for English law to expand to other markets. Jurisdictions where English is widely spoken and used officially are the most obvious addressable market for English law to grow into; however, the most value is likely to be generated where the existing law does not have a significant body of precedent or the approach to law leads to significant uncertainty. We have seen several examples of this where new regimes were created based on English law. This leads to economic value for the UK through the mechanisms that we set out in section 3. Furthermore, it is important for the UK to capitalise on its strong and longstanding position in specific areas, such as capital markets, insurance, and shipping.
Further opportunities lie in the application of English law as the main governing law to new areas that are seeing high growth and which will continue to do so in the future.[1]Similar to the four examples we have discussed so far, there is value for the UK from new areas using English law when the business activities physically take place in and/or outside the UK. This is where the strengths of English law in providing flexibility and predictability play an important role to maintain and further establish its position as the global standard. One example of this is the recent work by the UK Jurisdiction Taskforce—one of six taskforces of the ‘LawTech Delivery Panel’, which includes industry experts and members from the government and judiciary.
In May 2019, the UK Jurisdiction Taskforce (UKJT) published its public consultation paper on the status of cryptoassets, distributed ledger technology, and smart contracts under English private law.[2]UK Jurisdiction Taskforce (2019), ‘UKJT Consultation paper The status of cryptoassets, DLT and smart contracts under English private law’, 9 May. The consultation paper considers the legal status of cryptoassets and, in particular, whether the law treats them as property,[3]Note that it is difficult to formulate a precise definition of a cryptoasset and, given the rapid development of the technology, that would not be a useful exercise. The term ‘cryptoasset’ is … Continue reading as well as the legal status of smart contracts and particularly whether smart contracts should be treated as contracts for legal purposes.[4]There is a contract in English law when two or more parties have reached an agreement, intend to create a legal relationship by doing so, and have each given something of benefit. In its subsequent ‘Legal statement on Cryptoassets and Smart Contracts’, the UKJT states that in general, cryptoassets are to be treated in principle as property and smart contracts are capable of having contractual force.[5]UK Jurisdiction Taskforce (2019) ‘Legal statement on cryptoassets and smart contracts’, 19 November. This has been followed by the publication of digital dispute resolution rules for resolution of smart contract disputes either by English-seated arbitration or expert determination.[6]See UK Jurisdiction Taskforce (2021), ‘Digital dispute resolution rules’, UK Jurisdiction taskforce,
Where perceived legal uncertainty in relation to these assets is a reason for a lack of confidence among some market participants and investors, the well-developed common law system of England and Wales has been able to adapt to deal with such fast-changing technologies and is well positioned to provide a sound legal foundation for their development.[7]The UK Jurisdiction Taskforce (2019), ‘Legal statement on cryptoassets and smart contracts’, November, p. 4. Indeed, the principles set out in the ‘Legal statement on Cryptoassets and Smart Contracts’ have been tested and adopted in the English courts, and have been approved and referred to in other common law jurisdictions.[8]In the English courts, see, for example, AA v Persons Unknown (2019) EWHC 3556 (Comm) (Bryan J at p. 57–61). The principles have also been adopted in New Zealand in Ruscoe v Cryptopia Ltd (in … Continue reading
While cryptoassets are still small compared to traditional financial assets, the use of smart contracts and distributed ledger technology (DLT) on which smart contracts and cryptoassets are based has much wider application, and these are likely to have significant impacts on our society and economy in the future. Their use is likely to grow rapidly in the coming years—PwC estimates that the total assets under management of crypto hedge funds globally increased to nearly US$3.8bn in 2020 from US$2bn the previous year.[9]PwC (2021), ‘3rd Annual Global Crypto Hedge Fund Report 2021’, May. There is therefore likely to be substantial value to the UK in ensuring that English law is at the forefront in competing for these new internationally mobile financial instruments and transactions.
Promoting the use of English law in fintech fits particularly well in the government’s overall strategy to attract more technological innovations in the financial services sector and to ‘cement the UK’s position as the world’s pre-eminent financial centre’.[10]UK Chancellor of the Exchequer Rishi Sunak’s announcement of new plans to boost fintech at UK Fintech Week, 20 April 2021. The UK fintech sector generated £6.6bn in revenue and employed 76,500 people as of the first half of 2020,[11]TheCityUK (2020), ‘Key Facts about the UK as an international finance centre 2020’, December. and is a rapidly growing market globally, with €156bn in capital invested in fintech globally in 2019 (up 130% from four years previously).[12]Deloitte (2020), ‘Fintech On the brink of further disruption’, December. The predictability and flexibility offered by English law, high quality of judges and of UK legal professionals in general, along with a supportive regulatory environment, can serve as the strong foundation for high growth in the fintech sector.
Similar to fintech, another example of new areas that English law can take a lead on is sustainable, or ESG (environmental, social, and governance), investing. Demand for sustainable finance is expected to continue to grow substantially over the coming decades—for example, annual global issuance of green bonds was estimated to be $290bn in 2020,[13]Climate Bonds Initiative (2021), ‘Sustainable debt Global state of the market 2020’, April. up from just $42bn in 2015.[14]Climate bonds initiative (2016), ‘2015 Green bond market roundup’.
Currently, the most debated topic in this area is the lack of standardisation in reporting and ESG scoring. This leads to asymmetric information between investors and companies, and thus may be an opportunity for English law to provide further clarity and predictability, in the form of either standardised private contracts specifically for ESG or ESG laws/regulation.
The UK is already a prominent global leader in green finance—according to the latest Global Green Finance Index published by Z/Yen, London was rated the world’s number 3 green finance hub.[15]Z/Yen (2020), ‘The Global Green Finance Index 6’, 27 October. The position and global influence of the UK further bolsters the opportunities for English law in sustainable financing and investing.
Indeed, these and other future developments and markets are likely to grow rapidly, much like the growth of the derivatives and securitisation markets in the 1990s where English law has enjoyed the first-mover advantage due to its early solutions to key market issues. It has since become an asset generating great economic value for the UK economy. However, this value is not static, and looking forward, there is scope for significant growth in the value that English law can help to generate for the UK economy.
