The legal work required by Brexit offers a once-in-a-generation chance to strengthen the rule of law to boost UK competitiveness
Whatever your view on the UK’s decision to leave the EU, we can all agree that we must improve the country’s economic competitiveness post-Brexit.
An important part of that will be getting right the complex process of disentangling UK law from EU law. The significance of this process has focused unprecedented political and commercial attention on the UK’s legal system. Irrespective of the merits or risks of Brexit, we should use the importance of this legal task, and the corresponding level of attention on our legal system, as an opportunity not only to rework Britain’s laws but also to improve how the rule of law operates in the UK for the benefit of our business environment. The rule of law is the foundational basis for creating the stability, fairness and ultimately the confidence that businesses need to invest in Britain.
What we mean by ‘rule of law’ is that the law must be accessible, intelligible, clear and predictable. Questions of legal rights and liability should be resolved by consistent application of law and not excessive or arbitrary exercise of discretion – whether by regulators, judges or government officials. These principles are all critical for UK Plc.
How does the rule of law impact competitiveness? In short, because it produces the commercial confidence and certainty necessary for long-term investment and hence increased efficiency and productivity. Think about a business considering an investment in a particular country, perhaps in new production facilities or a new regional hub. It will weigh the positive potential of the investment and the unpredictable risks inherent in it. The greater the perceived risk, the less attractive the investment will be.
If a country’s legal system allows excessive or arbitrary governmental and regulatory decision making, makes extensive use of vague and uncertain laws, or has features resulting in legal rights and duties being unclear or unpredictable, then there will be a significant legal risk associated with investment in that country. The rule of law is thus a material factor in the ultimate decision of whether to invest in any economy. The stronger the rule of law, the less risk investors are exposed to and the greater their confidence in the attractiveness of that country for investment.
The vital importance of the rule of law to economic prosperity is internationally recognised. The United Nations Global Compact’s “Business for the Rule of Law” Framework says,
"For businesses, an operating environment which is governed by the rule of law provides the basis for commercial certainty and creates the foundation for long-term investment and growth, and sustainable development for all.”
This is not an academic point. The rule of law is particularly important for the financial services and technology sectors, which account for more than 2.5 million jobs in the UK. To have the confidence to invest, they need certainty of regulation and as to their intellectual property rights, as well as the assurance they won’t be exposed to damaging retroactive interpretations of vague principles.
Crucially, all of us have a role to play in strengthening the rule of law – Parliament, government, judges, civil society and even business itself.
For example, faced with the return of so many legislative competencies from the EU, Parliament should simplify and strengthen its processes for scrutinising legislation, as well as invest in professional development and expert support to help its members make better use of their time.
Government must be mindful of the need to improve legal predictability, and to avoid excessive executive and regulatory discretion. It also needs to increase legislative drafting capacity to reduce bottlenecks and improve the quality of legislation. In addition, government can also help individuals and businesses to manage the sheer volume of legislation, using interactive digital technology to make complex and changing regulations more accessible in their most up-to-date form.
We likewise need to maintain the quality and independence of our judges to ensure the UK remains a leading hub for international litigation at time when other jurisdictions are competing for the work. According to TheCityUK, 70% of cases in the Admiralty and Commercial court this year were international in nature and English law is used in 40% of all global corporate arbitrations. Global business needs access to a court system that provides swift, efficient, effective and reliable dispute resolution, and the UK should continually aim to provide this.
Companies themselves also need to consider how their conduct may interfere with the administration of justice or the effectiveness and accountability of institutions. While business should be a beneficiary of the rule of law, it should also be a contributor to its enhancement. Companies can join relevant business networks committed to strengthening the rule of law and more clearly explain its impact on their decisions to invest in particular countries or activities.
Legal certainty is particularly important at this time of great change for the UK. If the UK can demonstrate a renewed commitment to providing legal predictability and fairness, and if businesses know that – whatever their complaints about specific laws – there is a national commitment towards greater respect for the rule of law, the UK economy will be all the more competitive for it.
An edited version of this opinion piece by Charlie Jacobs, Chairman and Senior Partner, was published in The Telegraph on 6 December 2017.