Internationally debts were not divided among investors.
Internationallythe preferred governing law for business transactions is English Law.
It isprevailing all over the world because of it well established jurisprudence. HistoricallyEnglish law connects to the period of the British Empire, which was one of thelargest empires in history. The formercolonies established their legal systems as a legacy of English Law. The System of Common law has been retained even to this day by severalBritish colonies; it has been used by respectivecourts as a source of interpretation, guidance, rules and input.
They refer to the judgments of the higher courtsof England for giving decisions on new and unusual issues. In the same manner the English courts also seek assistance from the judgments of courtsfrom other jurisdictions. Historically, avital role in the development of international commercial law was played by the East India Company. A modelwas established for modern corporations, such as we have today, by QueenElizabeth by granting a charter to the East India Company.
The Royal Charterof 1600 set up the first English joint stock company to commence trade with East India, China and the IndianSubcontinent. This was set up by Queen Elizabeth I when she used her sovereignpower to create trade by setting up the first ever joint stock company, whichinvolved investors holding shares in thecompany. Based on their shares the company paid them a share of its profits. The liability of the investors of the East IndiaCompany was also limited due to it being the world’s first limitedliability corporation, which granted protectionto the money of the investors as they could not lose any more money than theirinitial investment. As a result,if the company operated at a loss theoutstanding debts were not divided among investors. This is the firsthistorical evidence of English law being pro-business as this newly establishedmodel would encourage people to invest in businesses’ knowing they would not beliable for more than their initial investment. It is not just historically thatthis can be seen as pro-business as today we have the concept of limitedliability. Starting in 1855 with the Limited Liability act and then a yearlater with the Joint Stock Companies Act parliament had found a way to inspirepublic confidence in the idea of investing into companies as investors knewthat they were only responsible for the value of their shares.
The acts allowedpeople to register companies as limited liability and quickly it became clearthat people were more interested in investing in limited liability companies.Even more recently we have the Limited Liability Partnership Act 2000 whichallowed limited liability partnerships to be established which are highlypopular as partners are not able to limit their liability if they actnegligently. This has proved to be highly popular with investors. These morerecent acts show that English Law has built upon to historical foundations ofjoint stock and limited liability to create a pro-business environment thatencourages economic growth and promotes the protection of investors, naturallyencouraging more investment. The UK is famed for having some of the highest qualityJudges, Barristers and Law firms in the world.
English Law also received famedue to the provision of relative and speedy justice regarding commercialdisputes. HM courts and services allow businesses (or individuals) to bringtheir claim forward, Arbitration claims, issues of banking and commercialservices, commercial agencies, matters of insurance, trade, contracts andbusiness disputes as well as financial conflicts are dealt with by the”Mercantile court” (now Commercial Circuit Court). The independence of thejudiciary also strengthens English laws standing internationally as the judgesare equipped to deal with complex cases speedily, effectively and impartially.This international fame has meant that between March 2012 and April 2013 81% ofcases before the UK commercial court involved a foreign party, with 49% ofcases ONLY involving foreign parties. To me this shows that UK law offers apro-business approach as why else would so many foreign businesses use the UK’scourts to argue their claims. English Law hasfour interrelated characteristics. Firstly, it is “pragmatic”, commercial lawis all about getting things done, solving issues1. It tends to deal withmeeting the legitimate requirements of the market,formulating contract structures and many legal tools.
Secondly, it is “responsive”. It provides a body of rulesdeveloped in response to commerce needs. According to Professor Goodee, “the totality of laws with regards tomercantile conflicts are represented by commercial law”.2, he further indicated thattrading is impossible without commercial laws. Thirdly, the role of commerciallaw is to facilitate the efficient operations of transactions rather than emphasising upon the content and form oftransactions. Lastly, they are consequentialistrather than normative.
Commercial laws are said to be consequentialist becausethey provide determinate results withoutbeing concerned would it be achieved or not. These four characteristics are thecaricature of commercial laws. Tofully understand contemporary commercial law and why it is pro-business wemust 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 andincorporated by common law” which was initiatedin the 17th century.3 Hence, it laid down the foundation of currentmodern commercial law.4 It is described by John Braithwaite and Peter Drahos that this ancientlaw that would eventually form the basis of common commercial law is “MedievalLex Mercatoria”. These laws were formulated by merchants and established policies to regulate commercial relations. Inthe domain of commercial life, the roleof the court was to operate in a declarative model.5 Significantly, the law of themerchant was applied internationally due to its’ composition, the ability of adaptability, flexibility andfreedom from technical rules of evidence and procedure.According to Gunther and Teubner, the merchant law comprised of broaderprinciples which possess the potential of changing their application case tocase.
