Speech

The value of the rule of law to international trade and finance

Speech at City of London Guildhall on the central importance to the British economy of the rule of law.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Justicia statue

It is a great pleasure to have been invited here to give this talk about the rule of law and the City.

Tonight we stand in the magnificent complex of the Guildhall. For eight hundred years this institution has been at the heart of the City’s governance. Here the great merchants of the day held court and fine-tuned the laws and trading regulations that helped create London’s – and England and now the UK’s – prosperity.

With the evidence of this history all around us, it is therefore particularly appropriate, I think, to talk tonight about the central importance to the British economy of the rule of law. Should we lose sight of this, our wealth and influence – and ability to look after our people and enhance their quality of life - would diminish. If we hold true to it as the heart of our constitution, as a political community we will be best placed to remain a global hub of business, and those working in the law can look to export their skills and values all over the world.

Global competition means that the countries that adhere to the rule of law, that nurture it and constantly review and renew it are the ones that will emerge ahead.

Of course, the rule of law does not mean we need to carpet our business world with red tape, or create unnecessary work so that lawyers can prosper. What it does mean is that we need clear rules, a high level of certainty about the legal parameters of decision-making, and clear consequences for unlawful actions. That, I think, is what the City wants, and it’s what this Government – and any Government worthy of the name – wants and should strive to provide.

While speaking up for the City is unlikely to win many plaudits in most of the popular press just at the moment, speaking up for the City and for lawyers at the same time may be seen these days as a career-ending move.

But those who shower unwarranted criticism down on the law and on the City choose to ignore an irrefutable truth – that each sector makes a vital contribution to the strength and well-being of our nation.

A weak financial and commercial sector represents less money in the economy, less foreign currency, less trade and less employment and, ultimately, wealth for all our citizens.

A weak legal system reduces contractual certainty, fuels corruption, delays and inhibits commerce, and undermines our international commercial attractiveness – the poorer the legal system and profession – the poorer the nation and its inhabitants. Something which was brought home to me in the days of the Soviet Union, and saw the low status of lawyers within it.

Our relationship – the City and the Law – is a symbiotic one. We each draw strength from the other.

London, and in particular the City of London, has been recognised across the world for many centuries as a centre of trade, commerce and finance. But it is no coincidence that during this period our country has also been regarded as a place where one could enjoy the protection of the Law and where in more recent times upholding, protecting and promoting the rule of law has been a central activity of the State. Put simply: London could not have become the global financial and commercial centre it is, were it not for the rule of law being held in such high regard.

Today, we are exporting professional legal services and the ethics and principles which underpin it around the globe and there is indeed an overseas market hungry for those educated and experienced in our system of justice and jurisprudence. The Government, which I am proud to serve as Attorney General, wants to do everything it can to support and boost those efforts. As recently announced by the Justice Secretary, the Global Law Summit planned for early 2015 will be, I trust, a world-class conference showcasing the UK’s unrivalled legal expertise, based on a long history of freedom and justice. Its goal is to help UK law firms and lawyers succeed and develop the business opportunities created by their world-class reputation, as well as spreading the word about what we believe has made us so successful.

Even today, now that the market has matured, there are still overseas law firms coming to London (more than 200 of them at the last count), including the first Chinese law firm Yingke whose premises I was very pleased to open. In turn London law firms are – even in these straitened times – opening new offices in places as far flung as Seoul, Tripoli and Ho Chi Minh City.

There is a demand for their work because of the reputation, experience and authority that our legal sector and in particular the legal sector of this City can provide. All of this, in my view, would not have been possible if Britain had not played a central role in the development, propagation and defence of the concept of the rule of law.

Now, the City of London was represented at what you could say was the earliest beginnings of the rule of law, the creation of the Magna Carta, which will be 800 years old next year.

In 1215, the Lord Mayor of London was appointed, along with the barons, to see that the provisions of the Magna Carta were carried out. London was also the only civic authority specifically named in the document – one of the few remaining copies of which is kept in storage very close to where we are at this very moment.

So our pedigree is well established. And it is not just about providing a domestic law framework for the resolution of disputes.

Our country has been central to the development of an international rule of law, starting with the concept of binding arbitration between states to resolve disputes and prevent conflict.

In this week of the American Bar Association’s visit to London, it is worth remembering that its modern form lies in our relations with our common law offspring and in the 1871 treaty of Washington to resolve the Alabama dispute. This led via further arbitrations to the UK supporting a permanent Court of Arbitration and now the International Court of Justice.

