London is the global hub for legal services and English law remains the law of choice for business transactions worldwide. 

That was the message that rang out loud and clear at the Law Society’s International Marketplace Conference on 9 July. It was a message endorsed by in-house purchasers of legal advice from external law firms, by legal professionals in emerging markets and by UK law firms that operate in jurisdictions across the world.

There were also some notes of caution. We are not going to recover from the current economic crisis as easily as we did from previous ones, one speaker warned. Hourly rates charged by London firms are too high and the inclination is to go elsewhere, another said. There is no room for complacency, a third speaker told the delegates, because some overseas jurisdictions are rapidly catching up on us.

And yet another speaker warned of the dangers awaiting inexperienced lawyers engaged in disputes in the Middle East, citing one general counsel who ‘went in a lamb and came out a sausage’.

The conference, organised by the Law Society’s international division under the leadership of head of international policy Nankunda Katangaza, attracted speakers and delegates from all corners of the globe, from Kenya to Kazakhstan, from China to Cote d’Ivoire, from the US to Malaysia.

The conference started with a keynote address by World Bank director of global indicators and analysis Dr Augusto Lopez-Claros. He put into perspective the contrast between ‘mired in debt’ developed countries, which are growing slowly, and some poorer countries that are developing fast.

‘Even with annual growth of 6%, compared with less than 2% for mature economies, it will be 2116 before the people of poorer countries earn the same as us,’ he said. He also reminded delegates that ‘economic miracle’ China is still ranked 100 out of the world’s 190 countries in terms of income per capita.

However, the UK legal services market, along with other sectors, is still going to be slow to recover from the economic downturn, he said. Unlike the downturn that followed World War II, we no longer have a young working population to fuel a period of reconstruction. ‘On the contrary,’ he said, ‘we have millions of people retiring and leaving the workforce. Recovery is going to be slow.’

The in-house head of legal at the multi-billion-pound international Hinduja Group was more upbeat about prospects for British lawyers. When choosing an external law firm, Abhijit Mukhopadhyay said, he cares primarily about the three Cs. ‘That’s cost, competence and care,’ he said. ‘And so long as British firms live up to the three Cs, London will remain the key legal hub globally.’

The Hinduja Group, one of the largest corporations in the world, is active in sectors that include automotive, oil and gas, banking and finance, media, IT, power and healthcare. It operates worldwide, with much of its revenue generated in the Far East.

Mukhopadhyay said that irrespective of whether he is dealing with China, India or the US, he prefers the transactions to be undertaken under English law and wants the external firms he chooses to have at least a presence in London. ‘There is a global respect for English law and London lawyers are the most experienced in the world,’ he said. The London legal scene did not escape some censure from Mukhopadhyay: ‘London law firms have a reputation for costing too much – there should be more use of fixed fees.’

Mukhopadhyay’s comment that London law firms are commonly viewed as too expensive was endorsed by an English delegate who, during a coffee break conversation with the Gazette, said: ‘I charge just £250 per hour, but many prospective clients won’t even talk to me because of our reputation for charging sky-high rates.’

Why English law?

National firm Eversheds’ project development and financing partner, Howard Barrie, said that one reason for the international success of English law was the ‘unfair advantage’ that the UK derived from its former empire. ‘Our legislation is frequently the basis of Commonwealth countries’ own legal systems,’ he said.

Barrie instanced a project in Britain’s former colony Sierra Leone, upon which he has been working to establish sugar plantations, bio-fuel ethanol production plants, a shipping terminal and associated infrastructure. The project gives work to 1,800 employees and includes ‘farm field schools’ to educate the workers in how to feed their families all the year round, rather than hand to mouth.

‘It is the largest ever international investment into Sierra Leone,’ he said, ‘and although none of the parties to the project were British, it was all achieved under English law.’

Barrie explained that ‘English lawyers are happy to team with local lawyers, bringing our expertise to supplement their local knowledge.’ He went on to list the attractions of English law to countries such as Sierra Leone: ‘Our law is respected and recognised in the host country and we have a long tradition of judicial interpretation that encourages just outcomes. We also have a well-developed system of commercial law and expert lawyers at all levels of seniority in law firms to staff projects, unlike smaller local firms which tend to be driven by one talented lawyer who is normally over-worked.’

