On 16 August 2026, the Center for China and Globalization (CCG) convened a breakfast roundtable in Beijing with Barnabas (Barney) Reynolds, Partner in Sullivan & Cromwell LLP’s Financial Services Group, and author of numerous books on law and legal systems.
The event focused on cross-border transactions, and the legal and compliance challenges facing Chinese companies operating in the UK and continental Europe.
CCG representatives at the roundtable included Professor Wang Yiwei, a CCG Non-Resident Senior Fellow and professor at Renmin University of China; Liu Jun, CCG Deputy Secretary-General; and Sicheng Yang, Research Associate at CCG.
Barney Reynolds has extensive expertise advising on transactions and investigations under UK and EU law and regulation, as well as navigating legal and regulatory systems worldwide. He has a broad practice advising clients on high-profile matters across the UK, Europe and the Middle East. He helped numerous financial institutions during the 2008 financial crisis, the Eurozone crisis of 2009–2012, and the Credit Suisse and Silicon Valley Bank situations.
He has played a significant role in the development of financial regulatory regimes, including designing the rules for Abu Dhabi Global Market (ADGM). This is the only common law financial centre outside the Commonwealth and US — which now, after 10 years, accounts for over 7% of Abu Dhabi’s GDP. He advised the UK government and market participants on legal and regulatory issues arising from the UK’s withdrawal from the European Union.
The following transcript is based on an audio recording and has been edited for clarity and concision.
Barney Reynolds, Partner, Financial Services Group, Sullivan & Cromwell LLP
Thank you for having me, and for coming on a Sunday morning. It’s very nice to meet you all. I met Professor Dr Wang two years ago at a roundtable in Shanghai, where I heard about China’s AI in particular. I was astonished by the quality of the thinking, and subsequently by how it has been borne out by events. Very impressive.
So, why is law central? Law is basically the modern way of organising a society through words. To invest most successfully in Europe, you need to navigate multiple legal and regulatory systems, from the common law (or Scots law) UK, to the continental member states and the EU. There is a morass of rules and interpretive mechanisms.
The two systems applied in international commerce are English law and New York law. They are estimated to be used for 80-plus per cent of all deals. The others in meaningful use are Singapore, Hong Kong, and ADGM law, which are all forms of English law. All are systems of reasoning, based on literalist techniques and argument over facts and evidence in making and applying the law. This is part of their attraction for business: argument is apolitical, so the terms of a deal, pretty much whatever they are, cannot be changed without your consent. Legislation is specific, and regulation largely risk-based. Both also result from, and are applied after, argument.
China’s system uses the code method of lawmaking: a scheme is set out on an anticipatory basis, which the courts then apply. It is a structural choice, made across two-thirds of the world, including the EU and all its member states except Ireland. In Europe, the anticipatory method has been used to create particularly far-reaching schemes – for instance the AI Act, the Securitisation Regulation and AIFMD.
Navigating Europe therefore means understanding that background and the reasoning techniques every relevant system deploys. Because argument comes from individuals, English law, like New York law, places a premium on individual skill, credibility and expertise. If you watch The West Wing, it’s all about arguments. The protagonists put their arguments to the President. The President then decides which he likes best, and runs with it. In some ways it’s how humans naturally interact. But in the common law environment it is intrinsic to the mechanisms of the state.
The reasoning in the continental systems is more purposive and less literal, with the courts seeking to apply the code as the legislators intended. There is often little written evidence of that. These systems deliver a very different type of outcome.
For lawyers, pivoting the system in a common law environment depends on mastery of the minute facts. In a code-based environment, you have to understand the thesis behind the laws as written, and what that thesis might be taken to be in novel situations. You must then explain how the provisions are best read in accordance with their conception and purposes, and how your desired course of action fits with that. In the EU it’s particularly complex because you’re dealing with member state laws too, each applying its own purposes. In addition, EU law has an integrationist teleology that is relevant in certain circumstances.
This is all quite jurisprudential, but why does it matter? Legal method is in my view a key missing variable in the analysis of economic prosperity. The common law method can lead to greater economic growth, because of its constrained permissiveness. You saw this in Hong Kong, in what was then an extreme version. In China, you have clearly discovered a way to achieve exceptional growth using the code method, and not just catch-up growth. Part of the secret is competition, which the common law also prizes. I believe the UK system could help you further, if deployed properly.
You might ask why, if I’m right, Brexit hasn’t yet restored Britain to the successful economic trajectory of the past. The answer is that the UK has yet to address the inherited EU code, which is at odds with its common law system and institutions. Replacing this will be a highly complex exercise which nobody has done before, and in my estimation would take a team of top lawyers around 18 months. Once that is done, Parliament and the regulators will take more of a back seat than now, intervening only when necessary and leaving more of the law’s creation and enforcement to lawyers and the courts, on an evolutionary basis. Various other institutional adjustments are needed. It may take another electoral cycle for this dialogue to begin, since it isn’t yet part of the national debate.
