Chapter 1 + Lecture 1 Notes – Conflict of Laws (Contract)
Background:
• Contracts have international elements which raise the questions of:
1. Jurisdiction: In what country might proceedings connected with the contract be brought?
2. Conflict of Laws: Which country’s laws govern the contract?
If 2 or more countries’ laws might apply to govern the contract (and, therefore, the dispute), the court hearing
the dispute must apply its own choice of laws rules to decide which laws will be applied to resolve the dispute.
• Choice of law regimes in contract:
- Common law:
Only regulates choice of law if the Rome Convention or Rome I do not apply – essentially now replaced in
England.
Allows parties to expressly or impliedly choose which country’s laws are to govern their contract, as long as:
a. Choice is made in good faith
b. It is legal
c. It is not against public policy
Although usually the court just accepts and applies the parties’ choice of law.
When deciding whether a choice of law can be implied, the court seeks to ascertain the true intentions of the
parties by reference to all the circumstances giving rise to the contract.
- Rome Convention:
Negotiated to harmonise the law in which the courts of the EU MSs use to determine the governing law of
international contracts.
Now superseded by Rome I.
Applies to contracts entered into between 1 April 1991 – 16 December 2009.
- Rome I Regulation only examinable regime in ACL
Came into force December 2009.
Applies to contracts that fall within its scope concluded on/after 17 December 2009.
Governing Law:
• The laws of the court hearing the dispute do not automatically apply to resolve the dispute:
- If the English courts have jurisdiction to hear the dispute, they will use English law to decide what the governing
law of a contract is.
- May be decided following a trial on a preliminary issue.
CPR 3 general case management powers gives courts jurisdiction to hold hearings on preliminary issues.
Rome I – Intro:
• Background:
- EU adopted Regulation 593/2008 which sets out the rules on choice of law in contractual civil and commercial
matters.
Aimed at predictability and consistency – all the courts should reach the same conclusion as to which laws apply
in a contractual dispute when applying the rules.
• Application in E&W:
- When the UK was a member of the EU it opted into Rome I and it still applies after Brexit.
• Interpretation:
- Recitals aid interpretation.
- Drafted so that it should work with Rome II.
1
,Rome I – When it applies:
• Mainly applies to commercial matters:
- Recital 6: It addresses the needs to:
o Improve the predictability of the outcome of litigation
o Improve certainty as to the law applying to litigation
o Improve the free movement of judgments within the EU
o Facilitate a scheme whereby the conflict of law rules in the EU MSs will designate the same national law to
apply to the parties’ dispute, regardless of where the litigation is actually commenced and heard.
• For Rome I to apply to a contract, the matter needs to fall within both: conclude whether Rome I applies
1. The material scope of Rome I (i.e. the substantive contracts it applies to):
Art 1(1): Rome I applies in situations involving a conflict of laws, to contractual obligations in civil and
commercial matters.
o Is there a dispute faced with a conflict of laws?
About where the court/tribunal hearing the dispute has a choice between applying the laws of one country
or another to resolve the dispute. State which countries’ laws the court/tribunal has a choice between.
o If so, does this relate a contractual obligation and is not excluded? Set out the contract.
Art 1(1)-(2): Sets out the exclusions where Rome I does not apply to contractual obligations arising out of:
note that it is not excluded
▪ Revenue matters
▪ Customs matters
▪ Admin matters
▪ Questions involving the status or legal capacity of natural persons
▪ Obligations arising out of family relationships, inc maintenance obligations + matrimonial property
regimes
▪ Bills of exchange, cheques, promissory notes and other negotiable instruments
▪ Arbitration agreements and agreements on the choice of court
▪ The law of companies/corporate or incorporated bodies to creation, registration, legal capacity,
internal organising or winding up of them, personal liability of their officers/members for the body’s
obligations
▪ The question whether an agent can bind a principal in relation to a third party
▪ The constitution of trusts and relationships between settlors, trustees and beneficiaries
▪ Obligations arising out of dealings prior to the conclusion of a contract
▪ Certain insurance contracts
Not interpreted broadly – the court needs to look at connected pieces of EU legislation to reach an
autonomous interpretation of EU law and uniform application.
If a claim raises a number of issues, the court should consider whether the principal subject matter of the
claim falls within one of the exceptions.
Art 1(3): Rome I normally will not determine the applicable rules on evidence or procedure – these are
decided by the domestic rules of the courts hearing the dispute regardless of the law being applied to the
dispute i.e. procedural and evidential matters would be decided by CPR in UK. Subject to Art 18.
o If so, is it a civil and commercial matter?
