#3615 - Choice Of Law (Contract) Cases - Conflict of Laws

ROME I REGULATION

Article 3

Iran Continental Shelf Oil Company [2002]

Both parties concluded contract between them on basis of their own standard terms and conditions, each of which contained a different choice of law provision (one in favour of Iran, the other Texas). Held:

• Was no express choice of law.

• This because neither party had accepted the other party’s terms

Compangie Tunisienne de Navigation [1971]

Common law case. Contract stated to be governed by law of flag of ship. At time contract concluded, was envisaged that ships used would be French. However due to unforeseen war, different ships had to be used. Held:

• Parties had made express choice of French governing law.

• This because parties had envisaged French law would be governing law at time of conclusion (as they had expected carrier to be French)

Court then considered what implied choice of law would have been had there been no express choice of law. Contract also contained arbitration clause in favour of England. Held:

Arbitration clause in favour of England would usually imply English choice of law.

However on facts French law was proper law of contract

This because contract was most closely connected with France

Implied Choice of Law

Egon Oldendorff v Liberia Corp [1996]

Common law case .German company sought to serve process on Japanese company on grounds that contract between them was impliedly governed by English law. Contract had no connections with England save for arbitration clause in favour of England. Held:

• C could serve out of the jurisdiction.

• Idea that governing law is something other than English law despite fact that parties chose England as seat of arbitration is “unconvincing”

• Test under Convention Article 3 is almost identical to that under common law.

  If Art 3involves a change in emphasis, is a small one

Marubeni Hong Kong and South China [2002]

Was express choice of law in an earlier draft of contract between parties. However in concluded contact, choice of law clause had been left out. Held:

• Was no evidence parties had deliberately left express choice of law clause out of concluded contract.

• Thus was implied choice of law based upon earlier draft of contract.

Islamic Arab Ins Co [1987]

One party argued that English law was governing law of contract; other party argued that law of a Muslim State was governing law of contract. Under law of the Muslim State, contract would have been invalid. Held:

Is presumption that parties intend a contract they make to be valid, and therefore governed by law under which it is valid.

Thus is implied choice of English law by parties.

Star Shipping [1993]

Charterparty contained arbitration clause stating that any dispute arising under charter was to be arbitrated in China or England at D’s option. Held:

• Was no implied choice of law

• This because applicable law could not change from time to time depending on whether D chose English or Chinese arbitration.

• Thus clause not even valid as floating choice of law clause.

Article 4

Article 4(2)

Print Concept [2001]

German company undertook to distribute air-cooler systems manufactured by an English company in Germany, Austria and Switzerland. Held:

Characteristic performance of contract is the supply of the products by English company

And not the distribution of those products by German distribution company.

Bank of Baroda [1994]

Indian bank entered into credit agreement, whereby they guaranteed the creditworthiness of a client to D; bank’s central administration was in India, however confirmation of credit was effected through bank’s London branch. Was no express choice of law, thus dispute was as to the applicable law. Held:

For purposes of Article 4(2), characteristic performance is confirmation of credit.

This took place through the Indian bank’s London branch.

Therefore governing law of contract was English law

And not law of India (place where bank had its central administration)

Rebuttal of Presumption

Judge supported comment in Dicey and Morris (textbook)

Namely that a presumption under Article 4 may be most easily rebuttedwhere the place of performance differs from the place of business of the party whose performance is characteristic of the contract.

Ennstone Building Products [2002]

• Under Art 4(2) of Convention, applicable law will only be that of a place of business other than principal place of business where parties are bound to perform via that branch

  i.e. so that not performing through that branch would constitute breach of contract

Iran Continental Shelf Oil Co [2002]

Was contract for sale. D was American company with an office in England; in contract between C and D, D’s address was given as its English office. Held:

Clarke LJ

Under terms of contract D’s obligations were effected through English office.

(obiter) however doubted view in Ennstone Building Products [2002]

i.e. Art 4(2) of Convention might allow for applicable law to be that of country where branch is situated even if performance does not as matter of contractual obligation have to be performed through that place of business

though not necessary to decide this on facts of case.

Rebutting the Presumption

Intercontainer Interfrigo [2009] (ECJ)

Contract between Belgian and Dutch company. Place of performance of characteristic obligation was Belgium, place of business of characteristic performer was Holland. Was argued that presumption could only be rebutted by Article 4(5) of Rome Convention where place identified has “no genuine connecting value” (i.e. strong model). Held:

Primary objective of article 4(5) is to have the contract governed by law of country with which it is most closely connected.

Thus to achieve this objective, necessary for court hearing case to be able to disregard the “presumptions” in event they do not identify country with which contract is most closely connected

Presumptions serve requirement of legal certainty in contractual relations

i.e. as they allow people to foresee the applicable law

However where it is clear from circumstances of contract as a whole that contract is more closely connected with a country other than that identified by presumptions, court must apply law of that country and disregard presumptions.

Samcrete Egypt Engineers [2001]

C (Land Rover, UK company) entered into exclusive distribution agreement with a company in Egypt (X). This agreement was expressly stated to be governed by English law.

D entered into guarantee agreement with Land Rover, whereby they guaranteed X’s obligations to pay money to C. However D specifically removed an English choice of law clause from draft of guarantee. Held:

Article 3

Was no choice of law under Article 3

i.e. D’s act of deleting choice of law clause meant it was not incorporated

Article 4

As per Article 4(2), was presumption that governing law was Egyptian.

characteristic performance under guarantee is the payment of money by the guarantor (D)

and here, characteristic performer’s place of business was in Egypt

However this presumption was displaced

i.e. England was place of performance of characteristic obligation (place where money was due to be paid)

England was also place of performance in distribution agreement between C and X

Definitely Maybe [2001]

C was company providing services of pop group ‘Oasis’ to concert organisers; D was German concert organiser. D hired Oasis to play at concert in Germany, however due to fall-out only two members of group appeared; D declined to pay full price and C sued. Relevant issue was whether English law or German law governed contract. Held:

Place of performance of characteristic obligation is NOT a more important connecting factor than territorial connections of characteristic performer.

i.e. if English law is law with which characteristic performer has territorial connection, fact that characteristic performance occurs outside of England does not on its own displace presumption that English law governs.

Here, C was the characteristic performer.

Nevertheless on facts, German law was governing law

was in German currency

required obligations to be performed in Germany by both parties

was no other connection to England save for C’s territorial connection

Situation would probably be same under Regluation.

Marconi Communications [2005]

Was a contract of sale; price was payable via letters of credit. Participants to letters of credit were businesses located in various different countries. Held:

Article 4(2) assumes that there is a single party with characteristic performance.

However this is not the case in present case

i.e. as under a letter of credit, as there are numerous bilateral contracts.

Thus there is “valid reason and commercial logic” in applying Article 4(5) rather than Article 4(2)

On facts:

Purpose of letter of credit was to achieve payment for goods under the contract of sale.

Therefore contract had its closest connection with place where payment was to be made.

Displacing the Presumptions

Illegality

Foster v Driscoli [1929] (CA)

Governing law of contract was English law. Contract was for shipment of whisky across Atlantic during the Prohibition period in America. Was not stipulated that contract was to be performed in US, however parties intended to smuggle whisky into US. Held:

Lawrence LJ

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