International commercial law: Exorbitant privilege

IN 2012 ICBC, a state-controlled Chinese company that is the world’s most valuable bank, bought four-fifths of the Argentine subsidiary of Standard Bank, a South African firm. The deal was hailed as a leap forward for “South-South” co-operation—direct economic ties between emerging markets. But one group of rich-world middlemen got a slice of the action: lawyers. ICBC was represented by Linklaters, an English firm, and Standard Bank by Jones Day, an American one. The deal was made under English law, with any differences to be settled in an English arbitration centre.Though emerging markets now account for over half the world’s GDP at purchasing-power parity, and trade between them is booming, just two developed countries retain a stranglehold on cross-border finance, investment, mergers and acquisitions. Just as America benefits from issuing the world’s reserve currency, America and its former colonial master, Britain, enjoy the exorbitant privilege of issuing the world’s “reserve law”. A global survey by Queen Mary University in London in 2010 of general counsels and legal-department heads found that 40% most frequently did business using English law and another…

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