Interpreted broadly – a claim’s substance not form is relevant; court looks beyond the statements of case.
If a case falls outside of this, then the English court will apply the Rome Convention or (if falling outside of
that) the Common Law Rules.
2. The temporal scope of Rome I (i.e. the contract was entered after Rome I came into force):
Art 28 + corrigendum amendment: Contract must have been concluded on or after 17 December 2009.
Long-form questions scenario usually within temporal scope. Give the date of the contract.
Rome I does not have retrospective effect.
• Rome I applies to all contract cases falling within its material and temporal scopes which involve a choice of law of
different jurisdictions to be applied to resolve the dispute:
= The courts of the EU MSs apply Rome I but the laws applied to resolve the dispute may not be the laws of a MS.
- Art 2: Any law specified to apply under Rome I will apply to the dispute, even if it is not the law of a MS.
- Recital 13: Parties are not precluded from incorporating by reference into their contract a non-MS body of law or
international convention. Can still choose a non-EU law to apply in the contract.
2
,If Rome I applies, working out the applicable law to the matter: once you know it applies, using it to work out the law that
will apply to the contractual commercial and civil matters to resolve the dispute.
If there is a binding choice of law:
• Freedom of choice of governing law:
- Starting point → Recital 11: The parties’ freedom to choose the applicable law should be one of the
cornerstones of the system of conflict of law rules in matters of contractual obligations.
- Art 3(1): A contract shall be governed by the law chosen by the parties. The choice shall be made expressly, or
clearly demonstrated by the terms of the contract or the circumstances of the case. By their choice parties can
select the law applicable to the whole or part of the contract.
o Parties can incorporate law from any jurisdiction into their contract and any international convention.
o Choice may be set out expressly in the contract.
State whether or not there is an express choice of law that therefore engages Art 3.
o Choice may be clearly demonstrated by the terms of the contract or the circumstances of the case:
Judges might infer an implied choice where a standard form contract is known to be governed by a
particular system of law, even though there is no express statement to this effect, or where there has been
a previous course of dealing between the parties under contracts with an express choice of law clause and
its omission does not indicate a deliberate change of policy by the parties e.g. the parties just signed the
contract in a rush. Note that an argument about this might be made but is not certain to succeed.
Means that, just because there isn’t an express choice of law clause in the contract, there hasn’t necessary
not been a choice of law.
The fact that there is a preliminary issue being heard by the court suggests that the parties disagree on the
applicable law and if the parties are disputing the choice of law, this usually suggests that it is not clear from
the circumstances/terms.
A jurisdiction (not governing law) agreement/choice of jurisdiction (not law) clause can be considered by the
court but is not a conclusive factor and should not be used as a strict rule: Recital 12: An agreement
between the parties to confer on one or more courts/tribunals of a MS exclusive jurisdiction to determine
disputes under the contract shall be one of the factors to be taken into account in determining whether a
choice of law (to govern the dispute) has been clearly demonstrated by the terms/circumstances.
May conclude that a choice of governing law is not implied as it is not clearly demonstrated.
o The parties may select a law to apply to the whole or just part of the contract:
If a contract has separable parts, parties should make clear in their choice of law clauses which parts
are to be governed by the chosen law/s.
Need to be careful when choosing more than one law to govern a contract as they could conflict.
Parties’ choices of law might still be subject to certain overriding principles as set out in Art 3(3), Art 3(4),
Art 9 and Art 21.
• Limiting freedom of choice: even where the parties have expressly chosen the governing law or the
terms/circumstances clearly demonstrate the governing law
- Arts 5-8: Apply to some cases to give them their own bespoke rules, usually aimed at protecting weaker parties
e.g. consumers and employees, so parties are limited as to the extent to which they can agree the applicable law
in:
o Art 5: Contracts of carriage.
o Art 6: Consumer contracts.
Art 8(2) is relevant even where there has been a binding choice.
o Art 7: Insurance contracts.
o Art 8: Individual employment contracts.
Art 8(1) is relevant even where there has been a binding choice.
Still apply these even if there has been a choice of law.
- There are provisions of law that cannot be derogated from by agreement – taking precedence over the law the
parties’ have chosen:
Art 3(3)/Recital 15: Modify the primacy of the parties’ choice where a choice of law is made but ALL other
elements relevant to the situation are located in a country other than the country whose law has been chosen.