The Government recognises and emphasises the importance of upholding the rule of law and our international obligations-that famous eighth principle of Lord Bingham’s definition by putting the obligation to do so at the heart of the business of Government in the Ministerial Code reissued by each incoming Prime Minister and now a public document. It’s my task to try and ensure it is observed!

You could say that the rule of law runs as a great river through the work of modern Government. It has many tributaries: the stream of legislation, the run of prosecutions, the torrent of judicial review - not always liked by many -, the course of international law which pervades our foreign policy. But there are also culverts and conduits – the determined challenges put forward by the Government to unnecessary or intrusive EU rules, the drive to reduce unwarranted litigation and the repeal of moribund or bureaucratic Acts of Parliament.

We must cherish and safeguard this great river, because without it the rule of law cannot irrigate and nurture daily life in the UK and it certainly would not nourish the immense ‘soft power’ that gives our country a unique status.

Rightly, we expect our citizens and companies to respect the rule of law, the rules of doing business, ensuring a fair market and resolving disputes through law and peaceful means. But we expect other Governments and countries to do the same, and rightly criticise them when they don’t.

And, in these days of increased and welcome scrutiny of the work which Government does, we have to be seen to walk the walk, as well as talk the talk, and - that has to mean abiding by decisions to which we have bound ourselves by Treaty to observe even when they go against us – a topic I shall return to in a moment.

Certainly where the United Kingdom is concerned, there are plenty with which to comply.

Since 1815, the United Kingdom has signed up (on the best estimate of the FCO and even they are only able to provide the best estimate) to more than 13,200 treaties and agreements which bind how we will do business on the world stage in various ways, from the European Convention on Human Rights and the UN Charter to bilateral agreements on fishing rights.

And far from seeking to limit that, we are doing our very best to add to that list on an almost daily basis by taking a leading role in trying to solve the world’s problems- encouraging collective action through binding commitments on everything from world trade to climate change.

We’re doing this because experience has shown that the best way to achieve these objectives is through consensus and agreement, compelling ourselves and international partners to take action and then following through on that agreement, so that we can all benefit from the results. That’s something tangible that the rule of law can deliver for all of us, whether it’s protecting the ozone layer, black rhinoceroses or fundamental human rights.

But there is no point in Britain just adding mechanically to the list of agreements and declarations we have signed up to if we don’t also influence others to see the benefit of both signing up to and abiding by these agreements, and encouraging them to build their capacity to achieve this.

That is why, through our aid budget and the work of the International Development Department, as well as the Foreign Office and our Embassies overseas, Britain is building the capacity of other countries for good governance – at the heart of which is the need for the rule of law.

I have to say, since becoming Attorney General one of the most interesting and rather unexpected facets of my work, which I thought would be domestically rooted, has been international travel to support and promote capacity building, whether to a trial centre in Kabul developed to remove impunity and bring to justice local drug barons, or to the West Bank to discuss improvements to the legal process.

And of course, it is not just the Government that helps build this capacity but also some of you here in this room through your pro-bono work. I am overwhelmed by the amount of work done by London firms that’s been highlighted to me through the national and international pro bono committees.

To take one example, the case of the Palestinian Authority, after I went over, we have been able to involve the Slynn Foundation and the Bingham Centre for the Rule of Law. I was delighted to meet recently with them and the Palestinian Justice Minister and hear about their work which is sharing knowledge and best practice from here.

And Herbert Smith Freehills have been identified as among the market leaders in London, in offering more than £1 million of billable time to the Government of Sierra Leone, particularly to those Government officials involved in attracting and supporting inward investment into the country. This must be one of the most laudable examples of international pro bono work in the City to date, but I know there are many more.

In seeking to increase respect and adherence for the rule of law, this is not just about a principle- there are also, I would suggest, hard-headed reasons of national self interest in doing it too.

Firstly, it is essential for our economic and physical security. The constitutional document of modern international law, the Charter of the United Nations, was developed during the Second World War as an attempt to create a system of rules to prevent the horrors of a global conflict occurring ever again. In Europe the spectre of conflict thankfully no longer looms large, but in some places around the globe it is in fact ever present, and we need to use all the tools we can to prevent it from growing.

Secondly, the work we are doing to boost capacity results in British people from all backgrounds and professions, including those of you in this room, exporting our values. It creates an appreciation of the quality of British legal expertise, and a desire for it in the future. During these times of intense international competition, that desire lays the foundations for developing trade in services on which our prosperity, so much depends.