English law can serve China well in its UK and European deal-making, whether in sovereign and other debt trading, shipping, insurance, financial services, digital asset trading, potentially AI, or other commercial matters.
Q&A
Q: What should Chinese investors understand about political change in the UK, and how should they approach a new government?
Barney Reynolds
The changes are largely to do with redistributive policy and oscillate around it. There is an extra ingredient: the relationship with the EU and, to a lesser degree, the US (a regrettable ordering of priority which arises from ignorance of the significance of legal systems). For deals, the government matters less than you might think. The UK runs on law, and much of the day-to-day machine is operated by the civil service. That makes the UK more predictable, and deals more actionable, than the political headlines suggest.
To navigate the complexities, develop a thesis – not only of what you want to do, but of why it works for the UK. Then reflect it in documents that match the facts exactly, however far people drill down.
Q: How should the recent difficulties with some Chinese investments in the UK be viewed?
Barney Reynolds
There have certainly been issues, but I believe many can be overcome if rigorous legal thinking breaks the problems down and shows, through common law argument, why the specific investment intentions are win-win. If the paperwork and the facts align, and are expressed simply and argued correctly, I am optimistic there is a way through.
Q: What role do lawyers play in getting major transactions and policy changes through the UK system?
Barney Reynolds
They are central to the UK system. They join up interests, rationalise them, explain them, and put them in writing, so that people say, “Oh yes, that works” – or, in a commercial context, “Yes, we’ll do exactly that”. The method travels with its practitioners. Hong Kong, Singapore and ADGM are proof of that.
Q: Could Hong Kong regain its historic role as a gateway for China?
Barney Reynolds
Yes, it could. Hong Kong could supplement and enhance what you have built elsewhere, providing a meeting point for China and the global markets. The key is the common law method, and how it is applied. It is a way of life and a culture – lived, not merely learned. UK lawyers could help operate the Hong Kong system to maximum benefit, if that is desired. Doing so would not take business away from any Chinese city, whether Shenzhen or otherwise, but would add to it, including through foreign investment. Common law lawyers, imbued with the full common law culture and allowed to deploy their skills, would improve the investability of Chinese assets. But there are complexities in how this needs to be done.
Q: Does the UK need greater strategic autonomy in AI?
Barney Reynolds
AI brings with it all sorts of concerns yet to be mapped out. The UK has many of the ingredients for an autonomous solution – for a start, DeepMind is based in London. One issue is the inherited EU GDPR, which restricts automated decision-making and the use of personal data, but that can be replaced with something more sensitive to what is required. Autonomy matters to every major economy. But how necessary it is in the immediate term, and how the situation evolves, are open questions.
Q: How should AI be regulated without stifling innovation?
Barney Reynolds
Under the common law method, action is taken when a specific risk or problem has been identified. I don’t believe this is an area in which anticipatory legislation is helpful. The EU AI Act sets out many sensible positions, but there is little EU AI. I think it is best to identify the principles and legislate against specific harms when one can see what they are. There are clearly risks to address right now. The question is how to define them in a way that doesn’t go beyond what’s necessary.
Q: Could Chinese AI products gain acceptance in the UK and Europe?
Barney Reynolds
That’s a difficult one. There are already day-to-day applications of AI in China – I noticed several at Shanghai airport two days ago. Ultimately, people will try to buy what they want: if China keeps producing things that others want and cannot obtain elsewhere, demand will assert itself, subject to states preventing it for wider reasons. However, AI can be unpredictable and opaque. Other countries will struggle to evaluate technology they cannot yet fully comprehend, or address through their legal systems or common law contracts.
Q: Which ESG rules must a global financial institution follow when its headquarters and European operations face different requirements?
Barney Reynolds
You have to follow the laws of every place in which you do business. I have seen Chinese clients apply US, UK and EU sanctions assiduously. The same approach is required for EU ESG regulation, for EU business properly defined. (There are issues over asserted extraterritoriality to be navigated.) This is a topic where the world’s legislators, regulators and judiciaries approach things differently. The EU has gone far further than others, on an anticipatory basis. The common law approach tends to be more disclosure-based, with remedies if the disclosures are inaccurate. The code-based approach involves a greater degree of categorisation, with consequences following the taxonomy. The complexities of the area make the differences more acute, and navigation harder, than in some others.
Q: How can law help foreign businesses overcome regulatory barriers and invest in the UK or Europe?
Barney Reynolds
Good lawyers define the obstacles and work out how to navigate them with reasoning consistent with the applicable systems. That does not mean there is always a solution, but with a very good lawyer there normally is – and it is ultimately individual practitioners, operating in teams, who shape things most successfully at the highest levels.
Q: Should Chinese companies expanding overseas use a Chinese law firm or a local international firm?
