Internationally law[1]. Historically, a vital role in the

Internationally the preferred governing
law for business transactions is English Law. It is prevailing all over the
world because of it well established jurisprudence. Historically English law
connects to the period of the British Empire, which was one of the largest empires in history. The former colonies
established their legal systems as a legacy of
English Law. The System of Common law has been
retained even to this day by several British colonies; it has been used by respective courts as a source of interpretation,
guidance, rules and input. They refer to
the judgments of the higher courts of England for giving decisions on new and
unusual issues. In the same manner the
English courts also seek assistance from
the judgments of courts from other jurisdictions. One important point to note
right away is that freedom of contract is pivotal to both a pro-business
environment and within UK law1. 

Historically, a vital role in the
development of international commercial law was
played by the East India Company. A model was established for modern
corporations, such as we have today, by Queen Elizabeth by granting a charter
to the East India Company.  The Royal Charter of 1600 set up the first English joint
stock company to commence trade with East
India, China and the Indian Subcontinent2.
This was set up by Queen Elizabeth I when she used her sovereign power to
create trade by setting up the first ever joint stock company, which involved investors holding shares in the company3.
Based on their shares the company paid them a share of its profits. The liability of the investors of the East India
Company was also limited due to it being the world’s first limited
liability corporation4,
which granted protection to the money of the
investors as they could not lose any more money than their initial investment.
As a result, if the company operated at a
loss the outstanding debts were not
divided among investors. This is the first historical evidence of English law
being pro-business as this newly established model would encourage people to
invest in businesses’ knowing they would not be liable for more than their
initial investment5.
It is not just historically that this can be seen as pro-business as today we
have the concept of limited liability. Starting in 1855 with the Limited
Liability Act6 and then a year later with the Joint Stock Companies Act7
(often regarded as the founding piece of modern UK company law legislation8) parliament had found a way to inspire public confidence in
the idea of investing into companies as investors knew that they were only
responsible for the value of their shares9. The acts allowed people to register companies as limited
liability and quickly it became clear that people were more interested in
investing in limited liability companies. Even more recently we have the
Limited Liability Partnership Act 2000 which
allowed limited liability partnerships to be established which are highly
popular as partners are not able to limit their liability if they act negligently10. This has proved to be highly popular with investors.
These more recent acts show that English Law has built upon to historical
foundations of joint stock and limited liability to create a pro-business
environment that encourages economic growth and promotes the protection of
investors, naturally encouraging more investment.

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The UK is famed for having some of
the highest quality Judges, Barristers and Law firms in the world11.
English Law also received fame due to the provision of relative and speedy
justice regarding commercial disputes. HM courts and services allow businesses
(or individuals) to bring their claim forward, Arbitration claims, issues of
banking and commercial services, commercial agencies, matters of insurance,
trade, contracts and business disputes as well as financial conflicts are dealt
with by the “Mercantile court” (now Commercial Circuit Court). The independence
of the judiciary also strengthens English laws standing internationally as the
judges are equipped to deal with complex cases speedily, effectively and
impartially. This international fame has meant that between March 2012 and
April 2013 81% of cases before the UK commercial court involved a foreign
party, with 49% of cases ONLY involving foreign parties12.
To me this shows that UK law offers a pro-business approach as why else would
so many foreign businesses use the UK’s courts to argue their claims.   

English Commercial Law has four
interrelated characteristics. Firstly, it is “pragmatic”, commercial law is all
about getting things done, solving issues13. It
tends to deal with meeting the requirements of the market, formulating contract structures and many legal tools. Secondly, it is “responsive”. It provides a
body of rules developed in response to commerce needs. According to Professor Goodee, “the totality of laws with regards to
mercantile conflicts are represented by commercial law”14, he
further indicated that trading is impossible without commercial laws. Thirdly,
the role of commercial law is to facilitate the efficient operations of
transactions rather than emphasising upon
the content and form of transactions. Lastly,
they are consequentialist rather than normative. Commercial laws are said to be
consequentialist because they provide
determinate results without being concerned would it be achieved or not. These
four characteristics are the cornerstone of commercial laws and they offer a
pro-business approach as their very essence offers individuals/businesses
quicker, easier and safer dealings.

