Law Tech seminar, Mishcon de Reya, 70 Kingsway, London, Thursday, 1 February 2024
Remarks by The Rt Hon The Lord Mayor of London, Alderman Professor Michael Mainelli
KEY MESSAGES:
- London’s strategic position and competitive advantage
- Connect to Prosper – particularly Smart Economy Networks
- Need to share best practice and export our know-how to meet the full potential of ETDA
Greg, Alan, Distinguished Guests, Ladies and Gentlemen,
It is a great privilege to join you this afternoon for this important and timely seminar. My thanks to Nick Davies, not just for that introduction, but for his tireless work challenging the market to move into a new digital era. And to Mishcon de Reya – and particularly, Tom Grogan and Greg Falkof – for bringing us together and hosting us today.
To those I haven’t yet had the pleasure of meeting, I am Professor Michael Mainelli, the 695th Lord Mayor of London. I lead the City of London Corporation – the world’s oldest democratic workers’ and residents’ cooperative – the governing body of the Square Mile, and serve as an international ambassador for the UK’s financial and professional services sector.
My background is in technology research and finance, and before that – longer ago than I care to admit – I completed my PhD just a stone’s throw away from here at LSE in chaotic systems, which funnily enough, is a pretty accurate description of the 25 billion paper trade documents generated by the international container shipping community every year. When it comes to trade documentation, in 2017 my firm, Z/Yen working with the government of Singapore, built a trade system in the far east using smart ledger technology that was ultimately acquired by a major insurer. When I was Master of the Worshipful Company of World Traders we commissioned research, The Economic Impact Of Smart Ledgers On World Trade, in 2018 that showed the immense benefits of digitisation.
Indeed, I could attempt to tell a joke about the benefits of going paperless, but it probably wouldn’t be worth the paper it’s written on.
This is my 82nd day in office and over the last 12 weeks I’ve been busy promoting the mayoral theme for this year – Connect to Prosper, celebrating the many Knowledge Miles of the Square Mile and reviving London’s proud coffee house tradition. One in which Jonathan’s Coffee House, opened in 1680, grew into the London Stock Exchange, Lloyd’s Coffee House, founded in 1686, became Lloyd’s of London, and the Virginia and Baltick Coffee House, opened in 1744, spawned the Baltic Exchange, with The Spectator, Tatler, Sotheby’s, and Christie’s – to name just a few – emerging from these “penny universities” too.
London is today the world’s “coffee house” – a place where people come together, from across the globe, to find solutions to our planet’s biggest challenges – from mental health to climate change. And being home to 40 learned societies, 70 higher education institutions, 130 research institutes, and over 24,000 businesses, with more than 300 languages spoken, we have access to incredible talent and skills and multifarious global connections.
A centre that trades in goods, and ideas, in equal measure. And it’s the latter we’re here to trade today.
- Commerce is about exchange between people.
- Commerce is about social interactions where people exchange ideas, opinions, and merchandise.
- Commerce is also intrinsically linked with economics and finance, and at the same time, politics and sociology.
London’s success – be it as the world’s biggest currency trading centre, the second largest centre for asset management, or as a global leader in the provision of legal, insurance, shipbroking, and other specialist maritime services – is all underpinned by our commitment to the rule of law, a principle upon which our city’s very foundations are built.
At its most basic level, the rule of law is the concept that both the government and citizens know the law and obey it – a durable system of laws, institutions, and community commitment that delivers four universal principles:
- Accountability
- Just laws
- Open government
- Accessible & impartial dispute resolution…
…with justice delivered in a timely fashion by competent, ethical, and independent representatives and neutrals who have adequate resources and reflect the makeup of the communities they serve.
And how can you tell that the rule of law is alive and well? Well, as a general rule of thumb, it’s when you can take the Government to court and have a chance of winning. While the subtle importance of the rule of law frequently goes unrecognised or is taken for granted – including by businesspeople – it can be looked at as a foundation stone of societal infrastructure – as the US Department of Defense often does.
It’s also crucial to trade, with the UK gaining enormously from being a centre of excellence and a venue in which contract disputes are regularly conducted. The rule of law is not only crucial to trade, but also of trade. Our legal services sector alone is worth £60 billion to the UK economy, and English law governs around £250 billion of global mergers and acquisitions and 40% of global corporate arbitrations.
Just as London is underpinned by the rule of law, the law is underpinned by documentation. Arbitration, mediation, and litigation revolve around contracts and the exchange of documentation. At the City Corporation we’re well versed on this, not least because in 1997 we helped write the T&C’s on carbon markets at COP3.
Those who draw up the T&C’s, draft the rules, and clear the path ahead crucially set the tone as well as the pace that others follow. And despite Ireland now being the largest common law jurisdiction in the EU post-Brexit, with the possibility that over time more businesses may opt for English law but Ireland as their jurisdiction of choice, we remain in an extremely competitive position. One in which we are well placed to help organisations and businesses – at home and abroad – find solutions to the frictions they’re encountering.
