London has long been regarded as one of the most popular venues for resolving international disputes, but the government - and the legal profession - hope that the opening of the Rolls Building as the world’s biggest commercial court will help cement the UK’s reputation as the key jurisdiction in which to bring commercial litigation.
The unveiling of the new £300m state-of-the-art law court complex last October coincided with a wider move to market the UK’s legal services sector as effectively as the country’s financial services. The sector is already a significant earner: law firms generated £19.3bn in 2010 - equivalent to around 1.8% of GDP - while legal services exports totalled £3.6bn, triple the level of a decade ago. When the project was launched five years ago, it was claimed the Rolls Building would develop into ‘the biggest dedicated business court in the world’. Consequently, the Ministry of Justice and UK Trade and Investment have been promoting British courts as the gold standard for resolving international disputes, hoping to profit from their excellence.
Justice secretary Kenneth Clarke said: ‘The provision of modern, high-quality services for all parties will present the opportunity to market the facility at a global level in order to maintain the unrivalled work of the high court and English law.’ The government is not the only one to trumpet the achievements of the UK’s legal sector. Coinciding with the new court’s opening, the Law Society joined with the Bar Council and financial services industry lobby group TheCityUK to launch ‘Unlocking Disputes’, a campaign to promote London as the world’s leading centre of excellence for dispute resolution.
This initiative highlights, for example, that more international and commercial disputes take place in London under English law than in any other city in the world, and that 90% of commercial disputes handled by London law firms now involve an international party. Furthermore, the volume of dispute resolution work has nearly doubled in the past five years: in 2009, more than 35,000 disputes were resolved through arbitration or mediation in the UK, up from fewer than 19,500 in 2007.
Michael Todd QC, chair of the Bar Council, says that the Rolls Building ‘cements the UK’s reputation as the world’s pre-eminent centre for litigation’, and will therefore attract more business to London. ‘The integrity of our judicial system, the impartiality of our judges, our long experience of commercial law, and the expertise of our legal practitioners should not be undervalued,’ says Todd. ‘London has a unique standing in terms of dispute resolution and legal services, and we should promote these facts more readily.’
John Wotton, president of the Law Society, agrees. ‘London is already recognised as a leading international financial and business centre, but the launch of the Rolls Building provides a great opportunity for the UK to market itself as the leading centre for litigation as well.’ The Rolls Building - which brings under one roof the Chancery Division, the Admiralty and Commercial Court and the Technology and Construction Court - is the largest specialist centre for the resolution of financial, business and property litigation anywhere in the world. It has judicial expertise in areas such as asset recovery, banking and financial services, company law, construction, insolvency and reconstruction, intellectual property and patents, professional liability, property, shipping, technology and trusts. It will also be used for mediations and arbitrations, both of which are increasingly popular alternatives to traditional litigation.
The 11-storey building in Fetter Lane, close to the Royal Courts of Justice in central London, contains 31 courts, including three ‘super-courts’ designed to accommodate big, multi-party disputes and four courts set out in ‘landscape’ format for multi-party cases. The building also has 55 consultation rooms that clients can use - a facility sorely lacking in the old premises, say lawyers. The MoJ is also keen to trumpet the building’s investment in cutting-edge technology, such as full WiFi connectivity throughout, in-court facilities for parties to use their own IT (including electronic presentation of evidence and cabled broadband), in-court video conferencing facilities and a new electronic filing system intended to make it mostly paperless.
Few regret leaving its predecessor St Dunstan’s House, also on Fetter Lane. Lord Gold, head of legal consultancy David Gold Associates and formerly a senior litigation partner at Herbert Smith, says that the facilities there were ‘unacceptable and an embarrassment to lawyers and their clients’. ‘For the first time in many years the Rolls Building will demonstrate to the clients we are bringing into England that we actually care about them,’ he says.
Others agree. ‘The former premises were run-down and not fit for purpose,’ says Steven Philippsohn, senior partner at PCB Litigation. ‘If we are going to conduct major dispute cases here, the least we can do is offer clients decent facilities.’ Yet while lawyers praise the new facilities and much-needed investment, most believe that it is London’s long-established reputation as a leading litigation centre that will continue to attract clients rather than the new building and its ‘modcons’. They also point out that London has a great network of expert witnesses, shorthand note-takers, translators and so on, which the city has built up over a long time. Litigants therefore have the reassurance that everything they need to conduct their case can be found in one place.
‘The Rolls Building enhances the UK’s reputation as being the leading centre for commercial dispute resolution cases,’ says Owen Williams, head of commercial litigation at law firm Clarke Willmott. ‘No other jurisdiction comes anywhere near. Over hundreds of years London has built up a reputation for impartiality and excellence that other countries are unable to match, and it now provides the largest concentration of judicial expertise for finance, business and property anywhere.’
