A Personal View: Magna Carta And International Trade

by Allen & Overy LLP

“All power tends to submit; absolute power submits absolutely”

This is not a history lesson about the origins, context and subsequent amendments to Magna Carta, nor about how far it was or was not put into practice. It is a view from within the four corners of the 1215 version about the symbolic relevance of the charter’s concepts to commercial legal practice today1.

Magna Carta symbolises fundamental principles of the rule of law, which are as relevant now as they were in 1215. They are crucially relevant to human rights and the criminal law, but also essential to effective international trade. In turn, international trade, and the legal practice associated with it, may be the most effective tool now available for transmitting and guaranteeing the rule of law. Where the rule of law becomes established for trade, it will also tend to affect the approach to human rights and the criminal law; and, although that process can be a long one, the results of evolution are more secure than those of revolution.

Many people are familiar with the concepts, if not the words, of the "great" articles2: Article 39, that "no free man shall be arrested, or imprisoned, or disseised [ie thrown off his land], or outlawed, or exiled, or in any way destroyed, nor will we [ie the King] go against him, nor will we send against him, save by the lawful judgement of his peers or by the law of the land"; and Article 40, that "to no one will we sell, to no one will we deny or delay, right or justice".

Articles 41 and 42 convey an expressly commercial perspective – and ideas worth emphasising in increasingly xenophobic and parochial times. (To neutralise any historians, I emphasise that it does not matter for my purposes whether these or any other articles of the 1215 version of Magna Carta survived in later versions.) Article 41 guarantees the security of merchants coming to England and their right to conduct trade "without any evil exactions" – in today’s terms punitive tariffs or protectionist regulations perhaps. It continues that, if war breaks out against another country, England will "without damage" attach (ie detain) the other belligerent’s merchants and their property while the chief justice checks to see how our opposing country is treating English merchants: "if ours are safe there, the others are to be safe in our land". Irrespective of how far this was honoured in fact, it is remarkable that this was being written down and signed by the King at all. Next, Article 42 guarantees free and safe movement into and out of England "for the common utility of the kingdom" of "anyone" – except nationals of countries at war with England and outlaws, but even then only those outlawed "according to the law of the kingdom".

There are other important and fascinating articles too: I will not venture into the "escheats" of Wallingford and Boulogne (Article 43) nor the "evil customs of forests and warrens" (Article 48), nor seek to justify articles that would rightly be shunned today – the time of Magna Carta was not an enlightened period of universal suffrage, equality and religious tolerance, even if the very optimistic might discern faint glimmers of hope – nor go on about some of the interesting rules of evidence or proportionality. I do, however, note Article 45’s admirable commitment that only those who "know the law of the realm and wish to observe it well" should be judges and law enforcement officials.

But for a litigator Magna Carta saves its best until last. When handed a contract, transactional lawyers understandably look to the operative provisions, just after the definitions and recitals, to see who is promising what services or payments to whom. Litigators turn first to the back of the contract. Is it signed? What law governs it? What are the rules on where and how I can fight the dispute and enforce my client’s rights? Magna Carta has a remarkable dispute resolution clause.

In summary, if the King breaches the charter, anyone can apply to four barons who in turn can demand redress from the King "without delay". If redress is not given within 40 days "counted from the time it is shown to us" (detailed rules of procedure even then), the four barons refer the matter to the council of 25. They requisition help from the population to "distrain and distress us [ie the King] in all ways they can" until the wrong is redressed "according to their judgement". The only things you cannot touch are the persons of the King and his family (ie "true" sovereign immunity). And then, perhaps a little optimistically, "when it is redressed, they shall obey us as they did before".

But the charter goes further: if anyone wants to take an oath to aid the 25 "distressing" barons against the King, he permits it (ie effectively absolving them of treason) and, if anyone does not want to take that oath of his own free will (for understandable reasons of self-preservation), the King will order him to take the oath against the King! And it finishes with a provision to set the whole thing in stone as a sort of legal Excalibur: if the King tries to do anything to get out of these commitments, that is "to be invalid and void, and we will never use it, either through ourselves or through another".

