Rolls Royce justice - Neil Hodge
At £300m, the new Rolls Building offers cutting-edge commercial dispute resolution – but at a hefty price. Is the building emblematic of the world’s leading centre for legal services?
London’s new £300m state-of-the-art court complex – the Rolls Building – opened its doors in October. The government wants to make the UK the world’s pre-eminent destination for swiftly resolving international legal disputes, while making the country’s legal services market as lucrative as its financial services sector in the process.
When the project was launched five years ago, it was claimed the Rolls Buildings would develop into ‘the biggest dedicated business court in the world’. Consequently, the Ministry of Justice (MoJ) and UK Trade and Investment have been promoting British courts as the gold standard for resolving international disputes, hoping to profit from their excellence.
‘The provision of modern, high-quality services for all parties will present the opportunity to market the facility at a global level in order to maintain the unrivalled work of the high court and English law,’ said justice secretary, Ken Clarke. In a speech to TheCityUK in September, he added: ‘The UK may no longer be able to boast that it is the workshop of the world… but the UK can be lawyer and adviser to the world.’
The UK’s legal sector is already a significant earner, generating £23.1bn in 2009 – equivalent to 1.8 per cent of GDP. It contributed £3.2bn in exports, triple the level of a decade ago. Of commercial arbitration cases, 90 per cent of those handled by London law firms involve an international party, and – anecdotally – they mostly come from Russia and Eastern Europe. Court 26 is currently hearing a dispute between a certain Boris Abramovich Berezovsky and a former colleague, Roman Arkadyevich Abramovich.
'Four out of five cases that are dealt with in the Commercial Court have one party that is based outside the UK. In half of all cases neither party is UK based.'
The Rolls Building – which brings under one roof the Chancery Division, the Admiralty and Commercial Court and the Technology and Construction Court – is the largest specialist centre for the resolution of financial, business and property litigation anywhere in the world and has judicial expertise in areas such as asset recovery, banking and financial services, company law, construction, insolvency and reconstruction, intellectual property and patents, professional liability, property, shipping, technology, and trusts. It will also be used for mediation and arbitration, both increasingly popular alternatives to the traditional confrontation and expense involved in litigation.
The curvaceous, 11-storey building in Fetter Lane, close to London’s Royal Courts of Justice, contains 31 courts, including three ‘super-courts’ configured to accommodate big, high-value disputes, as well as four courts configured in ‘landscape’ format for multiparty cases. The building also has 55 consultation rooms that clients can use – a facility sorely lacking in the old premises, according to lawyers’ testimony.
The MoJ is also keen to trumpet the building’s investment in cutting-edge technology, such as full Wi-Fi connectivity thoughout, in-court facilities for parties to use their own IT (including electronic presentation of evidence and cabled broadband), in-court video conferencing facilities, and a new electronic filing system intended to make the facility mostly paperless.
An embarrassment of riches
At Dunstan’s House, also in Fetter Lane, is the Rolls Building’s predecessor, and few will mourn its passing. Facilities at St Dunstan’s were ‘unacceptable and an embarrassment to lawyers and their clients’, according to Lord Gold, head of David Gold Associates and formerly a senior litigation partner at Herbert Smith. ‘For the first time in many years, the Rolls Building will demonstrate to the clients we bring into England that we actually care about them,’ he says.
Yet while lawyers praise the new facilities and the much-needed investment, most believe that it is London’s long-established reputation as a leading litigation centre that will continue to attract clients rather than the new building and its mod cons.
Masood Ahmed, senior lecturer at Birmingham City University’s School of Law, says that the Rolls Building’s development ‘recognises the well-established fact that the UK (in particular London) is an epicentre for business and has, for many years, been a key centre for international commercial parties to resolve their disputes’.
Ahmed also believes that the UK has the status and reputation as a safe and neutral forum for the resolution of international business disputes. Added to that, the judiciary in the UK is recognised as the very best in the world in handling and resolving some of the most complex commercial cases. ‘The Rolls Building brings together the geographical significance of the UK as a key centre for international business with the best legal minds in the world to make it a leading centre for the resolution of disputes,’ Ahmed explains.