Barney Reynolds
I’d say an international firm, using cross-border common law practitioners, who may or may not be located locally. “Lawyer” means different things in different systems. In a common law system, the lawyers train themselves to create arguments and different ways of looking at the facts. For international business those skills are essential if you are to get the best results. It’s a feature of the system from which they come, though of course individual abilities differ.
There are other differences too. In common law systems, discussions with lawyers are protected by the law of privilege, and their arguments are given the same weight as the state’s before a court or regulator. Hayek made the point in Law, Legislation and Liberty: it took him thirty years, and a return to Austria, to see how profoundly the roles of lawyers differ between types of legal system.
So, for the big cross-border deals, I would use the international common law firms, with local firms for local law, security packages and enforcement. This isn’t only about Chinese firms. The same is true of firms from other code-based jurisdictions. It follows from the relevance of individual argument within the system itself. Intriguingly, code systems do respect common law argument.
Q: What does intense domestic competition in China mean for its ability to sell technology abroad?
Barney Reynolds
I was here 20 years ago, and the country is transformed. As I understand it, a key driver has been internal competition and hard work. That means you are creating technology that operates increasingly at the frontier. Others will want it, and will pay for it. However, you still need to use lawyers to explain what it does, why it is desirable and safe, and what protections people have if anything goes wrong. And that all needs to be written down specifically opposite the facts in a way other legal systems can verify, including when people test it rigorously in argument as the facts evolve.
Q: Has the common-law system produced too much litigation and too many lawyers?
Barney Reynolds
No. The success of the system depends on rigorous argument before an independent arbiter. That is how the system learns. It is how people obtain redress and protect themselves from invalid claims. The state does not stipulate when people are allowed to dispute something. It does not control the demand for lawyers. Societies which argue in this way have also produced extraordinary innovation – Britain in the 19th century, and the US in more modern times, particularly now in California and Texas, but also elsewhere.
China has managed, almost uniquely in recent times, to achieve ongoing growth on a code-based approach. But that requires an element of state coordination quite different from anything in a common law system. I do not believe one system can be changed into another – attempts were made to introduce common law features into Louisiana and Quebec, unsuccessfully. Equally, UK efforts to inject common law thinking into the code-based EU scheme had insufficient effect.
Q: How can China explain its governance system in a way that builds trust in the West?
Barney Reynolds
This is the most fascinating question of all, because I don’t think China’s system has yet been properly explained in the language of the West. You have your own structures across different topics, and some of what you’re doing is similar to Western code-based systems. I do believe that building trust starts with explanation. The question is not just the legal system, but also the administrative one and how social expectations work. All are interconnected, and are best understood and conveyed by lawyers versed in the language, operations and reasoning of multiple systems – particularly the common law – with a sufficient understanding of yours. They can then express the Chinese techniques in terminology familiar elsewhere.
Q: What makes cross-border cooperation on AI and data particularly difficult?
Barney Reynolds
On data, I suspect the value systems differ, which makes interoperability difficult, though potentially not impossible with the right legal arrangements. On AI, a significant issue is the uncertainty of the technology itself. There are regular stories of AI doing what wasn’t intended. How people identify, own up to and deal with that is partly cultural, since the legal system cannot get involved in real time. It might be possible to reach accommodations, but that would require a lot of thought, discussion and legal structuring. It may also involve embedding agreed rules and interpretations in the AI itself, and monitoring how those are applied so that, over time, trust can build. Even then, an audit of the code may be needed to prove that the AI cannot, in extremis, override those rules.
Q: How can Chinese companies demonstrate compliance with local laws in the US, UK and EU?
Barney Reynolds
When I have acted for large Chinese companies and funds, I have found them keen to comply properly with every system. Proving compliance to third parties is another matter. In common law countries, it partly involves trust in the responsible individuals, earned over time through interactions which test whether they “get” the system’s reasoning. In code-based countries the techniques can involve more paperwork and process – show-your-work solutions. But these are simplifications, and the reality is often more complex. In financial services, some of the proof points are particularly difficult. China is yet to be accepted as a consolidated supervisor by Western regulators, perhaps most importantly those of the US and UK. Achieving that will, I suspect, take time, discussion and a build-up of trust over how the rules are applied and over the checks and balances that ensure they are observed in practice.
Q: Why has Brexit not delivered the expected results, and what would need to change?
Barney Reynolds
As mentioned, the issue is the legacy of EU code, which is alien to the UK’s common law institutions. The UK has acquired millions of code-based provisions from almost fifty years in the EU system, and its institutions still produce laws by this method. There is no precedent for a proper exit from the legal methodology, except ADGM, which was of course a smaller exercise. Nor is it just a question of removing unnecessary code and reformulating what remains in common law style. The law also needs to cater for what the UK would have done had it been independent for all that time. I have mapped out the work and believe it can be done, with top lawyers, in 18 months. Until this is delivered, the results of Brexit will not properly follow. Some ancillary points need dealing with at the same time.
