governing law in international contracts

To begin with, the 1994 Inter-American Convention on the Law Applicable to International Contracts refers in two placesprecisely, in Articles 9(2) and 10to legal sources of an a-national or supra-national character for the purpose of the determination of the lex contractus, thereby justifying the conclusion that under this Convention soft law instruments such as the Unidroit Principles may well be applied as the law governing the contract at least if expressly chosen by the parties.37 Yet, the Convention has so far been ratified only by two Statesthat is, Mexico and Venezuela. Indeed, at least with respect to issues covered by party autonomy, not only arbitral tribunals but also domestic courts will normally follow the indications made by both parties as to how they wish to have ambiguities in the applicable law resolved or gaps filled, and, to this effect, it is irrelevant whether such indications are made by the parties in their pleadings with respect to specific issues under dispute or by a reference to the Unidroit Principles with respect to all issues that may become relevant.92. (p. 194). International Instruments and Commentary, 2nd ed. For a comprehensive analysis of the different approaches followed worldwide in the interpretation of the CISG, see F. Ferrari, Autonomous Interpretation versus Homeward Trend versus Outward Trend in CISG Case Law, in Uniform Law Review 2017, p. 244 et seq. 48 Significantly enough, however, even the most vehement critics of the provision concede that their opposition would have been much weaker if at stake was only the possibility to choose as the lex contractus the Unidroit Principles: so expressly, e.g., P. Mankowski, Art. 10 This holds true also for successful instruments such as the 1980 United Nations Convention on Contracts for the International Sale of Goods (CISG), with respect to which it is estimated that e.g. In other cases, the parties agreed that their contract would be governed by, and/or the arbitral tribunal should decide the merits of the dispute in accordance with, no further specified principles and rules of supra-national or transnational character, such as the the lex mercatoria, general principles of international contract law, general principles of equity, laws and rules of natural justice, and the arbitral tribunal applied the Unidroit Principles on the ground that they constitute a particularly authoritative and reliable expression of the principles and rules in question.63, Yet, in quite a number of other cases, the Unidroit Principles were applied either as the sole lex causae or in conjunction with other sources of law, such as the CISG or a particular domestic law, even in the absence of any indication by the parties. Updated October 28, 2020: International contracts are the primary legal tool put in place for companies to limit their risks when working in the global or international market. Walt, The Inappropriate Use of the PICC to Interpret Hardship Claims under the CISG, in Internationales Handelsrecht 2017, p. 97 et seq. 20 See e.g. F. K. Juenger, The Inter-American Convention on the Law Applicable to International Contracts: Some Highlights and Comparisons, in 42 The American Journal of Comparative Law (1994), p. 601 et seq. 2.1.5, 2.1.5.1, 2.1.5.2 and 2.1.5.3). 11 As of 31 December 2017 the Convention was ratified by 89 States; see the list at http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.htlm (last accessed 31 December 2017). 93 So in particular S.C. Symeonides, Codifying Choice of Law around the World: An International Comparative Analysis, Oxford University Press, 2014, pp. 90 In this sense in particular R. Michaels, The Unidroit Principles as a Global Background Law, in Uniform Law Review 2014, p. 643 et seq., p. 657 et seq. Too much because even highly sophisticated national laws, let alone less developed ones, do not always offer such clear and predictable solutions for the ever-changing scenario of cross-border business transactions; too little because more and more decisionsnot only arbitral awards but also court decisions that apply in one way or the other the Unidroit Principlesare reported and annotated so that it may not take too much time until the Principles will also be corroborated by a sufficient body of case law. 140 jurisdictions, includes in all its contracts a choice-of-law clause in favour of the Unidroit Principles in combination with an arbitration clause. The limits of the traditional state law-centred conflict-of-laws approach, III. For similar acknowledgements, see recently, e.g., K.-P. Berger, The Role of the Unidroit Principles of International Commercial Contracts in International Contract Practice: The Unidroit Model Clauses, in Uniform Law Review 2014, p. 519 et seq. GOVERNING LAW AND JURISDICTION IN INTERNATIONAL CONTRACTS In a transaction with no foreign element involved it will not usually be necessary to specify the system of law which is to govern the transaction or the courts which are to have jurisdiction in the event of a dispute. For a list of similar instruments produced by non-governmental organizations in the United States, see S.C. Symeonides, Party Autonomy and Private-Law Making: The Lex Mercatoria that Ist, Festschrift fr Konstantinos D. Karameus, Athens, 2009, p. 1403 et seq. 31825. 66566). XIV.2 - Law applicable to international contracts. One year later, the Swiss Supreme Court, while overruling the decision of the lower court with respect to the FIFA Rules, confirmed that a different solution might be adopted with respect to the Unidroit Principles, which, in its words, represent a set of general principles and rules prepared by independent academics and comparable to domestic legal systems as to intrinsic equilibrium, comprehensiveness and general recognition.51. 61 UNILEX, http://www.unilex.info (accessed 31 December 2017). Governing Law and Jurisdiction in International Contracts Select currency: British Pound Euro United States Dollar $ International Contracts - International Contracts and Documents for instant download 24.1 of the 2002 ICC Model Distributorship ContractSole ImporterDistributor; Art. What are the consequences? 