Lawyers believe that the UK has good Commercial and Chancery judges coupled with a sound and robust system of law. And there is a substantial amount of case law relating to litigation cases in England which makes it very appealing for litigants to bring cases here - even more so if the rule of law in their own countries is unpredictable or if judges are inexperienced in handling these types of cases. They also highlight the fact that the Commercial Court is ‘unique internationally’ - as already noted, four out of five cases that are dealt with there have one party that is based outside the UK - and that the court’s appeal is that it is widely regarded as a neutral forum with all the necessary expertise and experience to conduct complex dispute litigation cases.
The ‘court for Eastern Europe’
Some jokingly refer to the Rolls Building as ‘the court for eastern Europe’ given that so many litigants are from the former Soviet bloc, some of which cite a lack of impartiality in their own jurisdictions as being one of the reasons why they favour London. Philippsohn says: ‘There is certainly a well-recognised belief that at least 60% of the work in the Commercial and Chancery divisions is Russian and eastern European-based, and that that figure is unlikely to go down.’ In fact, the first case to be heard in the new building is the high-profile £3.2bn ($5bn) lawsuit between Boris Berezovsky, Russia’s best-known political exile, and Roman Abramovich, owner of Chelsea Football Club and friend of Russian prime minister Vladimir Putin.
For many, the UK is the safest place for many litigants to bring a case. Katie Papworth, solicitor in the commercial dispute resolution group at Thomas Eggar, says that English courts have a strong reputation and long history of adjudicating litigation cases, and that foreign litigants will continue to choose England as their jurisdiction of choice due to the popularity of English law when drawing up business contracts.
‘English law has long been established as the law of business, and English jurisdiction clauses are very popular when foreign companies go into business with one another,’ says Papworth. ‘An English law jurisdiction clause in a commercial agreement can provide additional assurance for both parties, because it is likely from the outset to enable either party to seek recourse in an English court where foreign jurisdiction would normally take precedence.’
Lynne Gregory, associate at Charles Russell, agrees: ‘It is common for parties of different nationalities who are entering into commercial contracts to specify English law and jurisdiction as their chosen dispute resolution option. The reasons for this include the fact that English is still one of the most widely spoken languages in the world, which makes proceedings conducted in English easily accessible.
‘English law has a lengthy provenance. It contains guidance on most conceivable areas and is based on the fundamental principle of freedom of contract, which is attractive to parties from jurisdictions that take a more interventionist and paternalistic approach. The English common law has been exported throughout the world and parties therefore tend to be familiar with its underlying principles.’
‘Over hundreds of years London has built up a reputation for impartiality and excellence that other countries are unable to match’
There are other aspects to UK justice that foreign litigants find attractive. For example, says Ted Greeno, senior partner in the dispute resolution department at Herbert Smith, claimants appreciate the adversarial approach, whereby both parties must disclose the documents that may favour the other party as well as the documents that support their own case. ‘While this may seem counterintuitive, claimants tend to believe that this approach ensures fairness and that a reasonable judgment is more likely, as it is based on all the evidence at the judge’s disposal and has been cross-examined by both parties.’
English procedural rules are helpful in other ways. For example, privilege is respected in English courts and judges are generally prepared to hear any dispute - even where the parties have no connection with England - and will also apply foreign law, if appropriate. English litigation is also relatively cheap, with no trial or hearing fees. It is also, since the advent of the Civil Procedure Rules (CPR), relatively quick and there are options available such as summary judgment. While not perfect, say practitioners, it compares favourably with many other jurisdictions.
There is one other major factor in London’s favour: judgments can be readily enforced. Jeremy Cole, head of the investigations and fraud team at Hogan Lovells, says that the UK has the best armoury of interlocutory ‘weapons’ - such as freezing and search orders - anywhere. There is also the flexibility to restrain an individual from leaving the country by taking their passport. ‘In an extreme case you can go to the judge in the middle of the night and get an order to freeze the defendant’s assets. This ensures that there are assets available to enforce against if, at the end of the case, you are successful,’ says Cole.
Philippsohn agrees that enforcement tools are easier to access in the UK. ‘You can get court orders from a UK court that you might not be able to get in other jurisdictions. For example, we’re involved in a number of cases where victims of fraud have been able to get worldwide freezing orders against a company so that the assets are secured for possible financial redress. These kinds of legal weapons are not always available - or at least not as readily - in other jurisdictions.’ There are other dispute resolution centres around the world, of course. Some litigants prefer to use local courts wherever possible, particularly if based far from the UK, such as Asia or South America.
Singapore is fast emerging as the preferred destination for Indian companies seeking arbitration services, for example. The Singapore International Arbitration Centre (SIAC) has also recently tried to attract a wider caseload by introducing its ‘expedited procedure’, which allows for a more efficient and simplified arbitration route.
The new model clause is used where parties agree at the time of making their contract that their disputes - regardless of the financial sums being contested – will be managed by the SIAC under this procedure. The clause allows for a complete arbitration to take place in a time period of six months from the appointment of arbitration tribunal, thereby saving time, reducing costs and potentially mitigating the losses for both parties.
