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Internationally debts were not divided among investors.

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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.

 

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
Subcontinent. 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
company. 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 corporation, 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 investment. 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 act and then a year
later with the Joint Stock Companies Act 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 shares. 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
negligently. 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.

The UK is famed for having some of the highest quality
Judges, Barristers and Law firms in the world. 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 parties. 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 Law has
four interrelated characteristics. Firstly, it is “pragmatic”, commercial law
is all about getting things done, solving issues1. It tends to deal with
meeting the legitimate 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”.2, 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
caricature of commercial laws.

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.3  Hence, it laid down the foundation of current
modern commercial law.4 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.5 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 and 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 procedure.6 Thus, the most important
feature is the “commitment to good faith” which is the superseding need of
making agreements.7
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 law8. 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. Lex
Mercatoria’s 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 day9. 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 1894, followed by the Sale of Goods act 1979 (   

 

Commercial law of
England is “pro-business”

There are many
sectors dominated by English law. These include international commercial
contracts, banking and financing, maritime and shipping, mergers and
acquisitions, dispute resolution and international arbitration. 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, “knock
for knock” indemnities 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.

 

 

Risk factors

There are various
wide categories of commercial contract risks such as Liability risk, breach of
contract, problems of warranty; terminations, disputes and allegations. The international and English courts concentrated upon
“tort law and warranted the potential liability of successor
corporations primarily by the
desirability of spreading the risk of accidents” while considering the issue of
successor liability as a matter of corporate or commercial law.10 Traditionally,
the contractual expectation is perceived
as promises made for receiving the benefits. The operational standards of good
faith performance are based upon the
costs perspectives articulated in the jurisdiction of common law. The
perspective of good faith could be implemented
when one party workout the discretion in performance and another party controls
the projected benefit the risk arises when discretion is used in bad faith to
recapture the predetermined opportunities.11 Breach of international
law jurisdiction is another issue. Investment treaties are meant to encourage
and protect foreign investors but mostly
they are not respected. Nevertheless, many investment treaty cases have ruled
that foreign investment by foreign nationals in host countries will not be protected in front of investment
arbitration tribunals. It has been debated
whether the illegal considerations are
the issue of jurisdiction, the research reveals that it is considered. Moreover, in the
era of globalised business, industries
are commissioned to select governing law for cross-border
business contracts. English law is mostly preferred because it is adaptable to
allow and implement limitations of the “cause of liability, waivers of
consequential loss, liquidation of assumed damages, time and procedural bars on
claims”. Further, clauses of “knock to knock” and pay when paid” are favourable elements to choose English Law.12 Frustration is another doctrine of
the risk factor; the contract can come to
an end if the contractual parties are unable to oblige
to the commitments made in the contract,
or are incapable of delivering because of
unfavourable circumstances.13 Dependency on frustration
and illegality may refrain the contractual parties to avoid liability caused due to a breach
of contract resulted from the imposition
of sanctions.

 

Conclusion

English law is
predictable and transparent; it provides
freedom of contract, a pro-business approach. There is no implied rule of duty
of good faith in commercial law, unlike other jurisdictions. According to
English law, a “duty of faith requires neither party to take advantage of the
other”. In the context of foreign
investors agreements, the parties are
obliged to inform each other the fundamental
aspects and rules if the parties are unable to comprehend. Hence, the law bound
both parties to be reasonably persistence about
contractual obligations and observe moral and ethical behaviours as mentioned in the contract.

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

2
Ibid at 8; and also Goode, above n.33, at
23)

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

4
Giles, above n.4, at
16; Goode, above n.33, at
3-6; and W. S. Holdsworth, A History of
English Law, vol. 1 (1969 ed., Sweet & Maxwell, London) at pp. 569-572.

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

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

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

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

9 Edward
L. Rubin, Learning from Lord Mansfield: Toward a Transferability Law for Modern
Commercial Practice, Idaho L. Rev, Vol31 pp.775, 802 (1995)

10 Gilson, R. J. (1986). The law and finance of corporate
acquisitions. Foundation Pr.

11Teubner, G. (1998). Legal
irritants: good faith in British law or how unifying law ends up in new
divergencies. The Modern Law Review, 61(1), 11-32.

12 ?????, ?. ?., & ?????,
?. ?. (2015). A Step To Perfection (Part II).

13 Posner, R. A., &
Rosenfield, A. M. (1977). Impossibility and related doctrines in contract law:
An economic analysis. The Journal of Legal Studies, 6(1),
83-118.