To fully understand
contemporary commercial law and why it is pro-business we must look at the
historical origin of commercial law. Researchers believe that ancient laws that govern merchants and traders’
disputes and practices formerly “credited or borrowed, absorbed and
incorporated by common law” which was initiated
in the 17th century.15  Hence, it laid down the foundation of current
modern commercial law.16
It is described by John Braithwaite and
Peter Drahos that this ancient law that would eventually form the basis of
common commercial law is “Medieval Lex Mercatoria”. These laws were formulated
by merchants and established policies to
regulate commercial relations. In the domain of commercial life, the role of the court was to operate in a
declarative model.17 Significantly, the law of the merchant was applied internationally due
to its’ composition, the ability of
adaptability, flexibility and freedom from technical rules of evidence and procedure. According to Gunther Teubner, the
merchant law comprised of broader principles which possess the potential of
changing their application case to case. Indeed
it is more about the law of values rather
than the law of rules and structure and
procedure18.
Thus, the most important feature is the “commitment to good faith” which is the
superseding need of making agreements.19
Hence all these features are useful to comprehend the meaning of commercial law. In
1889 the barrister responsible for the Bills of Exchange Act 1882 and the Sale
of Good Acts 1893, Mr Mackenzie Chalmers augmented that mercantile laws are not
meant for lawyers, though they are made by lawyers or laymen to regulate the
conduct of business with relation to rules mentioned by the law20. Nowadays commercial law is perceived as important and practical,
meaning it is the law for getting things done. Lex Mercatoria was first applied
in the common law by Edward Coke and then later Lord Mansfield (the founder of
commercial law in England21).
Lex Mercatorias ability to adapt and flex is the key reason that commercial law
became pro-business as Mansfield understood that for this happen the law would
need to be constantly changing and adapting, just as Lex Mercatoria could.
Mansfield lay down that commercial law should be based upon the commercial
practices of the day22.
This is another example as noted above that the law was not meant to guide
business but instead business was meant to guide the law. Now if business is
guiding the law and not the other way around, it is clear to me that that law
must be pro-business. The Sale of Goods act 189323,
followed by the Sale of Goods act 1979 (an
updated version of the pervious act with modern developments) show perfect
examples of lex mercatoria rules and customs being implemented into law, for
example a man could not give what he himself has not and good title must be
transferred24,
thus showing a pro-business approach25. One slight counter to this argument that it is worth mentioning
is that when lex mercatoria was incorporated into international commercial law,
it lead to the creation of various regulatory bodies such as “the united
nations commission on uniform trade law” and “the international chamber of
commerce”. These bodies imposed more rules and regulations upon the market
which hindered freedom of contract and a pro-business approach26. Despite this, this is a minor point that does little to
suggest that UK is not weighted towards a pro-business environment.

There are many different business
organisations within the UK such as: corporations, sole traders and
partnerships. As a result of this, individuals have a wide choice of
orginisations so they may choose the one that is suited to the needs of their
venture. This is pro-business as allows choice and freedom to individuals when
starting a venture, for example, the Companies Act 2006 governs
companies and has hundreds of sections but an example of one that promotes
pro-business is that it offers protection to minority shareholders27. On top of multiple organisation choices there is also
methods of finance. Equity finance and debt finance are the main two. Equity
finance allows you to sell shares in your company, raising finance while
maintaining control of the company28. Also allows you to bring in additional voices to the
company that can aid in decision making and general running of the company.
Debt finance is a safer investment compared to equity finance but does not
offer such a pro-business approach as you’re paying for the cash you
get.

With the increasing globalisation of
business, companies are tasked with choosing governing law for cross-border
construction contracts. English law is frequently chosen because English courts
are amenable to permitting and enforcing limitation of liability causes,
waivers of consequential loss, liquidation of anticipated damages, time and
procedural bars on claims, and “pay when paid” clauses. English law dictates
that discussions with your lawyer are confidential and covered by legal privilege.
English lawyers are bound by professional rules to keep the affairs of their
clients, and former clients, confidential. Legal professional privilege is
established in English law as a basic human right and provides comfort to
parties that they can freely and frankly discuss issues and strategies with
their legal counsel without this prejudicing the case or leaking into the
public domain.