The chosen law should not prejudice the application of provisions of law of that country which cannot be
derogated from by agreement: state why all the other elements are located in another country
o Whether parties can avoid application of a statute will depend on whether the provision that they are
seeking to avoid is one which cannot be derogated from by agreement.
o The provisions that cannot be derogated from by agreement will still apply to a contract even where there is
a choice of law of a different jurisdiction.
3
, The law chosen will apply to the parties’ rights and obligations but these overriding mandatory laws of the
country to which the contract is connected apply in the event there is a conflict.
This is trying to prevent the use of an artificial applicable law that is selected to avoid the compulsory rules
of the country to which the contract is connected e.g. competition law rules, restrictive practices,
international carriage and protection of individuals who merit special treatment by the law.
o One example:
Prevents parties to a contract, where all other elements relevant to the situation are located in the UK,
from contracting out of the controls of UCTA 1977 by choosing the law of a country outside of the UK to
resolve the dispute – the foreign law will still apply to the contract but subject to the UCTA 1977 provisions
being given effect.
S27(2) UCTA 1977: UCTA 1977 has effect notwithstanding any contract term which applies the law of any
country outside of the UK where:
a) The term appears to the court/arbitrator to have been imposed wholly/mainly for the purpose of
enabling the party imposing it to evade the operation of UCTA 1977
and/or
b) In making the contract, one of the parties dealt as consumer + he was then habitually resident in the
UK and the essential steps necessary for the making of the contract were taken there
The choice of law still applies despite the fact everything else indicates the laws of another country as more
relevant – but then the laws of this more relevant country that can’t be derogated from by agreement will apply.
- Art 3(4): Where all other elements relevant to the situation at the time of the choice are located in one or more
relevant states (UK or MS), the parties’ choice of applicable law other than that of a relevant state shall not
prejudice the application of provisions of retained EU law which cannot be derogated from by agreement.
Mainly applicable where both parties are based in the UK or the EU but they have stipulated that their contract is
to be subject to the laws of some non-EU state.
- Art 6(2) (consumer contracts) and Art 8(1) (individual employment contracts):
If there is a choice of law in the employment contract it will be governed by this as parties are free to choose
pursuant to Art 3. But the choice of law will not prevent a consumer obtaining the protections of the provisions
that cannot be derogated from by agreement which would apply under the law that would have been applicable
on the basis of Art 6(1)/Art 8(2)-(4) if there had been no choice of law.
4
Background:
• Contracts have international elements which raise the questions of:
1. Jurisdiction: In what country might proceedings connected with the contract be brought?
2. Conflict of Laws: Which country’s laws govern the contract?
If 2 or more countries’ laws might apply to govern the contract (and, therefore, the dispute), the court hearing
the dispute must apply its own choice of laws rules to decide which laws will be applied to resolve the dispute.
• Choice of law regimes in contract:
- Common law:
Only regulates choice of law if the Rome Convention or Rome I do not apply – essentially now replaced in
England.
Allows parties to expressly or impliedly choose which country’s laws are to govern their contract, as long as:
a. Choice is made in good faith
b. It is legal
c. It is not against public policy
Although usually the court just accepts and applies the parties’ choice of law.
When deciding whether a choice of law can be implied, the court seeks to ascertain the true intentions of the
parties by reference to all the circumstances giving rise to the contract.
- Rome Convention:
Negotiated to harmonise the law in which the courts of the EU MSs use to determine the governing law of
international contracts.
Now superseded by Rome I.
Applies to contracts entered into between 1 April 1991 – 16 December 2009.
- Rome I Regulation only examinable regime in ACL
Came into force December 2009.
Applies to contracts that fall within its scope concluded on/after 17 December 2009.
Governing Law:
• The laws of the court hearing the dispute do not automatically apply to resolve the dispute:
- If the English courts have jurisdiction to hear the dispute, they will use English law to decide what the governing
law of a contract is.
- May be decided following a trial on a preliminary issue.
CPR 3 general case management powers gives courts jurisdiction to hold hearings on preliminary issues.
Rome I – Intro:
• Background:
- EU adopted Regulation 593/2008 which sets out the rules on choice of law in contractual civil and commercial
matters.
Aimed at predictability and consistency – all the courts should reach the same conclusion as to which laws apply
in a contractual dispute when applying the rules.
• Application in E&W:
- When the UK was a member of the EU it opted into Rome I and it still applies after Brexit.
• Interpretation:
- Recitals aid interpretation.
- Drafted so that it should work with Rome II.