The rule of law can be a vital factor when deciding where you might want to trade, grow or do business. No-one wants to invest several million pounds in a new factory overseas, only to have it seized by the authorities on a flimsy pretext or end up in a legal dispute that will be tried by a corrupt judiciary. It is small wonder that many international businessmen wish to have their disputes litigated in our Commercial Court which the City has supported so consistently and which I was delighted to see finally up and running.

Nor I believe should we be troubled by the growth of competition.

If retired UK judges and other lawyers are all contributing to developing Commercial Courts in places such as Qatar then this can only be for the good as trade networks develop. There will be work, I suspect, for everyone.

Developing economies like Brazil, Russia, India and China, the so called BRIC nations, are also clearly working hard to emphasise their willingness to provide a rule of law framework for business. This too is a tremendous opportunity for British and in particular London law firms, to work extra hard to mark out our unique selling points.

But at the end of the day it is not just state of the art commercial courts which will determine where legal business will go. I have recently returned from Russia where I attended a conference of the International Association of Prosecutors on the excellent theme of the independence of the prosecutor and the Rule of Law. Our hosts were keen to showcase Russia’s positive developments in this area, although clearly there are huge challenges in both capacity and intent.

But as I said there in my speech, such laudable aims cannot be realised in any country until it is clear that justice and the rule of law is available to all without discrimination and without interference from other State actors.

The same principle applies just as much here. Our attraction as a place to do business and to live is as much dependent on what goes on at the Old Bailey, the Mayor and City’s Court and the Guildhall Magistrates Court as it does in Fetter Lane. That the City supports all of these legal institutions with the Lord Mayor the City’s Chief Magistrate, is indicative of an intent that the rule of law must be maintained at every level.

This is what distinguishes London from some of those places around the world that aspire to be regional legal or litigation hubs. While they may have gleaming new commercial arbitration centres equipped with all mod cons, walking beyond the tourist areas will often reveal entire communities bereft of any sense of the protection of the rule of law.

In Britain, you can walk several miles out from the Commercial Court and find dedicated lawyers working in small law firms and law centres that offer high-quality legal advice to local residents on a range of legal problems.

The rule of law is a concept that must run through the life of a nation from top to bottom, and not be confined to the upper echelons or a transient foreign clientele. As this Government pursues necessary and difficult reforms to bring the cost of justice in line with other Western economies, we must strive to ensure that we do not return to the era of Lord Justice Sir James Mathew, when ‘justice in England was open to all – like the Ritz Hotel.’

Plenty of criticisms can justly be made that the rule of law is often not observed by those who have signed up to it. But the fact that many a country may fail in its obligations should not lead us to consider our international promotion of the rule of law a failure.

Even in the worst of conflicts and the most serious violation of human rights, of which we can see many examples such as the present conflict in Syria, it seems to me to be noteworthy that the impact of the principles of the rule of law now routinely intrudes for the better, in forcing an acknowledgement that certain conduct is unacceptable to the world community and in providing some leverage to reduce its incidence.

The development of the International Criminal Court in removing impunity from those who have committed the worst violations of human rights constitutes a positive force for good. Change takes time. That is why we need to support the process – it has taken us 800 years to get to this point, after all. And we can only look around this building to find examples of cases where the rule of law was not obscure.

Equally there is every reason to monitor and scrutinise the international structures we have created to further this process. International agreements should be neither scraps of paper nor tablets of stone. If institutions which impact on us and whose decisions we are bound to observe such as judgments of the European Court of Human Rights or of the European Court of Justice are not working as the founders intended or in a manner fit to serve modern Britain, that is an absolutely legitimate subject for debate, and is something from which the Government does not shy away.

We should be bold about international institutional reform, as we were in using our chairmanship of the Council of Europe’s Committee of Ministers in 2012 to convene an important discussion on the future of the European Court of Human Rights. The Government’s aim was to make the Court more efficient, and ensure it did not exceed its mandate by unnecessarily intrusions into national democratic preferences.

The outcome of that meeting – the Brighton Declaration – has undoubtedly introduced significant practical changes that are already beginning to improve the efficiency of the Strasbourg Court and should ensure that key concepts such as subsidiarity and the margin of appreciation are applied consistently in the Court’s application of Convention rights. But, I’m the first to accept, its full effects are yet to be seen.

The Brighton process also stands as a symbol of what the UK can do when it sets it mind to reforming institutions – many naysayers said meaningful reform could never be achieved. But the Government rolled up its sleeves, mobilised a coalition of allies and got down to the hard business of negotiating change. You can only succeed if you try.

Of course, this Government is not about negotiation or international discussions for their own sake. When we see institutions that are ineffective, obsolete or wasteful, we are willing to withdraw – as we did in 2011 in pulling out of the International Labour Organisation and the UN Industrial Development Organisation.