He tempered the unalloyed optimism of his words by wondering aloud whether ‘the sun was about to set on the English legal empire’. There are dangers, he said, because ‘host country’ firms are growing and their countries’ commercial law is being updated. He added that as local firms become more competent, lenders could in turn become more confident about giving money to developing nations – without requiring any input at all from English lawyers.

Chilean firm Morales & Besa international associate Claire Rason spoke about the opportunities and challenges for British lawyers in South America. There are many ‘preconceptions’, she said, that must be overcome before approaching the marketplace. ‘South America is not all the same,’ she said, ‘despite what many British people seem to think. Each country is different.’

Corruption is not always a problem in every country in South America, she added, giving the example of a large international corporation whose dispute with a Chilean company was resolved fairly with the full cooperation of the relevant authorities.

Another misconception, she said, is that to do business in South America it is best to be based in the US or Spain. There is an element of truth in this, she said, except traditionally ‘Colombia looks towards Britain and Chile, latterly, towards China, even though all Chile’s big mining companies are listed in London’. She repeated: ‘Each country is different.’

Weighty matters

Even patriotic overseas colleagues,’ in-house lawyer Richard Reade said, ‘are willing to litigate in London.’ Reade, who is vice-president and assistant general counsel at diet brand WeightWatchers UK, works across Europe, but finds himself, he told the conference, ‘increasingly using English law’.

Where problems arise, he favours English common law courts over European courts. ‘Common law will try and complete a deal by looking at the original intention behind it, whereas European courts might allow the original deal to be changed.’

However, Reade does not exclusively use UK lawyers. ‘We often pre-empt problems by consulting local lawyers to help us achieve Europe-wide compliance,’ he said, ‘and sometimes we use local firms to project-manage. But recently we used a London firm that is used to managing projects on a grand scale and which has the best food lawyer in Europe. We use the most suitable option available.’

One such option, according to Thierry Ngoga Gakuba, registrar of the Kigali international arbitration centre in Rwanda, is to use one of the increasing number of local dispute resolution centres. ‘It is ridiculous,’ he said, ‘to see people from Angola or the Democratic Republic of Congo going to arbitration in London when there is a local alternative.’

Establishing such a centre is not an overnight process, he said. ‘We have a big budget for training the judiciary and have worked hard to eliminate corruption.’

Dubai has similarly invested heavily to establish itself as a regional arbitration centre. Mark Beer, chief executive of the Dubai International Financial Centre, said that to persuade oil-rich Middle East countries to bring some of their trillions of pounds invested overseas back into Dubai it had first been necessary to ‘create a common law system, common law courts and common law judiciary’.

Simeon Obidairo, risk and compliance director at Nigerian firm Aluko & Oyebode, said that the legal system in his country is characterised by ‘high regulation (and) uneven enforcement’. Overseas investors should build corruption into their risk management, he said, citing one bank chief who was convicted of a $1.2bn (£796m) fraud. How much does anyone need for a comfortable retirement, he asked in an aside.

City firm Bird & Bird counsel Colin Long agreed with points made on corruption, but added that ‘know your partner risk’ should be part of the due diligence process. He said: ‘You must find out exactly who you are taking on as local partners.’ There may be a conflict, he said, or another issue that was not evident.

Patriotic duty

Law Society chief executive Desmond Hudson shared the conference’s closing session with deputy London mayor for business and enterprise Kit Malthouse. Like previous speakers, Hudson praised the UK’s ‘independent, trustworthy judiciary that is crucial to wealth creation’. However, he warned that it is easy to be complacent and ‘bask in the glory of London’.

Malthouse told UK delegates that it was a ‘patriotic duty’ to help close the trade deficit by ‘getting out there’ and winning business. The stage was set for growth, he said, because of the ‘stability and predictability’ of UK legal services. He said: ‘This country is very low on the corruption scale and our lawyers have seen every legal variation known to man over the years. Foreign investors know that they are certain to be treated fairly if they come to this country.’