International Commercial Law Choice of Governing Law

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International Commercial LawChoice of Governing
Law

• University of Oslo
• Giuditta Cordero Moss, Ph.D., Dr.Juris
• Professor, Oslo University

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Conflict of laws

• International transactions
• Between parties having place of business in
  different states (CISG art. 1.1)
• Involving a choice between the law of different
  countries (Rome Convention art. 1.1)
• Transaction has a foreign element (French CPC art
  1492)
• More than one national law seem to be applicable

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Mechanisms for cross-border contracts

• Conflict rules (PIL) determine the law of what
  country governs
• Conflict rules are part of each countrys own law
• EU has harmonised conflict rules
• Norway has own conflict rules

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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 countrys
  substantive law governs the contract

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Choice of Forum

• Civil procedure of the judge
• International Instruments
• Bruxells regulation
• Lugano Convention
• Hague Convention?

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Choice of forum II

• Defendants forum
• Place of performance
• Exhorbitant fora
• Exclusive fora
• Forum chosen by the parties

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Application of conflict rules

• FIRM OFFER
• Forum Lugano convention, art. 2 or 5.1
• Governing Law
• Italian subcontractor Italian law
• English subcontractor English law

• FORCE MAJEURE
• Forum Lugano convention, art. 2 or 5.1
• Governing Law
• Italian supplier Italian law
• English supplier English law

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Party Autonomy

• The vast majority of PILs allow parties to choose
  the governing law
• Two possible effects
• Incorporation of the chosen law in the contract
• Choice of governing law

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Effects of Party Autonomy

• Domestic contracts
• Incorporation (e.g. Art. 3 Rome Convention)
• International contracts
• Choice of law (e.g. Art. 1.1 Rome Convention)
• Limitations (e.g. Art. 7 Rome Convention)

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Exercise of Party Autonomy

• Expressed choice or demonstrated with reasonable
  certainty by the terms of the contract or the
  circumstances of the case
• Severability

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Tacit choice of law

• Use of English contract models
• Actual choice, not hypothetical
• Certain
• Example Lloyds Marine Insurance Policy
• Example Patchwork of documents expressed in
  English

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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

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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 partys 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

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Choice of non-national law

• Lex Mercatoria as law?
• Rome Convention Law
• Draft Rome I Principles
• Gaps autonomous interpretation, then governing
  law
• Outside of scope governing law
• Conflict with mandatory rules?
• Legislative Resolution 29.11.07
• (15)  This Regulation does not preclude parties
  from incorporating by reference into their
  contract a non-State body of law or an
  international convention.
• (16)  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.

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Choice of non-national law II

• Arbitration
• Rules of law v. Law
• Is Lex Mercatoria Rule of Law or ex bono et
  aequo?

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Closest Connection

• Lacking parties choice
• Too vague

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Closest Connection- Rome Convention

• Art. 4.2 Presumption
• Habitual residence/place of business
• Characteristic performance
• Art. 4.5 Exception
• Characteristic performance cannot be determined
• Circumstances as a whole show closer connection

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Closest Connection II

• Draft Rome I
• Art. 1 (a)-(h) defined conflict rule for
  contract types
• Art. 2 Other contract types residence of
  characteristic debtor (main place of business)
• Art. 3 if no characteristic performance closest
  connection

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Applicable Law Certain Contracts

• Immovable property
• Carriage of goods
• Consumer contracts
• Employment contracts

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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

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Other conflict rules

• Procedural rules (arbitration clause)
• Legal capacity
• Company law
• Security