So, it is therefore entirely right that, when we have tried reform and it does not work, or it does not go far enough, we consider whether the UK should remain part of a particular organisation – and, as the Prime Minister has said, this is the case even for hugely significant institutions like the European Union or for that matter Council of Minister or the European Convention on Human Rights. As a matter of law and of Parliamentary sovereignty, it is perfectly possible for the UK as a sovereign state to remove itself from treaty-based international obligations, regardless of how important some may think they may be.

However, in considering whether it should be done, we need to carefully analyse the costs and the benefits, and the wider implications. These European institutions allow the free exchange of people, goods and services with Britain’s biggest trade partner and have helped foster a continent where human rights laws have a special significance and can be fostered on a wide scale even if many of us will also have sympathy for the criticism that some EU rules or ECHR rulings have gone too far, and intrude into British practices and traditions that should be for us alone to change, should we choose by democratic means to do so.

But while we remain part of these institutions and remain bound by the rules which we helped to create, we must continue to be actively engaged, and to comply with our commitments. Moreover, if we are to remain secure and prosperous in this new century, the British body politic has to ensure it does not lose sight of the value in being a central player in developing the international system of mutually binding rules that determine how we as countries, companies and individuals conduct ourselves on matters that affect each other’s interests.

That does not imply blindly accepting European or international rules in an abdication of sovereignty. It does mean we must be clear-eyed and hard-nosed in our pursuit of British interests, but remember also that our key interests and wider interests for the international good are always going to be inextricably entangled.

It is in Britain’s interest that barriers to international trade are removed. But that is also for the global good as living standards rise wherever markets are fairly opened up. It is in Britain’s interest to pursue a clean environment on a sustainable footing, but also for the global good. It is in Britain’s interest that tyrants do not prosper and that there can be no impunity for perpetrators of the most serious international crimes.

From these examples, I hope it is clear that the economic, physical and ethical wellbeing of the United Kingdom remains rooted in international engagement. We have to play an active part in these organisations and discussions to make sure that our voice is heard, and British interests are protected.

International trade and finance are what made the City, and this country, rich. But it is the rule of law that made us respected. The fact that our constitution and at its apex our Parliament has facilitated its growth and guarded it whilst asserting its sovereignty to change the framework when needed is what has given us the benefits we enjoy today.

In 1666 the Great Fire of London destroyed large parts of the City. Samuel Pepys said:

A sad night to see how the river looks – no house nor church near it, from London Bridge to the Temple where it stopped.

For many months nothing was done to repair and rebuild the ruin of a City. Numerous legal difficulties and obstacles were placed in the way and at all levels of London life frustration was felt at the lack of activity.

In many European countries at the time I suspect the matter would have been dealt with by autocratic royal fiat. Or nothing might to happened at all to the City’s ruin.

Here, the Lord Mayor, Sheriffs and Alderman resolved to act and went in barges along the river to Westminster Hall where sat the Chief Baron of the Exchequer, the great Sir Matthew Hale and his fellow Judges.

Sir Matthew seized the initiative and was instrumental in ensuring an Act of Parliament was passed to rebuild the city. Central its success was the creation of the Fire Court in which Sir Matthew and 21 other Judges sat to decide all questions pertaining to the rebuilding.

The Court sat daily in Cliffords Inn and, in a way which my colleague Eric Pickles might envy, was able to demonstrate, thanks to the act of Parliament, a pragmatic willingness to cut through the tangle of property owners and tenants rights in order to expedite the rebuilding fairly but decisively. The restoration of the City is in no small measure due to the efforts of Sir Matthew and his colleagues in the legal profession.

Of course it’s interesting to note that Wren’s plans to rebuild St Paul’s struggled because of the ownership rights. The Judges were given the name ‘the Fire Judges’ and in recognition of their efforts the Court of Aldermen commissioned their portraits so that to this day that of Sir Matthew is proudly displayed here in the Guildhall gallery.

Fortunately we have no recent challenge of the nature of the Great Fire. I am not here to advocate a wholesale exception to current planning laws for great swathes of the City. But in bringing together three institutions, Parliament, the City and the judiciary for the common good it serves a shining example of what we achieve together.

I hope that, in our work in fostering and protecting the rule of law in this country and beyond, we can bear in the mind the duty we owe to those that led us here and to those who will take over after we have left the stage. As long as the rule of law remains at the centre of our national life, we can help make this City, our country and the rest of the world a more prosperous, secure, fairer and better place.

Thank you.

Published 15 October 2013