Commercial risk exists throughout the
world but how a country deals with the commercial risk determines its
effectiveness as a pro-business state. One aspect of commercial risk is the
risk sellers undertake when selling on credit without collateral. This issue
has potential to undermine a pro-business approach because businesses risk a
great deal which in turn may affect their profits if they are not paid.
However, the UK has many statutes and regulations in place to try and protect business
in this scenario, one being the Sale of Goods Acts 1979. Despite offering much
protection to consumers/buyers the act does also help businesses/sellers when
it comes to mitigating commercial risk. Section 39(1) states that even if the
goods have passed to the seller (as they would have if sold on credit) the
unpaid seller has by implication of law a lien on the goods, a right of
stopping the goods in transit and a right of resale as limited by the act29.
The most important right here is the lien as it offers protection to sellers,
usually a lien is for when good haven’t been delivered and allows the seller to
retain the goods however for the purpose of this act the fact that the seller
must normally retains the goods is presupposed30.
This helps support a pro-business environment as the act is offering protection
to sellers. The act also supports buyers in business to business transactions
which promotes pro-business as it encourages and protects businesses when
buying31.
Quick examples of this are section 14 and section 30(1) which place a duty on
the seller to supply the correct quality and quantity of goods32.
Despite this placing more duties on the seller, which could be argued hinders
business, as this is in business to business transaction it actually promotes
pro- business as it promotes a transparent relationship between buyer and
seller. Despite, so far, the sale of goods act helping to counter commercial
risk and promote pro-business, it, coupled with a few other factors could be
used as a counter argument. The SGA (and now the consumer rights act) offers
the very same protection it offers buyers in business to business transactions
to consumers. This protection does not promote pro-business as business have
more duties they must comply with when selling to consumers. On top of this
some rule-making has been delegated to the “Financial Conduct Authority”, they
have then implemented rules such as “Prospectus rules”33 and
“Disclosure and transparency rules”, business must follow these rules even
though they have not even been created by the central law-making body and they
hinder freedom of contract34.
This is possibly further evidence that UK law is not pro-business. However, I
feel these are weak arguments as it is not unfair and it necessary that consumers
are offered protection and a few extra rules governing business does not
greatly impede upon all the other factors that make UK law pro-business.

There are other various wide categories of
commercial contract risks such as Liability risk, breach of contract, problems
of warranty; terminations, disputes and allegations. Many of these are
negligible and do not impede upon a pro-business stance, the only one I will
mention is liability risk, this is greatly counter by limited liability
(mentioned earlier).

One final point worth mentioning is the
lack of a duty of good faith in English law. English law has been slow to
recognise an implied duty of good faith, like several international Civil
Codes, this might lead to a less transparent business environment, where more
importance is placed on due-diligence, resulting in an inefficient business
environment. Nevertheless, this does result in a pro-business outlook. With no
impediment on the freedom of contract parties can freely negotiate their own
terms.

English law is predictable and transparent; it provides freedom of contract and a
pro-business approach. There is no implied rule of duty of good faith in
commercial law, unlike other jurisdictions. Both historical and contemporary
evidence supports the idea of a pro-business environment where the
individual/business has great freedom to contract as they wish speedily, easily
and safely. Commercial risk is countered well by laws and regulation. Finally,
despite some possible counters to pro-business (including certain laws and
regulations that help counter commercial risk), they are not strong enough to
defeat the many strong arguments as to why UK law is pro-business.

 

References

Bibliography

 

Baladouni
V, ‘Accounting in the Early Years of the East India Company’ (1983) The
Accounting Historians Journal Vol 10, 63

 

Hunt
B, ‘The Development of the Business Corporation in England, 1800-1867’ (1936)
Cambridge MA: Harvard University Press

 

Bowen
H, The Business of Empire: the East India Company and Imperial Britain,
1756-1833 (Cambridge: Cambridge University Press 2006)

 

Braithwaite
J & Drahos P, Global business
regulation (Cambridge: Cambridge university press 2000)

 

Chalmers B, Mackenzie C, & Kapoor K, U.S.
Patent No. 4,890,174. Washington, DC: U.S. Patent and Trademark Office
(1989) 

 

Chaudhuri K, The Trading World of Asia and the English
East India Company, 1600-1760 (Cambridge: Cambridge University Press, 1978)

 

Companies Act 2006

 

Davies P and Worthington S, Gower’s principles of
modern company law (First published 1956, 10th edn, Sweet & Maxwell 2016)

 

Flanagan P, ‘Demythologising the law merchant: the
impropriety of the lex mercatoria as a choice of law’ (2004) ICCLR 15(9), 297

 

Goode R, Commercial Law in the Next Millenium (Sweet
& Maxwell 1973)

 

Griffith J, Politics of the Judiciary (Fifth edition,
Fontana Press 2010)

 

Holdsworth W, A History of English Law vol. 1 (First
published 1903, Paperback edn., Sweet & Maxwell 1969)

 

Joint Stock Companies Act 1856

 

Lawson P, The East India Company: A History (Routledge,
1993)

 

Limited Liability Act 1855

 

Limited Liability Partnerships Act 2000

 

Maltby J, ‘UK joint stock companies legislation
1844-1900: accounting publicity and “mercantile caution”‘ (1998) Vol
3, 9

 

Radmore E and Zeira M, ‘From prospect to fact: the
Prospectus Rules’ (2005) C.M, 4

 