3, cit., General Remarks, Comment 4. The first case concerned a contract between a Danish multinational company and a Brazilian company for the delivery of goods in Hong Kong. 4, cit., Comment 3 to Variant (b). one for pre-dispute use and one for use post-dispute use). Oxford 2012. 2.1 Choosing the Unidroit Principles Supplemented by a Particular Domestic Law (in the two variants, i.e. On the whole, it is fair to, to quote Justice Finn of the Federal Court of Australia, the Principles contain much that is recognizable in many legal systems of the world even when it does not fully accord in its detail with the law of any particular country.31 In other words, there are relatively few provisions of the Unidroit Principles that openly conflict with existing domestic laws, while, for the most part, they are perfectly consistent with almost all of them and, in a number of cases, represent a useful clarification or complement. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case. For an overview of the most significant decisions falling in this category with a brief indication of the legal issues respectively addressed, see M.J. Bonell, An International Restatement, cit. Indeed, once a dispute has arisen, the parties know what the issues at stake are and are therefore in a better position to appreciate the advantages of choosing the Principles as the rules of law applicable to the substance of the dispute in lieu of a particular domestic law. Here's a web page that explains governing law clauses. 60 The various surveys on the actual use of the Unidroit Principles conducted over the years in different parts of the world are only of limited informational value since in general they consider only those cases where the Principles were expressly chosen by the parties as the law governing their contract, thereby neglecting other possible uses of the Principles, such as their choice as the rules applicable to the substance of the dispute after the beginning of a court or arbitration proceedings, or their application by the adjudicating body in the absence of any reference to them by the parties: for a list of the most significant surveys of this kind conducted in recent years see S. Vogenauer, Commentary, cit., pp. One may think of a variety of situations in which partiesbe they powerful global players or small or medium businessesare unable or unwilling to agree on a particular domestic law as the law governing their contract and end up by not making any choice as to the applicable law or by referring for that purpose to no better defined general principles of law, generally accepted principles of international commercial law, the lex mercatoria, or the like. Lisa Spagnolo, A Glimpse through the Kaleidoscope: Choices of Law and the CISG, Vindobona Journal of International Commerce Law and Arbitration 2009, p. 135 et seq. Parties. 41 For a convincing critique of these arguments, see e.g. No. Investment Commitments: International Law Versus Contract Interpretation, 31 TEX. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I Regulation). They are standard clauses found in business contracts and transactions. Regulation (EC) no. This makes the outcome of the case often rather unpredictable, which is another reason that may well prevent a party from pursuing its rights under the contract.2. On the basis of such premises, the Principles are no longer merely used as a means to interpret and supplement the CISG in accordance with, and within the limits of, Article 7 of the Convention; rather, they are applied side by side with the CISG as rules of law to regulate, in lieu of the otherwise applicable domestic law, even questions outside the scope of the Convention such as merger clauses, the right to request re-negotiation of the contract in case of hardship, illegality and restitution, penalty clauses, limitation periods, and so on.77 Admittedly, most of the decisions of this latter kind are arbitral awards, but, recently, some domestic courts, including courts of last instance, have also taken a similar far-reaching approach. (R. Goode, Rule, Practice, and Pragmatism in Commercial Law, in International and Comparative Law Quarterly, vol. Stephan, The Futility of Unification and Harmonization in International Commercial Law, in 39 Virginia Journal of International Law (1999), p. 743 et seq. 63 See the relevant decisions at http://www.unilex.info/dynasite.cfm?dssid=2377&dsmid=13621&x=1 (accessed 31 December 2017) (under issues nos. Governing Law Clause Explained 45 See the full text in Spanish and English at https://www.hcch.net/en/publications-and-studies/details4/?pid=6300&dtid=41 (accessed 31 December 2017). Essays in honour of Michael Joachim Bonell, Rome 2016, p. 273 et seq. This applies above all to the Hague Principles on Choice of Law in International Commercial Contracts (Hague Principles), which were adopted in 2015 by the Hague Conference on Private International Law,44 and the Paraguayan law Sobre el derecho aplicable a los contratos internacionales (Paraguayan Law), which entered into force in that same year.45 Both instruments expressly provide that parties to an international contract may choose as the law governing their contract not only a particular domestic law but also, to quote Article 3 of the Hague Principles, the rules of law that are generally accepted on an international, supranational or regional level as a neutral and balanced set of rules,46 and the Official Commentary expressly mentions the Unidroit Principles as an example of such rules of law capable of being chosen as the governing law.47 It is true that, according to the Hague Principles, parties may choose such non-State rules of law as the law governing their contract only if the law of the forum does not provide otherwise. 