国际商法

International commercial law

Exorbitant privilege

American and English law and lawyers have a stranglehold on cross-border business. That may not last

IN 2012 ICBC, a state-controlled Chinese company that is the world’s most valuable bank, bought four-fifths of the

Argentine subsidiary of Standard Bank, a South African firm. The deal was hailed as a leap forward for “South-South”

co-operation—direct economic ties between emerging markets. But one group of rich-world middlemen got a slice of

the action: lawyers. ICBC was represented by Linklaters, an English firm, and Standard Bank by Jones Day, an

American one. The deal was made under English law, with any differences to be settled in an English arbitration centre.

Though emerging markets now account for over half the world’s GDP at purchasing-power parity, and trade between

them is booming, just two developed countries retain a stranglehold on cross-border finance, investment, mergers and

acquisitions. Just as America benefits from issuing the world’s reserve currency, America and its former colonial master,

Britain, enjoy the exorbitant privilege of issuing the world’s “reserve law”. A global survey by Queen Mary University in

London in 2010 of general counsels and legal-department heads found that 40% most frequently did business using

English law and another 22% American, generally the law of New York state. No other country’s law got a significant

share.

America and Britain reap large rewards from their legal dominance. Of the world’s 100 highest-grossing law firms, 91

have their headquarters in one of the two. America’s legal sector is bigger than the GDP of Peru; though much of that is

because of Americans’ litigiousness, a good chunk comes from foreign work. The New York offices of American firms

earn around $1.8 billion annually from international-dispute resolution. Almost two-thirds of litigants in English

commercial courts are foreign. At 1.5%, the legal sector’s share of British GDP is nearly double that in other big

European countries. Other bits of both countries’ economies feel the ripples, too. Foreigners visiting for legal hearings stay in hotels and eat

in restaurants. Aspiring lawyers from around the world pay to attend their universities and spread goodwill when they

go home. Dependence on American and British law firms makes it harder for dealmakers to move from New York and

London to Hong Kong or Frankfurt. Britain’s government describes lawyers as “central to the export of other

professional services” such as accounting, asset management and banking.

The competition is often weak: much of China’s commercial law was written by Communist Party officials and is riddled

with errors; and though India adopted much of English common law, its courts are notoriously slow. But the incumbents’

biggest advantage is that they have common-law systems with centuries of binding precedent. That means they offer

as much certainty as any jurisdiction can. In civil-law countries such as France, Portugal and Spain, and their

ex-colonies, judges have wide latitude to interpret statutes, increasing the risk of nasty legal surprises. Common law

also permits almost any terms in a contract. Civil systems place more restrictions on acceptable clauses, and often

consider the interests of third parties, such as workers or consumers.

Many other countries would like to break this duopoly. But even those with good laws on paper would take decades to

train enough lawyers and judges to make them stick. The immediate threat to American and British law comes from a

trend that dispenses with courts altogether.

Parties to a cross-border deal must decide not only which country’s law governs it but how disputes should be resolved.

Firms are increasingly opting for private arbitration, which promises confidentiality, speed and lower costs than going to

court—and here London and New York are less dominant. The Paris-based International Chamber of Commerce is

among the world’s biggest centres, and Stockholm was a popular venue during the cold war.

More recently, new entrants have made inroads. Among the most successful is Singapore, whose dedicated arbitration

venue, SIAC, opened in 1991. Singapore’s government exempts arbitrators from income tax and expedites entry for

participants in hearings. SIAC’s caseload has quadrupled in the past decade, with Indian firms particularly keen. Last

year they were parties to a third of its 259 new cases.

With 260 new cases last year, Hong Kong matches SIAC for size. Arbitration is essential for cross-border deals

involving China, since its judges rarely enforce foreign court decisions but are bound to uphold arbitration awards by