International Business Law
Sciences Po Paris
Spring 2017
Choice of governing law
Giuditta Cordero-Moss, Ph.D., Dr.Juris
Professor, Oslo University
Conflict of laws
• International transactions:
– Between parties having place of business in
different states (CISG art. 1.1)
– Involving a conflict of laws (Rome I art. 1.1)
– When international trade interests are at stake
(arbitration)(French CPC art 1504)
• More than one national law seem to be
applicable
Mechanisms for cross-border
contracts
• Conflict rules (PIL) determine the law of
what country governs
• Conflict rules are part of each country’s
own law
• EU has harmonised conflict rules in many
areas
Mechanisms for cross-border
contracts, cont.
• Judge applies his own conflict rules
• First step: identify forum
• Then: apply conflict rule
• So: conflict rule determines what country’s
substantive law governs the contract
Choice of Forum
• Civil procedure of the judge
• International Instruments
– Bruxells regulation
– Lugano Convention
– Hague Convention (EIF 2015: EU, Mexico,
Singapore)
Choice of forum II
•
•
•
•
•
•
Defendant’s forum
Place of performance
…
Exhorbitant fora
Exclusive fora
Forum chosen by the parties
Application of conflict rules
FIRM OFFER
FORCE MAJEURE
• Forum: Brussels I
convention, art. 4 or
7.1
• Governing Law:
• Forum: Brussels I, art.
4 or 7.1
• Governing Law:
– Italian subcontractor:
Italian law
– English subcontractor:
English law
– Italian supplier: Italian
law
– English supplier:
English law
Party Autonomy
• The vast majority of PILs allow parties to
choose the governing law
Party autonomy is a
choice of law rule
• No «universal principle»
• Depends on applicable law
– Assumptions
• Internationality
– Modality of exercise
• Written form, tacit exercise
– Scope
• Other conflict rules
Effects of party autonomy
• Two possible effects:
– Incorporation of the chosen law in the contract
– Choice of governing law
Effects of Party Autonomy
• Domestic contracts:
– Incorporation (e.g. Art. 3 Rome Convention/Rome I
593/2008)
• International contracts:
– Choice of law (e.g. Art. 1.1 Rome Convention/Rome I)
– Limitations (e.g. Art. 7 Rome Convention/art. 9 RomeI)
Choice of non-national law
• Law – Rules of Law – Ex bono et aequo
• Arbitration
• Courts
Choice of non-national law in
arbitration
Rules of law
• Parties’ choice: all
• Absent parties’ choice:
– French, Swiss arbitration
law
– ICC
– LCIA
Law
• Parties’ choice: all
• Absent parties’ choice:
– UNCITRAL Model law
– English, Norwegian law
Choice of non-national law
Courts
• Rome Convention: “Law”
• Draft Rome I: Principles
– Gaps: autonomous interpretation, then governing law
– Outside of scope: governing law
– Conflict with mandatory rules?
• Rome I: “Law”
Rome I: Incorporation and
prospects of choice of law
•
•
Art. 3.1:“A contract shall be
governed by the law chosen by
the parties.”
Recital 13: “This Regulation does
not preclude parties from
incorporating by reference into
their contract a non-State body of
law or an international
convention.”
•
Recital 14:“Should the Community
adopt, in an appropriate legal
instrument, rules of substantive
contract law, including standard
terms and conditions, such
instrument may provide that the
parties may choose to apply those
rules.”
CESL:
Optional instrument, second regime
• Must be chosen by the parties
• Creates “within each member State’s national law a
second contract law regime … identical throughout the
Union and existing alongside the pre-existing ! rules
of national contract law” (recital 9)
• Should “not amount to, and not be confused with, a
choice of the applicable law within the meaning of the
conflict-of-law rules and should be without prejudice to
them (recital10)
Incorporation or choice of law?
• Becomes a term of
contract
• Is subject to governing
law
– Cannot derogate from
mandatory rules
– Gaps are (ultimately) filled
by the governing law
– Is (ultimately) interpreted in
the light of governing law
• Uniform application?
• Selects governing law
• Ensures higher degree of
consumer protection in
consumer’s country
• Preserves differences
among systems
Exercise of Party Autonomy
• Expressed choice or demonstrated with
reasonable certainty by the terms of the
contract or the circumstances of the case
• Severability
Tacit choice of law
• Use of English contract models
– Actual choice, not hypothetical
– Certain
– Example: Lloyd’s Marine Insurance Policy
– Example: Patchwork of documents expressed
in English
Tacit partial choice of law
• Clauses that do not make sense under the
governing law
– Waiver of jury trial
• Clauses that have different effects under
the governing law
– Entire agreement
• Actual choice, certain
How to Choose Governing Law
• No need to choose a connected law
• Identify particularly favourable law (difficult):
– What protection/remedy is most likely to be needed
– What law provides that protection/remedy
– Is a literal interpretation of the contract expected?
– Is a contextual evaluation of the relationship
expected?
• Avoid the other party’s law (not always necessary)
• Choose a law particularly developed in the area
• Choose a stable law which is sufficiently known
• Choice of Lex Mercatoria is not equivalent to choice of
law
Closest Connection
• Lacking parties’ choice
• Too vague
Closest Connection- Rome
Convention
• Art. 4.2 Presumption:
– Habitual residence/place of business
– Characteristic performance
• Art. 4.5 Exception:
– Characteristic performance cannot be
determined
– «It appears from the circumstances as a whole that
the contract is more closely connected with another
country»
Closest Connection II
• Rome I:
– Art. 4.1 (a)-(h): defined conflict rule for
contract types
– Art. 4.2: Other contract types: residence of
characteristic debtor (main place of business)
– Art. 4.3: »Where it is clear from all the circumstances of the case that the
contract is manifestly more closely connected with a country other than that»
– Art. 4.4: if cannot be determined: closest
connection
Applicable Law – Certain
Contracts
•
•
•
•
Carriage of goods
Consumer contracts
Insurance contracts
Employment contracts
Governing Law – Scope of
Application
•
•
•
•
•
Interpretation of the contract
Performance of the contract
Consequences of non-performance
Consequences of invalidity
Termination
• NOT choice of law rules
Other conflict rules
•
•
•
•
•
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Procedural rules (arbitration clause)
Legal capacity
Company law
Security
Tort
…