31 P. Finn, The Unidroit Principles: An Australian Perspective, in Australian International Law Journal 2010, p.193 et seq. 6364). in the United States 5571% of lawyers typically/generally opt out, in Germany around 45%, in Switzerland around 41%, in Austria around 55%, in China 37% or less (cf. Of the numerous examples, mention may be made, for instance, of Comment 3 to Article 4.3, which states that: [c]onduct subsequent to the conclusion of the contract can assist in determining what the parties intended their obligations to be. While most international uniform law instruments, be they of a legislative or non-legislative nature, are restricted to particular types of transaction (sales, leasing, carriage of goods by sea, road, or air, and so on) or to specific topics (delivery terms, modes of payment, and so on), the Principles provide a comprehensive set of principles and rules relating to international commercial contracts in general, comparable to thecodified or unwrittengeneral part of contract law found in domestic law. All in all, the role that the Unidroit Principles already fulfil, side by side with the still dominant domestic laws, is far from insignificant, and one may expect that the recently adopted Unidroit Model Clauses for the Use of the Unidroit Principles in international contract and resolution practice will promote their relevance even more. 69 More in general with respect to the growing importance of soft law to govern transnational private relationships. As a consequence, in such cases, only with respect to issues within the scope of the CISG, but not expressly settled by it (so-called internal gaps), the Unidroit Principles would act as gap-filler, rather than the possibly conflicting general principles underlying the CISG, whereas issues outside the scope of the CISG would still be governed by the applicable domestic law. Admittedly, quite often, the reference to the Unidroit Principles have had no direct impact on the decision of the merits of the dispute at hand, and individual provisions of the Principles were cited, either alone or together, with other legal sources such as the CISG or foreign domestic laws, essentially to demonstrate that the solution provided by the applicable domestic law was in conformity with current internationally accepted standards and rules. 23 See the list at http://www.unidroit.org/about-unidroit/membership (accessed 31 December 2017). the fundamental alteration of the equilibrium of the contract and the unpredictability of the event causing hardship, were not met. ), Model Clauses cit. The governing law may have a significant impact on the interpretation of a contract. 4849 (Tradition v. Innovation), pp. Yet, highly developed legal systems also do not always provide a clear-cut solution to specific issues arising out of commercial contracts, especially if international in nature, either because opinions are sharply divided or because the issue at stake has so far not been addressed at all. 66 See the relevant decisions at http://www.unilex.info/dynasite.cfm?dssid=2377&dsmid=13621&x=1 (accessed 31 December 2017) (under issue 2.1.6). Yet the Unidroit Principles differ from other international uniform law instruments also with respect to their formal presentation. 3 L. Olavo Baptista, The Unidroit Principles for International Commercial Law Project: Aspects of International Private Law, in 69 Tulane Law Review (1995), 1209 et seq. ; F. Dasser, Internationale Schiedsgerichte und lex mercatoria, Zrich 1989, p. 77 et seq. It is true that as of the beginning of the last century and, above all, in the second half of it, States have also been adopting an increasing number of international uniform law conventions in the field of contract law, with a view to eliminating the uncertainties arising out of the coexistence of different national legal systems.7 Yet, despite some undoubtable successes, the overall results of the unification efforts by legislative means are rather disappointing especially in the light of a cost/benefit analysis.8, To begin with, international uniform law conventions often risk remaining a dead letter, either because they have not been ratified by a sufficient number of States9 or, even if they have entered into force, the parties, sometimes ill advised by ultra conservative lawyers, exclude their application whenever they can.10, Moreover, international uniform law conventions are normally rather fragmentary in character, dealing only with the rights and duties of the parties arising from the specific types of transactions covered. ; K.P. limitations on prohibitions to compete). On a different note, in an Official Explanatory Note of 2008, the High Commercial Court of Ukraine stated that the Unidroit Principles, like other documents such as the UCP and the Incoterms, enshrine the trade customs applied in Ukraine and are therefore applicable if they do not conflict with the terms of the contract or the mandatory provisions of Ukrainian law. Some doubts may arise in view of the fact that courts consider the interpretation and gap-filling of the applicable domestic law in principle to be their prerogative. (95) 15, paras. 102 See e.g. Since the Venezuelan exchange regulations only permitted the payment in US dollars after the goods had been delivered at the place of destination in Venezuela, the buyer anticipated the price to the seller through a US bank in order to make the sale possible and then paid a second time after the arrival of the goods. The governing law refers to the country's laws that will apply to the contract. 96 Model Clauses no. 9 On the reasons why States may be reluctant to ratify uniform law conventions even where they have participated in their preparation see e.g. This rule gives the parties the power to choose . 1.2 and no. Only in a few of the reported cases were the Unidroit Principles expressly chosen by the parties in their contract either as the sole lex contractus or in conjunction with other sources of law, such as the CISG or a particular domestic law. Yet also highly developed legal systems often prove to be outdated. Examples of choice of law clauses include: Example 1: Oil & gas companies when working offshore. II, p. 1146 et seq. Finally, the argument that the Unidroit Principles without a sufficiently developed case law concerning their application in practice do not provide the necessary certainty and predictability of solutions proves too much and too little at the same time.
The Inkey List Peptide Moisturizer, Articles G