Is it different if we profit from providing a foreign court?

A frequent topic of public discussion these days is the extent to which we should be under the jurisdiction of foreign courts (although we have a right to appoint judges to them, and so they are international, not foreign, courts). It is considered unconscionable by some that we should be under the jurisdiction of anything other than our own domestic courts with our own domestic judges.

Yet we never consider that our country makes an appreciable living through the provision of what is in effect a foreign court to other countries. That is considered good. It doesn’t matter that we make money out of being a foreign court to other countries - they deserve it, and we don’t.

If you look at the statistics of the Commercial Court, around 70% of its cases are international, since so many contracts (either standard or bespoke) contain a specific provision for English law and/or for the English courts to resolve the disputes.

Similarly, in the London Court of International Arbitration (LCIA), over 85% of its cases concern both a seat in London and the choice of English law. A quarter of its parties come from Asia. The LCIA is trying to diversify the nationality of its arbitrators, and when it is responsible for selection, 63% are not British (if the parties are selecting, only 27% are not British).

What does it feel like to live in a country where your litigation rushes abroad? I know a fraction because of IBA-funded seminars that I help run in the developing world to help keep the law local. From the perspective of lawyers in the developing world, it is a new kind of colonialism, partly because they have no right to appoint judges.

When there are big-ticket transactions (foreign investment, for instance), international lawyers, including from the UK, come flying in to a developing country with their clients. The international lawyers are often obliged to retain local lawyers for due diligence and other local requirements. But, unless the local lawyers are well-prepared, they may undertake only a small part of the whole work, while the great part of the money for legal services goes abroad.

Then, if a dispute arises, the arbitration also goes abroad: to a country not only outside the jurisdiction but thousands of miles away on a different continent, to be heard by arbitrators who are not from your country, and in a law that is not yours. That is really what it is like to be subject to a foreign court, and those foreign courts are often English and staffed by English arbitrators.

To be fair to the international arbitration community headquartered in the global north, it is trying to diversify the nationality of its arbitrators (a course not really open to the Commercial Court in London). The following statistics come from a couple of those – although I have taken a broad brush to complicated and detailed figures.

In its most recent statistics, the International Centre for Settlement of Investment Disputes (ICSID) reported that only 17% of cases came from North America and Western Europe, yet 65% of the arbitral appointments came from those countries. It also reports, however, that 25% of first-time appointments in 2022 involved nationals of low- or middle-income economies.

The International Chamber of Commerce’s International Court of Arbitration paints a somewhat better picture: over 65% of the arbitrators come from North America and Western Europe, as above, but 43% of the cases originate in those regions. They also report continuous efforts to increase diversity, and that arbitrators confirmed or appointed in 2020 came from 92 jurisdictions.

There are separate efforts to try to improve the representation of women arbitrators, too, although that is another topic, which I am not addressing here.

Many countries in Asia, the Middle East and Africa are establishing and promoting their own arbitration centres, some increasingly successful, which is also slowly changing the picture.

I am making the following two points. First on the question of the UK political perspective: those who complain that the UK should not be subject to foreign courts should be aware that we make a lot of money by providing foreign courts and arbitration to others.

Second, and more importantly, international arbitration – in which the UK and UK lawyer arbitrators play a significant role – faces serious political questions, arising out of the fact that lawyers and legal systems in developing countries are kept out of big ticket work, which goes overwhelmingly to European and US arbitrations centres, law firms and legal systems.

Of course, parties are free to choose their arbitrators and their governing law, but (as the international arbitration community knows) a process which keeps out the global south to the commercial benefit of the global north is not going to keep its reputation, or indeed its business model, over the long term.

Jonathan Goldsmith is Law Society Council member for EU & International, chair of the Law Society’s Policy & Regulatory Affairs Committee and a member of its board. All views expressed are personal and are not made in his capacity as a Law Society Council member, nor on behalf of the Law Society