With the popularity of English law a key issue in the global legal market, we ask partners for their take on the exportability of UK law and how it stacks up against New York law.
Early adoption
‘Where parties adopt a law other than their own and look for a law with application for an international contract, English law is popular by quite some margin followed by New York law. It’s particularly increasing in use in South America. One important aspect of that is the role of the Commercial Court in London in continuing to develop and adapt the law to changing circumstances.
‘UK law is particularly dominant in the international oil and gas industry – the industry was one of the first to globalise. A lot of those contracts were developed in the UK in the late 1960s and early 1970s. English lawyers were active in that industry throughout the world.’
Ted Greeno, partner, Quinn Emanuel Urquhart & Sullivan
Different results
‘There was a period where major banks had concerns about lending unless agreements were governed by New York law. That has long gone and now there are a lot of other considerations. Where there’s an institutional choice, ie a lender’s choice, it is often chosen partly because of concern about exposure to the US legal system. This often centres on the fact that if New York law governs, you have a right to a trial by jury and a completely different litigation framework within which to test the strength of the case, and ultimately try it and defend it.
‘There are also significant differences in terms of commercial litigation results. Jury trial may be the most obvious one, but the whole course of disclosure and discovery is very different. You also have a much greater scope for punitive damages in the US than the UK.’
Lista Cannon, global co-head of regulation and investigations, Norton Rose Fulbright
Quality control
‘There is no doubt that English law is now the dominant choice of law for cross-border transactions outside the Americas where an international law is chosen. There are various theories as to why, but as a litigator, I would put the quality of the English judiciary and the English process at the top of the list.
‘I do not think that there are particular industry sectors where English law has become more dominant. In my experience, it has been driven more by geography. Strong jurisdictions for the choice of English law are Russia, Ukraine, China and the Gulf. There has been a boom in corporate transactions in Russia and its neighbouring states.’
John Reynolds, London head of litigation, White & Case
Flexible terms
‘My feeling is that English law is more widely used than five to ten years ago as the governing law for private contracts, but the dollar remains dominant. US investment banks are, of course, hugely influential, high-yield bonds are typically governed by New York law and there has been growth in cheaper US-sourced financing, all of which have contributed to the choice of US law. But against that, many non-UK clients prefer English law as it is a respected, impartial and predictable legal system with effective dispute resolution, which does not submit the contracting parties to the US jurisdiction.’
Paul Olney, practice partner, Slaughter and May
US rules
‘My best estimate would be that for the vast majority of cross-border M&A transactions, say well over 80%, US law or English law is the governing law of choice. I do think it is easier for a US law firm to come to London and make a real impression with a small but high-quality team of English lawyers, but I’m not sure the same can be said for the other way round. The strength and depth of client relationships in the US might partly explain this: the lawyer as trusted adviser is the first person to get the call from the board in the US. It may well take a transatlantic merger for some UK firms to crack Manhattan.’
Will Pearce, partner, Davis Polk & Wardwell
Comforting certainty
‘The reasons for using English law have nothing to do with currency. New York law tends to get used by US companies in the US, or close to the US. International transactions outside the US use English law. English law is seen as flexible and English courts are seen as commercially minded. There is a feeling of certainty with English law – you know what the answer is going to be.’
Peter King, partner, Weil, Gotshal & Manges
English standard
‘In our view, the use of English law is increasing at the expense of local law. At the same time, we also see an increasing use of English-style documents alongside a different governing law.
‘As a global firm we are seeing a significant increase in the use of English law across the world, particularly in emerging markets. A large proportion of our work relates to contracts governed by English law or disputes being resolved in London, even though the parties have no obvious connection to the UK. A terrific recent example is the Texas Keystone case, which our lawyers in London and the US successfully tried last year. This was a dispute between a US fund and oil companies based in the US and Bermuda over a New York law contract relating to Kurdistan oil blocks, that was nevertheless heard in the English Commercial Court.’
John Phillips, London managing partner, Jones Day
Arbitration forum
‘English law is dominant in cross-border banking transactions, followed by M&A. Arbitration follows the underlying contract, but English law and arbitration, or English courts, remain a very popular neutral compromise in international transactions. Confidence in the independence of tribunals, judiciary and predictability of outcome here seemingly outweigh high transaction costs.
‘The balance hasn’t fundamentally changed in the high-end finance sector. New York law is used for capital markets-based transactions and at the current time there are more of these in the leveraged loan market in particular.’
Paul Rawlinson, London managing partner, Baker & McKenzie