Report by Oxera for LegalUK for the first time identifies scale of value of English law as a platform that benefits UK plc and international business
New research for LegalUK by leading economics consultancy Oxera and funded by the legal industry has for the first time established how the value of English law goes far beyond benefits to the legal sector and underpins hundreds of trillions of dollars of annual business activity domestically and internationally.
The report marks the formal launch of LegalUK, a body including representatives from across the legal industry including solicitors, barristers, arbitrators, industry bodies and other key stakeholders within the legal community. LegalUK was established in 2017 by the Lord Chief Justice, and is chaired by Dame Elizabeth Gloster former judge of the Court of Appeal of England and Wales and now an international arbitrator. Its purpose is to promote English law nationally and internationally, to increase the use of English law internationally, and to enhance the UK’s position as a leading global centre for dispute resolution.
The report – the first of its kind to explore the economic value of English law – reveals that English law governed at least EUR 661.5 trillion of OTC derivatives trading in 2018, $11.6 trillion of global metals trading in 2020, and £250 billion of global M&A in 2019. English law also governs insurance contracts worth £80 billion annually and is the law of choice for maritime contracts, a sector that contributes over £15 billion annually to the UK economy.
“This is the first time anyone has looked at the economic value and contribution of English Law as distinct from legal services,” said Guy Beringer CBE, one of the directors of LegalUK and former chair of UK Export Finance (UKEF). “It is extraordinary to see laid out in economic terms the extent to which English law is an underappreciated asset and platform that provides huge economic value not only to the UK, but also the global economy. The fact that English law continuously evolves to reflect the issues businesses face is key to its success.”
Oxera establishes that businesses using English law enjoy an advantage over businesses governed by other legal systems through lower transaction costs. English law does this by increasing the predictability of outcomes and hence growth in the volume of transactions in an economy. This benefits all users of English law, not just UK companies or individuals.
The report identifies several opportunities for English law to underpin transactions globally in new areas of the economy, such as sustainable finance, fintech, and cryptoassets.
“The role of the law in supporting the creation of economic value and as a source of soft power has not been fully appreciated. We now understand the true value of English law to UK PLC and need to explore the best forms of investment and coordination of efforts to promote and develop it as an asset.” said Dame Elizabeth Gloster, Chair of Legal UK.
David Jevons, a Partner at Oxera/Dr Luis Correia da Silva a Partner at Oxera said: “The research reveals for the first time how the provision of English law suffers from the free-rider problem. It means that the market does not provide enough incentives for private parties to support and promote English law to the extent that would maximise the overall benefits to the UK from the use of English law. Targeted investment is required to overcome this problem.”
Professor Richard Susskind, one of the world’s foremost expert on the future of legal services and also a director of LegalUK added: “There is a clear opportunity for the UK to develop legal technology that will overcome our newly identified free rider problem and enable us to fulfil our potential as the leading international legal platform for business. This will be critical in the UK’s future competitive positioning.”
The funders of the Oxera report are Allen & Overy, Atkin Chambers, Baker McKenzie, Bar Council, Blackstone Chambers, City of London Corporation, Clifford Chance, CMS, DLA Piper, HFW, Herbert Smith Freehills, Howard Kennedy, Kennedys Law, Linklaters, Macfarlanes, Mishcon de Reya, One Essex Court, Osborne Clarke, RPC, Simmons&Simmons, South Square, Stewarts Law, The Law Society, Travers Smith, Twenty Essex and Wilberforce.