Aside from the quality of the judiciary, clients also appreciate the enforceability of their judgments. Jeremy Cole, head of the investigations and fraud team at Hogan Lovells, says that the UK has the best armoury of interlocutory ‘weapons’ – such as freezing and search orders – anywhere in the world. ‘In an extreme case you can go to the judge in the middle of the night and get an order to freeze the defendant’s assets. This ensures that there are assets available to enforce against if at the end of the case you are successful,’ says Cole.
Katie Papworth, solicitor in the commercial disputes group at Thomas Eggar, echoes these claims, underlining the English courts’ history and extensive jurisprudence. ‘We have good Commercial and Chancery judges coupled with a sound and robust system of law. Further, there is a substantial amount of case law relating to litigation cases in England which makes it very appealing for litigants to bring cases here, even more so if the rule of law in their own countries is unpredictable or if judges are inexperienced in handling these types of cases.’
Papworth also points out the frequency with which international companies use English law when they draw up commercial contracts with other parties. ‘English law is used a lot in commercial contracts and English jurisdiction clauses are very popular when foreign companies go into business with one another,’ she explains. ‘It can provide additional assurance for both parties, because without a jurisdiction clause from the outset it can be very difficult to seek recourse in a foreign court. Either party would need to demonstrate that England was the most appropriate forum, and should hear a case between two foreign litigants where foreign jurisdiction would normally take precedence,’ she adds.
There are other advantages, besides the judiciary. Ted Greeno, senior partner in the dispute resolution department at Herbert Smith, says that ‘as well as having experienced judges and barristers, London has a great network of expert witnesses, shorthand note-takers, translators and so on which the city has built up over a long time. Litigants therefore have the reassurance that everything they need to conduct their case can be found in one place,’ he says.
‘For the first time in many years the Rolls Building will demonstrate to the clients that we bring into England that we actually care about them.’
David Gold Associates
This offering is vital, considering the uniquely international character of the Commercial Court. ‘Four out of five cases that are dealt with in the Commercial Court have one party that is based outside the UK. In half of all cases neither party is UK-based’, Greeno explains. As a neutral forum, the UK Commercial Court has all the necessary expertise and experience to conduct complex dispute litigation cases.
Greeno also highlights how much claimants appreciate the adversarial approach, whereby both parties must disclose the documents that may favour the other party as well as the documents that support their own case. ‘While this may seem counter-intuitive, claimants tend to believe that this approach ensures fairness and that a reasonable judgment is more likely as it is based on all the evidence at the judge’s disposal and has been cross-examined by both parties,’ says Greeno.
Some lawyers also believe that UK courts are more ‘predictable’ in their behaviour, which means that foreign litigants are taking less of a gamble in terms of time and costs, particularly when compared to other litigation-friendly jurisdictions like the US.
Tim Strong, partner in the financial disputes practice at Taylor Wessing, says that the US does not have a specialist commercial court for dealing with dispute litigation cases, and that its wide-ranging discovery process can slow proceedings down as both parties try to locate documents. Strong says that there are other reasons why litigants favour the UK court over the US. For one, the US uses juries in civil cases, and the UK does not; also crucial is the issue of punitive damages.
‘Parties bringing a dispute to court want predictability about how the case is going to be conducted and so juries and the issue of punitive damages awards – which may bear no resemblance to the actual costs of the case – may be seen as too big a gamble. For many litigants, there is just too much to lose by bringing a dispute to a US court,’ says Strong.
The coming years may see a shift in the nationalities bringing disputes to the UK. Steven Philippsohn, senior partner at PCB Litigation and a member of the IBA’s Litigation Committee, suggests that in the in the number of Chinese parties bringing disputes to be settled in the UK. ‘The Chinese Government and many of the country’s largest companies have been investing heavily in infrastructure projects in emerging markets like Africa. Unfortunately, an increase in investment activity often has an impact on the amount of fraudulent activity within these contracts. As a result, we may see more disputes coming out of these kinds of deals which may mean that parties from China will seek legal redress in the UK.’
Not everyone believes that the UK’s attempt to lure international litigants to London is good news. Dimitry Afanasiev, chairman of Russia’s largest law firm Egorov Puginsky Afanasiev & Partners, explains: ‘Currently, we have the bizarre situation whereby English law is effectively the operative law in Russian business transactions. Even purely domestic transactions are governed by foreign law even to such an extreme that when one Russian is selling a house in Russia to another Russian, that is often an offshore company transaction that is governed by English law.’
