In this study, we define the UK legal services ecosystem to include the UK legal services sector and the complex network of organisations, individuals and associated activities within the UK economy that support the provision of legal services.See KPMG (2020), ‘Contribution of the UK legal services sector to the UK economy’, January, for an analysis of the sectors that provide inputs to the UK legal services sector.
This is a different concept from that of the legal system (defined in Chapter 2:3 footnote 2)—which is a broader concept that incorporates the legal services ecosystem, as well as the law itself. The legal services ecosystem is, however, much broader than law firms and includes in-house counsel and legal teams, providers of expert witness services, litigation funding, lawtech providers, and the like. By ‘lawtech’, we mean methods and technologies that replace or supplement traditional means of delivering legal services. See Law Society (2019), ‘What is lawtech?’, June.
We identify two mechanisms through which English law creates value for the UK legal services ecosystem in internationally mobile transactions:There are other ways in which the use of English law internationally can generate value for the UK. For example, the use of English law in the development of legal regimes elsewhere in the world … Continue reading
- the use of UK legal services by the international economy;
- the export of English law.
Firstly, the use of English law in internationally mobile transactions supports the use of UK legal services by the international economy. This includes the activities of UK legal services outside of the UK—i.e. the export of UK legal services, as well as the activities of UK legal services within the UK for international entities, such as UK-based dispute resolution for international businesses.Regardless of the location, a given activity generates value added to the UK economy as long as it serves the international economy/businesses.
For example, UK legal services may be required for advising, drafting, and negotiating contracts for internationally mobile transactions. Similarly, contracts governed by English law may stipulate England and Wales in the jurisdiction clause, requiring UK legal services in the event of disputes. Indeed, 77% of UK Commercial Court claims in 2019 involved at least one party outside England and Wales and 43% of claims involved parties all located outside England and Wales.TheCityUK (2020), ‘Legal excellence, internationally renowned UK legal services 2020’, November. This use of legal services increases the highly specialised expertise of the UK legal services ecosystem.
The use of legal services by the international economy generates significant value for the UK directly—the UK legal services sector generated a trade surplus of £5.9bn in 2019. Ibid. Additional value is created through the activity of the UK legal services ecosystem, including all organisations and individuals that support the provision of legal services, such as professional services firms and education services.
Secondly, the ‘export’ of English law itself through its use in internationally mobile transactions outside of the UK also generates value for the UK legal services ecosystem.
While the use of legal services by international users results in payment for the services, the export of English law does not result in direct payment to the UK economy. However, decisions of the English courts relevant to often complex internationally mobile transactions result in early solutions to new market problems as they arise. This contributes to the building of precedent under English law, and increases the volume of transactions under English law as it becomes a global market standard in various industries and sectors.Precedent is a judicial decision that is either binding—i.e. decisions that a court must abide by in its adjudication of a case—or persuasive, such as decisions from courts in other … Continue reading
English law being used in internationally mobile transactions allows it to evolve continuously, provides certainty and predictability in the law, and promotes England and Wales as leading locations for developments in complex legal issues. At a time when economies are embracing an increased use of innovative technologies and products, there is a clear need for a widely used law that can stay abreast of legal requirements not confined by physical borders. Therefore, the use of English law leads to a network effect—the benefit gained by English law users (wherever they are located) grows with the total number of users. This network effect is an important economic characteristic of the law to which we return in section 5.
This network effect further stimulates the use of English law in internationally mobile transactions and activity within the UK legal services ecosystem. This further increases the expertise and international competitiveness of the UK legal services ecosystem. These effects operate in a virtuous cycle, delivering benefits to the UK legal services ecosystem (and therefore to the UK as a whole).