One of the UK’s most successful exports is legal services.
Many international contracts contain clauses to the effect that any disputes
are to be arbitrated under English law. These generate a lot of business for
British courts and those who work in them.
The British legal system is seen as fair because British
judges have always been politically independent. The understanding at the heart
of the UK’s unwritten constitution has always been that elected lawmakers will
respect the independence of appointed judges in return for the judges not
making up their own laws.
This system worked well for three hundred years – compare
the UK’s political stability over that period with the lack of it in, say, France next door –
but the understanding has been undermined on both sides over the last decade.
It is particularly worrying that judges, perhaps envious of their American
counterparts, are now making up their own laws.
The most recent example is particularly frightening. It is a
well known legal fact that expatriate Brits need not pay British income tax, so
long as they spend less than 91 days in the UK
...or it was a well known legal fact until the Court of
Appeal arbitrarily and retrospectively changed the law. Tax
exiles must also now demonstrate a “distinct break” with their native land –
whatever that means: the Court’s nebulous language, which would never have been
tolerated by lawyers of the old school, leaves the concept open to all sorts of
So the purpose of this post is to sound two alarms. The
first is to warn entrepreneurs, not just in Britain but in other jurisdictions
that are following the British example, that international tax law is becoming
far more capricious and imprecise. That will make it harder for those of us who
want to be honest to plan with confidence. The irony is that the increased
complexity will actually make revenue collection harder and reduce the tax
The second – and more important – warning is to the judges
themselves, should any happen to be reading this. Arbitrary, retrospective, and
imprecise law-making by the courts will undermine confidence in their
independence. That will in turn undermine Britain as a venue for international
legal services. More to the point, it will also undermine the rule of law that
once made the UK the envy of the world, and on which all prosperity depends.