1
,Rome I – When it applies:
• Mainly applies to commercial matters:
- Recital 6: It addresses the needs to:
o Improve the predictability of the outcome of litigation
o Improve certainty as to the law applying to litigation
o Improve the free movement of judgments within the EU
o Facilitate a scheme whereby the conflict of law rules in the EU MSs will designate the same national law to
apply to the parties’ dispute, regardless of where the litigation is actually commenced and heard.
• For Rome I to apply to a contract, the matter needs to fall within both: conclude whether Rome I applies
1. The material scope of Rome I (i.e. the substantive contracts it applies to):
Art 1(1): Rome I applies in situations involving a conflict of laws, to contractual obligations in civil and
commercial matters.
o Is there a dispute faced with a conflict of laws?
About where the court/tribunal hearing the dispute has a choice between applying the laws of one country
or another to resolve the dispute. State which countries’ laws the court/tribunal has a choice between.
o If so, does this relate a contractual obligation and is not excluded? Set out the contract.
Art 1(1)-(2): Sets out the exclusions where Rome I does not apply to contractual obligations arising out of:
note that it is not excluded
▪ Revenue matters
▪ Customs matters
▪ Admin matters
▪ Questions involving the status or legal capacity of natural persons
▪ Obligations arising out of family relationships, inc maintenance obligations + matrimonial property
regimes
▪ Bills of exchange, cheques, promissory notes and other negotiable instruments
▪ Arbitration agreements and agreements on the choice of court
▪ The law of companies/corporate or incorporated bodies to creation, registration, legal capacity,
internal organising or winding up of them, personal liability of their officers/members for the body’s
obligations
▪ The question whether an agent can bind a principal in relation to a third party
▪ The constitution of trusts and relationships between settlors, trustees and beneficiaries
▪ Obligations arising out of dealings prior to the conclusion of a contract
▪ Certain insurance contracts
Not interpreted broadly – the court needs to look at connected pieces of EU legislation to reach an
autonomous interpretation of EU law and uniform application.
If a claim raises a number of issues, the court should consider whether the principal subject matter of the
claim falls within one of the exceptions.
Art 1(3): Rome I normally will not determine the applicable rules on evidence or procedure – these are
decided by the domestic rules of the courts hearing the dispute regardless of the law being applied to the
dispute i.e. procedural and evidential matters would be decided by CPR in UK. Subject to Art 18.
o If so, is it a civil and commercial matter?
Interpreted broadly – a claim’s substance not form is relevant; court looks beyond the statements of case.
If a case falls outside of this, then the English court will apply the Rome Convention or (if falling outside of
that) the Common Law Rules.
2. The temporal scope of Rome I (i.e. the contract was entered after Rome I came into force):
Art 28 + corrigendum amendment: Contract must have been concluded on or after 17 December 2009.
Long-form questions scenario usually within temporal scope. Give the date of the contract.
Rome I does not have retrospective effect.
• Rome I applies to all contract cases falling within its material and temporal scopes which involve a choice of law of
different jurisdictions to be applied to resolve the dispute:
= The courts of the EU MSs apply Rome I but the laws applied to resolve the dispute may not be the laws of a MS.
- Art 2: Any law specified to apply under Rome I will apply to the dispute, even if it is not the law of a MS.
- Recital 13: Parties are not precluded from incorporating by reference into their contract a non-MS body of law or
international convention. Can still choose a non-EU law to apply in the contract.
2
,If Rome I applies, working out the applicable law to the matter: once you know it applies, using it to work out the law that
will apply to the contractual commercial and civil matters to resolve the dispute.
If there is a binding choice of law:
• Freedom of choice of governing law:
- Starting point → Recital 11: The parties’ freedom to choose the applicable law should be one of the
cornerstones of the system of conflict of law rules in matters of contractual obligations.
- Art 3(1): A contract shall be governed by the law chosen by the parties. The choice shall be made expressly, or
clearly demonstrated by the terms of the contract or the circumstances of the case. By their choice parties can
select the law applicable to the whole or part of the contract.
o Parties can incorporate law from any jurisdiction into their contract and any international convention.
o Choice may be set out expressly in the contract.
State whether or not there is an express choice of law that therefore engages Art 3.
o Choice may be clearly demonstrated by the terms of the contract or the circumstances of the case:
Judges might infer an implied choice where a standard form contract is known to be governed by a
particular system of law, even though there is no express statement to this effect, or where there has been
a previous course of dealing between the parties under contracts with an express choice of law clause and
its omission does not indicate a deliberate change of policy by the parties e.g. the parties just signed the
contract in a rush. Note that an argument about this might be made but is not certain to succeed.
