Cities of Law, places of tradition or innovation?
Cities Of Law
As contemporary economies get more and more dependent on law, strong added-value legal services (upon which rely financial activities) cluster in legal market places.
In legal hubs within the United Kingdom or the United States, judicial activities are considered per se as an income-generating (business) activity. The UK legal market is estimated to generate up to 30 billion euros (2,5% of the GNP) whereas the French legal market (aggregating the general revenue generated by all legal professions in France) amounts to 1% of the French GNP.
A large part of the French judicial activity is clustered in Greater Paris which represents a major legal marketplace with international reach and influence, competing with London, Brussels or even New York.
To better grasp the issues at stake, the assets and the opportunities provided by the Cities of Law, the Global Cities Makers Forum gathered those who make cities attractive through legal practice: Noëlle Lenoir*, former French Minister for European Affairs and associate lawyer of the Paris bar association, Bertrand Savouré, President of the Paris Notary Chamber, Anne Maréchal, Head of Legal Affairs at AMF (Autorité des Marchés Financiers, France’s financial markets authority) and Lazaros Panourgias, Head of EIF Affairs Brussels at the European Investment Fund (EIF).
*Noëlle Lenoir is Chair of the working group « Paris, City of Law » launched by Greater Paris Investment Agency dedicated to supporting Paris as world-class place of legal excellence.
Paris, a place of legal excellence?
It takes three key features to achieve a City of Law: a diverse yet complementary community of legal professionals, efficient standard-setting institutions (regulation agencies, jurisdictions and international organisations) and procedures suited to modern settlements of dispute.
According to Noëlle Lenoir, Paris is a prominent living lab for legal excellence. She stresses that « France has been a pioneer in settling two International Chambers, one at the Commercial Court of Paris and the other at the Paris Court of Appeal ».
Launched in 2018, these International Chambers allow parties to work in English (soon in other foreign languages) throughout simplified legal proceedings with the possibility to resort to foreign legal systems when required. They are key assets for Paris in attracting international litigation cases, to the extent that other places in the world are developing their own.
Acknowledged as one of the world’s leading places for international arbitration along with London and New York, Paris welcomes highly qualified arbitrators from all nationalities. The Legal High Committee for Financial Markets of Paris (HCJP*) has recently made a proposal to further reinforce Paris position, recalls Anne Maréchal, with a simplified arbitration procedure which cuts on delays and limits costs. It also provides a model clause for contracts to choose Paris as an arbitration seat. The goal is to replace contract clauses that often prefer British or American Cities of law as arbitration seats, and eventually to host more international financial litigations in Paris.
“There is no economic development of a city without providing legal and judicial services.”
Former French Minister for European Affairs, Associate Lawyer at the Paris Bar association.
The Legal High Committee for Financial Markets of Paris
Created in 2015 at the joint instigation of the French Financial Markets Authority (AMF) and of the French Central Bank (Banque de France), the Legal High Committee for Financial Markets of Paris (HCJP) is a group of independent legal experts that suggests draft reforms to increase Paris legal competitiveness and supports public authorities during negotiations of European and international financial regulation.
For a city to host regulatory norm-making institutions is an asset that should be promoted. Noëlle Lenoir insists on the fact that « those who set the standard, shape the ways of thinking and acting, and thus own the power ».
Paris is home to international organisations such as UNESCO, OECD and more recently the European Banking Authority (EBA) that left London as a consequence of Brexit.
Administrative authorities and agencies (AMF, CNIL the French National Commission on Informatics and Liberty, AFA French Anticorruption Agency, to name a few) emit a growing number of guidelines that impact economic operators. They enforce a soft law that is increasingly constraining as it implies penalties in case of infringement.
Finally, striving to improve our legal system requires further support. Yet, effort is to be made in promoting existing instruments in French legislation, such as the evidence gathering procedure laid down in article 145 of the French Code of Civil Procedure, more convenient than British disclosure or US discovery procedures.
To better understand how foreign business and legal frameworks export themselves and to explain the French legal system based on continental law, Paris notaries take part in joint promotion missions in China and Japan along with other legal professionals.
Taking the same outward looking approach, the network of notaries from main European cities share experiences and best practices with one another, adds Bertrand Savouré.
“Paris is now identified for its strong entrepreneurial culture and VC-friendly regulatory framework.”
Head of EIF Affairs, European Investment Fund (EIF)
A clear and incentive legislation, efficient regulators: those are the basics sought by investors in a VC ecosystem where startups, entrepreneurs, investors and fund managers interact.