Other existing dispute resolution centres are also trying to boost their own attractiveness. Scotland is promoting its new arbitration centre, the Scottish Arbitration Centre, as a forum for parties involved in arbitration disputes in England and Wales. Its founders hope it will be seen as a credible international alternative to London, for example when a ‘home turf’ conflict prevents London being chosen as the seat of arbitration. Elsewhere meanwhile, the Hong Kong government has signalled its intent to confirm the island as a leading arbitration centre in the Asia-Pacific region by providing more office facilities. But the consensus is that these centres do not have the breadth of experience, expertise or resources at hand to enable them to carry out the range of dispute litigation that the UK can carry out. ‘They just don’t have the history or the numbers to carry out the same kind of legal work that is available in the UK,’ says one lawyer. ‘The centres based in Asia, for example, are geared towards arbitration, not litigation, and so can’t compete,’ he adds.
Some lawyers believe that UK courts are more ‘predictable’ in their behaviour, which means that foreign litigants are taking less of a gamble in terms of time and costs, particularly when compared to other litigation-friendly jurisdictions like the US. As John Sykes, partner at Charles Russell, says: ‘Non-US parties tend to be very reluctant to use US courts because of the risk of civil jury trials, excessive damages awards, lengthy court dockets, extensive deposition procedures and no ability to recover legal fees from the opposing party.’
In addition, the US does not have a specialist commercial court for dealing with disputes, says Tim Strong, partner in the financial disputes practice at Taylor Wessing, and that country’s wide-ranging discovery process can slow proceedings down and dramatically increase their cost, as both parties try to locate documents and supportive evidence in their opponent’s possession.
As a result, says Strong, there are two other reasons why litigants favour the UK court over the US - one is the wider use of juries in civil cases that the UK generally does not employ, and another is punitive damages. ‘Parties bringing a dispute to court want predictability about how the case is going to be conducted and so juries and the issue of punitive damages awards - which may bear no resemblance to the actual costs of the case losses suffered - may be seen as too big a gamble,’ says Strong. ‘For many litigants faced with an ability to influence where a case is heard, there is just too much to lose by bringing a dispute to a US court.’
Yet not everyone believes that the UK’s attempt to lure more international disputes to London is good news. Dimitry Afanasiev, chairman of Russia’s largest law firm Egorov Puginsky Afanasiev & Partners, says: ‘Currently, we have the bizarre situation whereby English law is often selected as the operative law in Russian business transactions. Even purely domestic transactions are governed by foreign law, to such an extreme that, when one Russian is selling a house in Russia to another Russian, that is often an offshore company transaction that is governed by English law.’
In the mid- to long-term this is not good for Russia, says Afanasiev. ‘Unless Russian law is going to apply to business transactions here, Russian lawyers and judges are not going to gain the experience and sophistication.’ But Afanasiev is also clear why Russians opt to take their disputes abroad. ‘The problem with Russian law is enforcement: people are reluctant to have deals governed by Russian law because they fear having to appear before a Russian judge who could be unsophisticated and/or possibly corrupt and I’m not sure which is the worst of those two options,’ he says.
But UK lawyers think that the fact that so many foreign litigants will still favour taking their case to England will force other countries to examine their legal systems and push for appropriate reform to boost confidence. ‘If the Russians were able to create a greater degree of confidence in their own legal systems then parties would be more comfortable litigating there,’ says Philippsohn. ‘At the moment, parties feel more comfortable resolving their disputes in the English court rather than their own domestic courts.’
Timothy Dutton QC, head of Fountain Court Chambers and former chair of the Bar Council, also believes that one of the best ways to push reform and move towards greater judicial impartiality in other jurisdictions is for them to reflect on the fact that London is settling their cases for them. ‘If word gets back to litigants’ domestic courts that disputes have been resolved fairly and to very high standards in England then courts in other countries will want to find out why and may embark upon a process of reform,’ he says. ‘There are already examples of this occurring. One example is Kazakhstan, where the judiciary has positively tried to adopt English process in commercial cases.’
Other states such as Dubai and Qatar have taken what they think will work from the UK system too, says Dutton. Both are trying to build financial services centres that have a similar type of regulatory oversight as in the UK. ‘As a consequence of modelling their financial regulation and compliance on the English system, they are also adopting a broadly English legal model,’ says Dutton. ‘In Dubai, the former Court of Appeal judge Anthony Evans has helped to establish the Court and a local London Court of International Arbitration so that the country has the skills and expertise to resolve local commercial disputes, while Lord Woolf has carried out similar work in Qatar,’ he says. He adds that companies doing business in Dubai and Qatar have also been prepared to arbitrate there.
Lawyers are in no doubt that London will continue to thrive as the dispute centre of choice for most litigants - ‘there’s no real alternative,’ says one. There is also enormous belief that the UK is in this enviable position by right. As Philippsohn says: ‘When litigants come to the UK to resolve a dispute, they know the process will be fair and independent; that it will be presided over by an impartial judge, and that it will be based on hundreds of years of case law. It is by far the best place to have a court hearing.’
Neil Hodge is a freelance journalist