Indeed it is more about the law of values rather than the law of rules and structure and procedure.6 Thus, the most importantfeature is the “commitment to good faith” which is the superseding need ofmaking agreements.7Hence all these features are useful to comprehend the meaning of commercial law. In1889 the barrister responsible for the Bills of Exchange Act 1882 and the Saleof Good Acts 1893, Mr Mackenzie Chalmers augmented that mercantile laws are notmeant for lawyers, though they are made by lawyers or laymen to regulate theconduct 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 appliedin the common law by Edward Coke and then later Lord Mansfield. LexMercatoria’s ability to adapt and flex is the key reason that commercial lawbecame pro-business as Mansfield understood that for this happen the law wouldneed to be constantly changing and adapting, just as Lex Mercatoria could.
Mansfieldlay down that commercial law should be based upon the commercial practices ofthe day9. This is another exampleas noted above that the law was not meant to guide business but insteadbusiness was meant to guide the law. Now if business is guiding the law and notthe other way around, it is clear to me that that law must be pro-business.
TheSale of Goods act 1894, followed by the Sale of Goods act 1979 ( Commercial law ofEngland is “pro-business”There are manysectors dominated by English law. These include international commercialcontracts, banking and financing, maritime and shipping, mergers andacquisitions, dispute resolution and international arbitration. With theincreasing globalisation of business, companies are tasked with choosinggoverning law for cross-border construction contracts. English law isfrequently chosen because English courts are amenable to permitting andenforcing limitation of liability causes, waivers of consequential loss,liquidation of anticipated damages, time and procedural bars on claims, “knockfor knock” indemnities and “pay when paid” clauses. English law dictates thatdiscussions with your lawyer are confidential and covered by legal privilege.
English lawyers are boundby professional rules to keep the affairs of their clients, and former clients,confidential. Legal professional privilege is established in English law as abasic human right and provides comfort to parties that they can freely andfrankly discuss issues and strategies with their legal counsel without thisprejudicing the case or leaking into the public domain. Risk factors There are variouswide categories of commercial contract risks such as Liability risk, breach ofcontract, problems of warranty; terminations, disputes and allegations. The international and English courts concentrated upon”tort law and warranted the potential liability of successorcorporations primarily by thedesirability of spreading the risk of accidents” while considering the issue ofsuccessor liability as a matter of corporate or commercial law.10 Traditionally,the contractual expectation is perceivedas promises made for receiving the benefits. The operational standards of goodfaith performance are based upon thecosts perspectives articulated in the jurisdiction of common law. Theperspective of good faith could be implementedwhen one party workout the discretion in performance and another party controlsthe projected benefit the risk arises when discretion is used in bad faith torecapture the predetermined opportunities.11 Breach of internationallaw jurisdiction is another issue.
Investment treaties are meant to encourageand protect foreign investors but mostlythey are not respected. Nevertheless, many investment treaty cases have ruledthat foreign investment by foreign nationals in host countries will not be protected in front of investmentarbitration tribunals. It has been debatedwhether the illegal considerations arethe issue of jurisdiction, the research reveals that it is considered. Moreover, in theera of globalised business, industriesare commissioned to select governing law for cross-borderbusiness contracts. English law is mostly preferred because it is adaptable toallow and implement limitations of the “cause of liability, waivers ofconsequential loss, liquidation of assumed damages, time and procedural bars onclaims”. Further, clauses of “knock to knock” and pay when paid” are favourable elements to choose English Law.12 Frustration is another doctrine ofthe risk factor; the contract can come toan end if the contractual parties are unable to obligeto the commitments made in the contract,or are incapable of delivering because ofunfavourable circumstances.13 Dependency on frustrationand illegality may refrain the contractual parties to avoid liability caused due to a breachof contract resulted from the impositionof sanctions.
ConclusionEnglish law ispredictable and transparent; it providesfreedom of contract, a pro-business approach. There is no implied rule of dutyof good faith in commercial law, unlike other jurisdictions. According toEnglish law, a “duty of faith requires neither party to take advantage of theother”.
In the context of foreigninvestors agreements, the parties areobliged to inform each other the fundamentalaspects and rules if the parties are unable to comprehend. Hence, the law boundboth parties to be reasonably persistence aboutcontractual 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 2.2Ibid at 8; and also Goode, above n.
33, at23)3 Leon Trakman, The Law Merchant: The Evolution ofCommercial Law (Rothman & Co 1983)4Giles, above n.4, at16; Goode, above n.33, at3-6; and W. S.
Holdsworth, A History ofEnglish 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 andreflexive elements in modern law.
Law and society review, 239-285.7 Leon Trakman, The Law Merchant: TheEvolution 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 EdwardL. Rubin, Learning from Lord Mansfield: Toward a Transferability Law for ModernCommercial Practice, Idaho L. Rev, Vol31 pp.775, 802 (1995)10 Gilson, R.
J. (1986). The law and finance of corporateacquisitions. Foundation Pr.11Teubner, G.
(1998). Legalirritants: good faith in British law or how unifying law ends up in newdivergencies. 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.