As part of the European Investment Bank group (BEI), the European Investment Fund (EIF) gives European and extra-European SMEs access to funding(s) from the InvestEU programme (successor of the Juncker plan) in co-funding with local and national investment bodies (bpifrance for instance).
Within the venture capital (VC) landscape, Paris is now recognised for its strong entrepreneurial culture supported by a regulatory framework which encourages innovation.
The recent opening of Station F flagship hub is both a strong signal and a means to facilitate dialogue between startups and investors, says Lazaros Panourgias.
In Greater Paris, EIF supports the growth and acquisition of startups in the fields of social impact, agriculture and cybersecurity among others. Still, more can be done with existing funds, tools and financial products by fostering interactions between players at the local, national and European levels to increase knowledge of funding sources for all parties.
Securing trust, a key focus for legal players
All four experts operating on different scales (metropolitan, national and international) agree on this point: law is a way of building trust for the benefit of everyone: citizens, legal persons, French and foreign companies.
Greater Paris notaries are main drivers of Paris metropolitan economic and urban development, and therefore act to secure trust in daily transactions. Bertrand Savouré recalls that they gather all 7 notarial bodies of Paris Ile-de-France region, representing 3,000 notaries and 7,000 associates settled in 600 offices. They are on the front line to answer the questions of 3 million clients every year, and to ensure legal protection as they draw up legal contracts in real estate, property or else company laws.
A secure access to housing is a key elements of cities’ attractiveness. Paris real estate market has been recently put under great pressure: rising costs can be seen as a sign of recovery, after years spent lagging behind other global cities’. Brexit and Paris 2024 Olympic and Paralympic Games are obviously part of the equation.
“Notaries [of Greater Paris] act to secure trust for the general public.”
President of Chambre des Notaires de Paris
For the AMF, securing legal stability necessarily comes with international cooperation. No file falls within a unique national jurisdiction or solely implies national players, hence the need to cooperate beyond borders to process transnational cases and fine those who infringe financial markets rules.
Furthermore, financial regulation in France is almost exclusively based on European law, and the French Financial Markets Authority, which is recognised as a world leading player for financial security, helps shaping it. The AMF draws its legitimacy and knowledge directly from field experience and the finance experts it brings together and interviews on a monthly basis.
For instance, France was the first country in the world to provide a comprehensive regulatory framework for digital assets (securities and derivatives markets) based on the AMF works. AMF brings forward its unique expertise and defends its positions before the European Commission in Brussels and the European Securities and Markets Authority (ESMA) based in Paris.
Instability is a threat to confidence and harms attractiveness, in particular in times of Brexit. To overcome these risks, Bertrand Savouré suggests that legal and fiscal rules should be maintained for a given period of time, beyond political changes. Lazaros Panourgias also claims that a stable tax framework and international cooperation are equally essential to guarantee a long-term attractive VC ecosystem.
Boosting Paris as a City of Law in the post-Brexit era: legal innovation
Brexit is a source of uncertainties for cities in Europe and the world hosting legal and financial centres. The AMF commissioned a report to the HCJP in order to assess the consequences on Paris financial centre, in terms of continuity of contracts and assets management.
There is definitely some room for Paris to benefit from the situation, Anne Maréchal says. Up to now, some twenty agreements have been granted to corporate investors and some twenty more to investment management companies that have decided to relocate 1,500 jobs from London to Paris. This may just be a start: the phenomenon is likely to grow and the final effects for Paris will depend on the negotiations between the European Union and the United Kingdom and the equivalence decisions taken with the future non-member State.
British regulation authorities used to play the suggestion box for EU financial legislation. They are now paving the way for the French to strengthen their position and influence in turn the regulatory framework in favour of Paris financial centre.
“The AMF has a strong expertise rooted in field interviews with experts. It provides us with the legitimacy to suggest draft reforms and shape EU’s financial regulation.”
Head of Legal Affairs of the French Financial Markets Authority (AMF)
Following the government’s request, the French Markets Authority has also reviewed France’s financial legislation to fix the excessive implementation of European norms and make the French legal environment even more attractive.
Is a post-Brexit pan-European legal firm possible? Noëlle Lenoir tackles another promising path to attract lawyers, consultants and legal experts who are willing to leave the UK, given that corporations involved in multinational legal disputes usually resort to large law firms, that are mostly based in the US or the UK. As recalled by Bertrand Savouré, a bill passed in 2015 now provides for different legal professions to partner and form a multi-professional firm in France.
Last but not least, innovation, a fortiori technological innovation, will play a decisive role in the competition between Cities of Law. To keep up with challenges ahead and provide their clients with a leading service level, notaries are investing in R&D for AI applied to real estate so that the remote signing of acts will soon become a reality for all.