As the Master of the Rolls, Sir Geoffrey Vos, has made clear in his work on smarter contracts with Lawtech UK that our common law system requires no adjustments to accommodate digital assets – it’s already capable of handling it. And compared to the top-down nature of civil law throughout much of Europe, common law is inherently one of evolution that responds well in periods of rapid change – something we should absolutely take advantage of.
Now I’m sure you’re all familiar with what The Economist dubbed in 2018 “Pulp Friction”: a shipment of avocados from Mombasa to Rotterdam which entailed more than 200 communications involving 30 parties. It’s pit-iful really – full of pits – an area ripe for reform, and it serves as an example of why electronic trade documentation is one of those areas in which we should be leveraging our unrivalled convening power to forge a way forward.
Cheaper, simpler, faster, more transparent, and secure – reducing trade costs, speeding up transactions, mitigating error, and bringing about considerable environmental benefits. The Electronic Trade Document Act (ETDA) marks a huge step in the right direction, removing the “legal alchemy” – to borrow our next speaker, Professor Green’s, words – that has been attached to the possession of physical documents from time immemorial. As evidence of common law’s strengths, the ETDA is only five pages long, seven if you count the cover and contents.
But ETDA is simply one vehicle on the journey to where we need to go – not the destination itself – and it will count for little if we don’t bring others along on this journey with us. Singapore, of course, passed the Electronic Transactions Act in 2021, with others, like Bahrain, introducing legislation based on the Model Law on Electronic Transferable Records put forward by the UN Commission on International Trade Law. Following our G7 Presidency, Germany, France, Italy, and Japan are in the process of introducing their own legislation or making the required regulatory changes.
But a handful of countries implementing domestic legislation in a piecemeal fashion without reciprocity will see us meet only a fraction of the potential of a fully digital trade system.
We need to coordinate with others to make this a truly global effort. The City Corporation has a strong track record of bringing people together in this field. Our Lawtech Sounding Board, which concluded its five-year programme late last year, worked with legal practitioners and technology experts to try to increase the adoption of technology in the legal sector. We’ve partnered with the Treasury to create the Centre for Finance, Innovation, and Technology, whose first piece of work is focused on finding solutions to unlock the potential of open finance. And last year, our Vision for Economic Growth set out a roadmap to prosperity through proposals that are already working to transition us to a digital-first economy, highlighting the need for regulators to keep pace with technological changes as they occur.
Socrates wrote that: “The secret of change is to focus all of your energy not on fighting the old, but on building the new”.
Using this previous work as a springboard, our Smart Economy Networks Initiative, launched in November, seeks to go even further. The economy of the last 20 years has been driven by mobile, social platforms, and the cloud. The next 20 years will be driven by smart economy networks based on artificial intelligence, open data, and shared ledgers. For example, smart economy networks will provide supply chain tracking for trade in goods and services. Value will be created by digitisation of assets and contracts combining different types of high-quality data.
Fundamental to success will be enforcing the principle that an individual owns and controls their own data – and should be able to access it, give third parties the permission to access and combine it from different sources, and share in the economic value derived from it.
To make this work, we need standards and infrastructure – by which I mean software, not hardware, with more shared data spaces, perhaps using smart ledgers, where data can be safely exchanged, and those exchanges reliably validated. International interoperability underpinned by international standards, which is why our 695th Lord Mayor’s Smart Economy Networks Initiative is convening interested institutions and organisations to pilot the development of standards in a number of key areas through demonstrator projects.
Just as a few examples, we’re looking at trade and supply chain verification with HMRC
- digital asset verification with Mattereum
- pensions administration with Lumera
- digital verification and identity with Demos
- collaborative authorised push payment fraud and credit risk reduction with the Estonian Embassy, Mifundo, and Salv
Using London – an engine of growth and an international hub of learning and creativity with unparalleled global connections, top talent, and a world-class legal system – to find answers to the problems of the here and now, and those on the horizon too. If you would like to find out more about this work or are keen to get involved, please do get in touch!
Trade reaps economic benefits from specialisation and comparative advantage, creates prosperity, distributes success and wealth, and collectively enriches all of our societies and communities. Indeed, with the World Bank estimating that roughly 10% of the world’s population still lives in extreme poverty, with an income below $2.15 a day, we should never underestimate the power of trade to lift people out of hardship.
Thomas Jefferson once said that:
“He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”
And by sharing best practice, exporting our know-how, and promoting the benefits of digitalisation – leveraging our strategic position and considerable legal nous – we can help speed up the adoption of technology that will ultimately benefit you, me, and billions of people around the world. Trading in ideas, passing on that light, and connecting to prosper – today, tomorrow, here, and everywhere.
Thank you.