There is not space to go into every article here, but there are common principles throughout: first, the King (or State or sovereign power as you prefer) cannot exercise arbitrary and capricious power (see, as well as the "great" articles, others like Article 20 that penalties should be proportionate); secondly, the King cannot expropriate (ie take property), whether by direct taxation (such as "scutage", the payment taken in lieu of the obligation to provide military service) or indirect taxation (such as putting fish weirs3 on the River Thames, taking corn or wood without payment, or planting forests on farmland for royal hunting parties) except under the law – in the ban on scutage "save by the common counsel of our kingdom" (Article 12) you can hear the 18th century American cry of "no taxation without representation"; and, fundamentally, there is the acknowledgement that even an absolute monarch should be subject to legal limits, due process and enforceable redress. "All power tends to submit; absolute power submits absolutely" – not just an optimistic play on words, but highlighting the deeper point that, where absolute power submits irrevocably to limits, then the aura of invincibility – that power’s claim to be a priori – is absolutely gone for good4 .

These qualities of security (by which I mean of person and property), predictability, due process5 and enforceability are exactly what we mean by the rule of law. And those are the qualities on the list of international businesses today when asked what they most desire from the legal systems where they operate. While Articles 40 and 41 symbolically support the need both to expect and to respect the position of other countries if trade is to function effectively, that respect is conditional: if a country lacks the essential rule of law qualities, a business may take the risk of trading there, but will still want to avoid being subject to the jurisdiction of courts that may be directed by the capricious will of an absolute executive power, or that have incomprehensible or interminable procedures.

But what of the idea that international trade, and the legal practice associated with it, may be the most effective mechanism for transmitting and guaranteeing the rule of law? This matters to the commercial lawyer whose inner voice may ask whether the work she or he is doing serves any higher principle.

When not doing free legal work, whether representing Guantanamo detainees, or helping countries rebuild legal systems shattered by war or aid organisations deliver services, are commercial lawyers no more than moneychangers in the temple of the common law? I do not see the rule of law as so easily divisible; how commercial lawyers practise law and the legal process they seek to protect can have far-reaching and positive effects at a profound level.

Fast-forward 800 years to the present day. Imagine a country where the "sovereign" has absolute power, where courts are expected to find as the sovereign directs, where assets are subject to expropriation or restructuring at the sovereign’s whim. There are no effective checks on the sovereign – no experienced, articulate and independent judiciary, no established and efficient legal process, no free and challenging press. If there are barons, they may be too close to the sovereign, or have hedged their bets by keeping assets in other countries. Even assuming legal justification, and that it is practical (and in the vast majority of cases it is not), invading countries in the hope of removing absolute monarchs and conferring the benefits of security, democracy and the rule of law does not have a good record. But one thing most nations and peoples want to do is to trade with each other.

International businesses, however, do not have to trade with or in countries where they consider the risks to be too high. Those risks reflect the absence of the key principles of the rule of law. They may also include other risks or restrictions, from formal sanctions to customer backlash in home markets for trading with unsavoury regimes. So international businesses, wherever they can, make it a condition of doing business with legally unpredictable countries that their rights are insulated: to control their contracts they insist on the law and courts (or tribunals) of a place that does adhere to the principles symbolised by Magna Carta. The net effect, over time, is that the businesses and "merchants" of the legally risky countries themselves become acclimatised to concepts of security, predictability, reliability, due process and enforceability. They require it for themselves, and for their businesses and assets. It is no accident that such a high percentage of disputes in the London commercial courts are between businesses or nationals both of whom are from one or more other countries; that statistic is at the same time a mark of how uncertain some legal systems still are, and a sign that acclimatisation to the rule of law is under way.

The last arc in this commercially driven circle is completed when first expectations, and then the reality, of the essential qualities of the rule of law are imported and disseminated into domestic legal systems. This is not imposed by some patronising imperialism: the rule of law is pulled into countries, not pushed. What begins as a demand by their own commercial barons comes over time to protect the person and property of everyone. That is why the Magna Carta of 1215 is relevant to international business and international commercial lawyers 800 years later.


1 - I will be speaking on this subject at the Global Law Summit in London on 23/24 February as part of the 800th anniversary celebrations, accompanied by colleagues from across the civil and common law world.

2 - For convenience I refer to the original Magna Carta text by clauses or "articles".

3- These "fish pond" articles tend to be disparaged by some commentators, but in the early 13th century I suspect they represented expropriation in its most raw form.

4 - A point that applies even if the King ignores the charter (as he did).

5 - Outside the commercial sphere I would also specify access to justice as a key quality. That is rightly a hot topic. Note, for example, Article 17 "that lawsuits shall be held in a fixed place" and Article 19 acknowledging that the resources necessary for the administration of justice should "have regard to the volume of [court] business", which hint at this principle.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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