Means that, just because there isn’t an express choice of law clause in the contract, there hasn’t necessary
not been a choice of law.
The fact that there is a preliminary issue being heard by the court suggests that the parties disagree on the
applicable law and if the parties are disputing the choice of law, this usually suggests that it is not clear from
the circumstances/terms.
A jurisdiction (not governing law) agreement/choice of jurisdiction (not law) clause can be considered by the
court but is not a conclusive factor and should not be used as a strict rule: Recital 12: An agreement
between the parties to confer on one or more courts/tribunals of a MS exclusive jurisdiction to determine
disputes under the contract shall be one of the factors to be taken into account in determining whether a
choice of law (to govern the dispute) has been clearly demonstrated by the terms/circumstances.
May conclude that a choice of governing law is not implied as it is not clearly demonstrated.
o The parties may select a law to apply to the whole or just part of the contract:
If a contract has separable parts, parties should make clear in their choice of law clauses which parts
are to be governed by the chosen law/s.
Need to be careful when choosing more than one law to govern a contract as they could conflict.
Parties’ choices of law might still be subject to certain overriding principles as set out in Art 3(3), Art 3(4),
Art 9 and Art 21.
• Limiting freedom of choice: even where the parties have expressly chosen the governing law or the
terms/circumstances clearly demonstrate the governing law
- Arts 5-8: Apply to some cases to give them their own bespoke rules, usually aimed at protecting weaker parties
e.g. consumers and employees, so parties are limited as to the extent to which they can agree the applicable law
in:
o Art 5: Contracts of carriage.
o Art 6: Consumer contracts.
Art 8(2) is relevant even where there has been a binding choice.
o Art 7: Insurance contracts.
o Art 8: Individual employment contracts.
Art 8(1) is relevant even where there has been a binding choice.
Still apply these even if there has been a choice of law.
- There are provisions of law that cannot be derogated from by agreement – taking precedence over the law the
parties’ have chosen:
Art 3(3)/Recital 15: Modify the primacy of the parties’ choice where a choice of law is made but ALL other
elements relevant to the situation are located in a country other than the country whose law has been chosen.
The chosen law should not prejudice the application of provisions of law of that country which cannot be
derogated from by agreement: state why all the other elements are located in another country
o Whether parties can avoid application of a statute will depend on whether the provision that they are
seeking to avoid is one which cannot be derogated from by agreement.
o The provisions that cannot be derogated from by agreement will still apply to a contract even where there is
a choice of law of a different jurisdiction.
3
, The law chosen will apply to the parties’ rights and obligations but these overriding mandatory laws of the
country to which the contract is connected apply in the event there is a conflict.
This is trying to prevent the use of an artificial applicable law that is selected to avoid the compulsory rules
of the country to which the contract is connected e.g. competition law rules, restrictive practices,
international carriage and protection of individuals who merit special treatment by the law.
o One example:
Prevents parties to a contract, where all other elements relevant to the situation are located in the UK,
from contracting out of the controls of UCTA 1977 by choosing the law of a country outside of the UK to
resolve the dispute – the foreign law will still apply to the contract but subject to the UCTA 1977 provisions
being given effect.
S27(2) UCTA 1977: UCTA 1977 has effect notwithstanding any contract term which applies the law of any
country outside of the UK where:
a) The term appears to the court/arbitrator to have been imposed wholly/mainly for the purpose of
enabling the party imposing it to evade the operation of UCTA 1977
and/or
b) In making the contract, one of the parties dealt as consumer + he was then habitually resident in the
UK and the essential steps necessary for the making of the contract were taken there
The choice of law still applies despite the fact everything else indicates the laws of another country as more
relevant – but then the laws of this more relevant country that can’t be derogated from by agreement will apply.
- Art 3(4): Where all other elements relevant to the situation at the time of the choice are located in one or more
relevant states (UK or MS), the parties’ choice of applicable law other than that of a relevant state shall not
prejudice the application of provisions of retained EU law which cannot be derogated from by agreement.
Mainly applicable where both parties are based in the UK or the EU but they have stipulated that their contract is
to be subject to the laws of some non-EU state.
- Art 6(2) (consumer contracts) and Art 8(1) (individual employment contracts):
If there is a choice of law in the employment contract it will be governed by this as parties are free to choose
pursuant to Art 3. But the choice of law will not prevent a consumer obtaining the protections of the provisions
that cannot be derogated from by agreement which would apply under the law that would have been applicable
on the basis of Art 6(1)/Art 8(2)-(4) if there had been no choice of law.
4