In the mid- to long term, this is bad for Russia. ‘Unless Russian law is going to apply to business transactions here, Russian lawyers and judges are not going to gain the experience and sophistication’, says Afanasiev. ‘English courts are going to be overloaded with essentially domestic Russian disputes on matters so alien to any English judge that he or she is not going to know how to do away with the case, and there is not going to be any rule of law in Russia,’ he adds.
So why do Russians take their disputes elsewhere? ‘Afanasiev is clear: ‘The problem with Russian law is enforcement: people are reluctant to have deals governed by Russian law because they fear having to appear before a Russian judge who could be unsophisticated and/or possibly corrupt, and I’m not sure which is the worst of those two options,’ he says.
One of the ways in which the Russian Government is attempting to address this problem is through the creation of a modern, sophisticated international court of arbitration, similar to the London Court of International Arbitration, with independent and well-paid arbitrators. ‘We are also helping the government to re-write the Russian Civil Code by deleting unnecessary imperative clauses that unreasonably restrict freedom of contract,’ says Afanasiev. ‘It needs to be simplified and liberalised and Russia should look at other countries that have legal systems built on the same Napoleonic code – such as France, Germany and the Netherlands – and consider the possibility of following the way in which they have adapted it,’ he says.
‘If implemented, both initiatives are going to be a big leap forward in the development of Russian law, and a small collateral benefit for Russian law firms will be that there will be more demand for Russian lawyers,’ Afanasiev adds.
Vassily Rudomino, senior partner at Alrud and Co-Chair of the IBA’s European Regional Forum, is also clear about why Russians take their disputes to the UK. Foreign companies insist on having jurisdiction clauses in their contracts because they distrust Russian courts, which means that dispute resolution needs to take place abroad, and usually in London under English law. Furthermore, Russian businesspeople have such strong personal links with London now that it is easy to establish a link that enables them to bring a case before an English court.
‘The problem with Russian law is enforcement: people are reluctant to have deals governed by Russian law because they fear having to appear before a Russian judge who could be unsophisticated and/or possibly corrupt.’
Egorov Puginsky Afanasiev & Partners
But Rudomino believes that the tide is beginning to turn. ‘The Moscow Commercial Court hears a lot of dispute litigation cases now and there are hardly any reports of unfair trials or corruption, which is welcome news. This is creating greater confidence in the Russian legal system and there is some evidence to suggest that Russian companies want to resolve disputes in Russia now instead of England.’
Some believe that the primacy of the English courts in international disputes will force other countries to examine their legal systems, and push for appropriate reform to boost confidence. Philippsohn says that ‘there is certainly a well-recognised belief that at least 60 per cent of the work in the commercial and chancery divisions is Russian and Eastern European, and that that figure is unlikely to go down.’ He adds that ‘if the Russians were able to create a greater degree of confidence in their own legal systems then parties would be more comfortable litigating there. At the moment, parties feel more comfortable resolving their disputes in the English court rather than their own domestic courts.’
Timothy Dutton QC, head of Fountain Court Chambers and former chairman of the Bar Council, hopes that ‘if word gets back to litigants’ domestic courts that disputes have been resolved to very high standards in England then courts in other countries will want to find out why and may embark upon a process of reform’. There are already examples of this occurring. One example is Kazakhstan, where the judiciary has positively tried to adopt English process in commercial cases.
Other states have taken what they think will work from the UK system too, such as Dubai and Qatar. Both are building financial services centres that have the same type of regulatory oversight as in the UK. ‘As a consequence of modelling their financial regulation and compliance on the UK system, they are also adopting a broadly English legal model’, says Dutton. ‘In Dubai, the former Court of Appeal judge Anthony Evans has helped to set up a court, and a local London Court of International Arbitration, so that the country has the skills and expertise to resolve local commercial disputes, while Lord Woolf has carried out similar work in Qatar,’ he says.
Given the weight of professional opinion, it appears that London’s status as the jurisdiction of choice for commercial disputes is only set to grow, and that the Rolls Building will enable the courts system more comfortably to deal with a burgeoning caseload. While some jurisdictions may bristle at the thought of high-profile – and high-value – cases being exported to London, practitioners both in the UK and abroad believe that regions like Russia and Asia will conduct more of their own dispute litigation cases as confidence in their own legal systems and enforcement improves.