The contention is that the UK’s common law approach - it is really the law of England and Wales here - is better than the Roman approach of the continent when building financial markets. We agree with that sentiment but the specifics seem a little garbled to us.

In all the maelstrom of debate about the future of global financial services in light of Brexit, one key point is often forgotten. That is, that the UK’s common law, pragmatic approach to law and regulation is intrinsically the safest for financial services, and conducting financial business under other available regimes introduces dangerous risk into the system which cannot be quantified or managed.

A rousing chorus of Flanders and Swann seems appropriate here, tuppence not being given etc.

However, much too much emphasis is being placed upon the institutions of the law. We agree that London being filled with people who know what they’re doing in this area is useful. As with Delaware’s Chancery Court competence and speed - if that can ever be applied to the law - is an aid to a business environment. But that doesn’t explain why the advantage arose in the first place, nor why it is likely to remain.

For that we need to look at the underlying concept of English law in commercial matters. Which is, broadly enough, that it does not follow the precautionary principle. As long as an arrangement is not obviously illegal already then it may be done. There is freedom of contract that is. It is not necessary to go around the corner to some bureaucrat or, worse, politician, to ask whether this may be done. Or even done in this manner. Some such arrangements that are tried out later prove to be illegal in new and interesting ways, true, but this is a cleaning up exercise that happens afterward.

The effect of this is as in any other area of innovation. Financial markets are webs of contracts. As contracts can be varied, tried out, experimented with, without the requirement of an imprimatur or political acquiescence then that innovation can and does proceed more speedily. London’s financial markets work, dominate even, simply because they are closer to free markets than those in many to most other places. Free in this sense of allowing innovation.

Once this is understood we can see the dangers of certain proposals floating around. There’s a suggestion that takeovers should be subject to a public interest test for example. You may only buy this if you can show how it benefits the wider economy. But this is to stick that crowbar of the precautionary principle back into markets which work precisely because they don’t already incorporate it. That you may not do this because it will be obviously harmful is one thing, it’s the reversal of the proof which is the damaging thing.

It’s all an example writ small of the larger point about economies in general. Those where the base presumption is that anything not obviously illegal may be tried have lots of innovation. Those where permission must be obtained have less, the amount less of innovation being directly proportional to the difficulty of gaining the permission. As innovation is what makes us all richer over time - it is how productivity and technology advance - then we desire, positively lust after in fact, a permit and permission free society.

It’s possible to confuse this, as we think has been done here, with the joys of our bewigged and peruked lawyers. The importance however is in the base assumption about liberty underpinning the system. Which is that we have freedom of contract, not just with whom but also in form.