The Brief Series: The Law of the Contract

The legal framework that establishes the basis for creating and governance a contract is called the "proper law of the contract." Parties to a contract can establish their own rules for resolving disputes by incorporating either self-devised rules derived from an existing legal system or by explicitly identifying the legal system they intend to apply. This provision is commonly known as a "choice of jurisdiction clause," which can specify the jurisdiction where any disputes will be adjudicated. Interestingly, even parties without connection to England can select English courts through this clause.

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However, when the parties involved in a contract from foreign jurisdictions do not specify the governing law, the court must resort to certain approaches to determine the proper law. These are the key mechanisms for determining the proper contract law and jurisdiction when the parties have not explicitly stipulated these terms.

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1-????? The Brussels Regulation applies to civil and commercial disputes if the defendant is domiciled in an EU member state and is to be sued in the country of their domicile. Exceptions to this general rule exist, mainly related to factors such as the location of performance, specific types of courts, and disputes (e.g., tort cases).

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2-????? Common Law Rules, including:

• When legal process is served upon the defendant within a jurisdiction due to a claim for a remedy against someone domiciled in that jurisdiction
• When seeking an injunction to restrain the defendant from performing an act within a jurisdiction.
• When the contract in question was either made within a jurisdiction or is governed by English law.
• In cases of a breach within a jurisdiction, regardless of where the contract was originally formed.
• In claims of tort, where the damage was sustained within a jurisdiction, or when damage results from an act committed within the jurisdiction.
• In cases related to property located within a jurisdiction.
• When it can be demonstrated that England, for example, is the appropriate forum to hear the dispute based on considerations of justice.

3-????? When parties have chosen to litigate or arbitrate in a specific country, such as England, the court handling the case will often determine that the country's laws govern the contract.

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4-????? The location where a dispute arises and the applicable law in court or tribunal proceedings govern the entire contract or specific parts of it.

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5-????? In complex international contracts involving various countries' performances, parties can segment the contract into different components. This allows them to select one law to interpret the contract and another to address the various legal systems involved. Disputes in such cases are typically resolved by the chosen court or tribunal, rendering the decision binding and enforceable within their legal system.

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6-????? If no choice of law can be determined, the court will consider factors such as the laws of the parties, the place (lex situs) where the contract was made, and where it was formed. Under its jurisdiction, the English court may then apply either English law or the laws of a foreign country with which the case has connections.

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7-????? In Enercon GmbH v Enercon (India) Ltd, the court emphasized the principle of comity towards the courts of "foreign and friendly states" when deciding whether to grant anti-suit injunctions. The case involved an arbitration clause that referred to London as the "venue" of arbitration and the Indian Arbitration and Conciliation Act 1996. Due to ongoing proceedings in the Bombay High Court regarding the seat of arbitration, comity prevented the English court from taking over the case. The court also addressed issues related to serving outside the jurisdiction, anti-suit injunctions, and freezing orders, emphasizing the importance of considering the natural forum and doing justice between the parties.

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8- Rule 6.20 under the Civil Procedure Rules (Civil Procedure Act 2009) may allow service outside the English jurisdiction when the defendant refuses to accept English law. This can occur when the subject matter of the dispute is connected to England.

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9-????? The rules governing the proper law of the contract are outlined in the case of Vita Food Products Inc. v Unus Shipping Co. Ltd. When parties expressly choose English law as the governing law of the contract, English contract law prevails, as long as the choice is bona fide, legal, and not against public policy. The law chosen by the parties also governs the material validity of the contract.

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10-? ?In Amin Rasheed Shipping Corp. v Kuwait Insurance Co. (1983), Lord Diplock described the proper law of a contract as the substantive law of the country chosen by the parties to ascertain their legally enforceable rights. Lord Donaldson mentioned the importance of determining relevant factors, which involves carefully analyzing and judging numerous factors related to the transaction. The "closest and most real connection" is determined by a system of law rather than the country most closely connected to the contract.

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11-? In Albert Borough Council v Australasian Assurance Society (1938), Lord Wright emphasized that when parties have neither expressly nor impliedly chosen the proper law, the court must determine the proper law that just and reasonable persons would have intended if they had considered the question when making the contract.

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12-? In Bonython v Commonwealth of Australia (1951), Lord Simonds referred to the factors that helped the court determine the proper law of the contract as those with which the transaction had its closest and most real connection, a notion approved by Lord Wilberforce in Amin Rasheed.

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13- Determining the proper law of a contract can follow either a subjectivist or objectivist view. The subjectivist view looks at the parties' intentions as expressed in the contract, while the objectivist view seeks to identify the law system with the closest and most real connection to the contract.

Thank you for your attention.

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