Rubin E, ‘Learning from Lord Mansfield: Toward a
Transferability Law for Modern Commercial Practice’ (1995) Idaho Law Review Vol
31 775          

 

Sale of Goods Act 1893

 

Sale of Goods Act 1979

 

Sanderson P, ‘Private equity transactions: equity
finance aspects’ (2004) PLC Mag 15(8), 23

 

Sealy L and Hooley R, Commercial Law Text, Cases and
Materials (First published 2003, 3rd edn, Oxford University Press 2005)

 

Slaughter and May, ‘Listing Rules and Disclosure and
Transparency Rules: FCA consultation’ (2015) PLC Mag 26(6), 83

 

Teubner G, ‘Substantive and reflexive elements in
modern law’ (1983) Law and society review Vol 17 239-285.

 

Trakman
L, The Law Merchant: The Evolution of
Commercial Law (Rothman & Co 1983)

 

Ziegel,
‘The Future of Commercial Law in Canada’ (1986) 20 University of British Columbia Law Review 1 at 2.

1 ‘The
love affair with freedom of contract’ (1994) I L & P 9(6), 161

2 Philip Lawson, The East India Company: A History (Routledge, 1993)

3 Vahé Baladouni, ‘Accounting in the Early Years of the
East India Company’ (1983) The Accounting Historians Journal Vol 10, 63

4 Huw
Bowen, The Business of Empire: the East
India Company and Imperial Britain, 1756-1833 (Cambridge: Cambridge
University Press 2006)

5 Kirti
Chaudhuri, The Trading World of Asia and
the English East India Company, 1600-1760 (Cambridge: Cambridge University
Press, 1978)

6 Limited
Liability Act 1855

7 Joint
Stock Companies Act 1856

8 Josephine Maltby, ‘UK joint stock companies legislation
1844-1900: accounting publicity and “mercantile caution”‘ (1998) Vol
3, 9

9 Bishop
Hunt, ‘The Development of the Business Corporation in England, 1800-1867’
(1936) Cambridge MA: Harvard University Press

10 Limited Liability Partnerships Act 2000

11 John Griffith, Politics of
the Judiciary (Fifth edition, Fontana Press 2010)

12 HM Courts & Tribunals Service Annual Report and Accounts
2012-13

13 Ziegel, “The Future of Commercial Law in Canada” (1986) 20 University of British Columbia Law Review
1 at 2.

14 Roy Goode, Commercial Law in
the Next Millenium (Sweet & Maxwell 1973)

15 Leon Trakman, The Law Merchant: The Evolution of
Commercial Law (Rothman & Co 1983)

16 William Holdsworth, A History
of English Law (First published 1903, Paperback edn., Sweet & Maxwell
1969) 1

17 John Braithwaite & Peter
Drahos, Global business regulation
(Cambridge: Cambridge university press 2000)

18 Gunther Teubner, ‘Substantive
and reflexive elements in modern law’ (1983) Law and society review Vol 17, 239-285

19 Leon Trakman, The Law Merchant: The Evolution of
Commercial Law (Rothman & Co 1983)

20 Chalmers, Mackenzie, &
Kapoor, U.S. Patent No. 4,890,174. Washington, DC: U.S. Patent and Trademark
Office (1989)

21 Lickbarrow v Mason (1783)
100 ER 35 (KB)

22 Edward Rubin, ‘Learning from Lord Mansfield: Toward a
Transferability Law for Modern Commercial Practice’ (1995) Idaho Law Review,
Vol 31 775, 802

23 Sale of Goods Act 1893 s 39

24 Sale of Goods Act 1979, s21(1)

25 Paul Davies and Sarah Worthington, Gower’s principles of modern company law (First published 1956, 10th
edn, Sweet & Maxwell 2016)

26 Peter Flanagan, ‘Demythologising the law merchant: the impropriety
of the lex mercatoria as a choice of law’ (2004) ICCLR 15(9), 297

27 Companies Act 2006, s 994

28 Philip Sanderson, ‘Private equity transactions: equity finance
aspects’ (2004) PLC Mag 15(8), 23

29 Sale of Goods Act 1979, S 39(1)

30 Lenard Sealy and Richard Hooley, Commercial Law Text, Cases and Materials (First published 2003, 3rd
edn, Oxford University Press 2005)

31 Ibid

32 Sale of Goods Act 1979, SS 14 and 30(1)

33 Emma Radmore and Maya Zeira, ‘From prospect to fact: the Prospectus
Rules’ (2005) C.M, 4

34 Slaughter and May, ‘Listing Rules and Disclosure and Transparency
Rules: FCA consultation’ (2015) PLC Mag 26(6), 83