Due diligence is your best ally when it comes to risk mitigation, especially when it comes to international treaties. While the benefits of an international business venture are numerous, they carry a significant risk that, if not properly mitigated, can far outweigh the benefits. Therefore, when drafting the applicable law clause, it is worth considering whether it should be limited or extended to the contract itself, so as to cover other non-contractual obligations related to the contract.7 There is currently no clear authority as to whether such a clause would be effective in English law to determine the law: which regulates the non-contractual obligations of the parties. In the light of Rome II, this position has now changed. Your contract, whether domestic or international, is always the first point of reference when a dispute arises between two business parties and will guide an arbitrator or judge in determining your respective rights, obligations and remedies. 4 A mixed contract which combines elements of several of the types of contracts listed above shall be governed by the law of the State in which the non-paying party has its habitual residence and registered office. In practice, the choice of applicable law by the parties can often be simple, depending on market practices or the law with which they are familiar. Below, however, we have highlighted a few points to consider when choosing the applicable law: A dispute resolution clause is important in any international contract as it clearly defines the methods and procedures for resolving disputes between the parties, whether through arbitration, litigation or any other choice of available options. When choosing the applicable law, the parties may agree on neutral solutions instead of subjecting the contract to the national law of one of the parties. If this is the case, they may opt for the law of a third country or decide to subject their contract to national legal standards such as the “generally accepted principles in international trade”, the “Unidroit principles on international commercial contracts” or other transnational rules. Therefore, after Brexit, the English courts will continue to apply the rules currently contained in the Rome I and Rome II Regulations when deciding to maintain a choice of law or, in the absence of a choice of law clause, to determine the law applicable to contractual and non-contractual obligations. Similarly, the rest of the EU should continue to apply the English clauses on the applicable law, given that the Rome I Regulation obliges Member States to implement the applicable law chosen by the parties, whether or not it is the law of a Member State or whether the parties come from outside the EU.
Applicable law and jurisdiction clauses may ultimately change the way an international contract is interpreted and performed (i.e. in accordance with the laws of a particular country or in accordance with precedents to which a particular court is bound). Therefore, particular attention should be paid to the wording of those clauses in order to ensure that there is no room for ambiguity. In addition, reference to country-specific laws should be avoided unless they relate to the agreed applicable law. It makes sense to seek advice from a lawyer on drafting international treaties. A relevant clause expressly sets out the choice of law applicable to the contract, thus eliminating the need for preliminary arguments as to the country to be applied in the interpretation of the contract. These types of clauses are called “boilerplate” clauses and are standard in almost all contracts and are usually set towards the end of the agreement. The main objective of this study is to address the issue of lex mercatoria and/or general principles of law as a contractual solution for the choice of applicable law, which can be used where no agreement on national law is possible or appropriate. If at least one of the parties is established in an EU Member State, the Rome I Regulation (for contracts concluded on or after 17 December 2009) and the Rome II Regulation (which applies from 11 January 2009 to non-contractual disputes such as negligence, misrepresentation, product liability) contain a set of rules for determining the applicable law. According to Rome I, special rules apply to different types of contracts, but in most cases the applicable law is the law of the country in which the party with characteristic performance of the contract has its habitual residence. According to Rome II, the applicable law is generally the law of the country where the damage occurs or is likely to occur. However, it can also be the country where both parties have their “habitual residence” or the country most closely related to the underlying crime.
There are also specific rules for certain types of claims under Rome II. Catherine Walsh joined Conlin Bedard LLP in 2016 as a partner and specializes in the areas of international trade law, economics and investment. Catherine served on the Board of Directors of OWIT (Women in International Trade Organization) from 2013 to 2015 and has also co-authored several published articles on international investment and trade relations. See all articles of Catherine Walsh Rome II offers business partners the opportunity to achieve greater commercial security by allowing them to contractually agree on a clause on the applicable law that covers both the contractual and non-contractual obligations of the parties. As far as editorial requirements are concerned, Article 14 does not prescribe any specific formalities. It merely provides that the choice of law governed by their non-contractual obligations “shall be expressed or demonstrated with sufficient certainty by the circumstances of the case”. To avoid some of these problems, arbitration is often chosen as a method of dispute settlement in international treaties rather than leaving it to the courts. If you choose an applicable law that can cover both contractual and non-contractual obligations and disputes (subject to certain exceptions), be sure to be aware of the consequences of this choice.
Some jurisdictions have very different regulations, for example on .B eligibility of damages and the circumstances in which you can terminate a contract and the consequences of termination….