Tag Archive for: choice of law

Tesseract: Don’t Over-React! The High Court of Australia, Proportionate Liability, Arbitration, and Private International Law

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By Dr Benjamin Hayward
Associate Professor, Department of Business Law and Taxation, Monash Business School
X: @LawGuyPI, @MonashITICL

On 7 August 2024, the High Court of Australia handed down its long-awaited decision in Tesseract International Pty Ltd v Pascale Construction Pty Ltd [2024] HCA 24. The dispute arose out of a domestic commercial arbitration seated in South Australia, where the Commercial Arbitration Act 2011 (SA) is the relevant lex arbitri. That Act is a domestically focused adaptation of the UNCITRAL Model Law on International Commercial Arbitration (with its 2006 amendments).

The respondent to the arbitration sought to rely upon proportionate liability legislation found in the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) and in the Competition and Consumer Act 2010 (Cth). The High Court was asked to determine whether those proportionate liability regimes could be applied in the arbitration. A very practical difficulty arose here, reflected in Steward J noting (in dissent) that the High Court was ‘faced with an invidious choice’: see [228]. Were the proportionate liability laws not to apply in the arbitration, the respondent might find themselves liable for 100% of the applicant’s loss, when they would not be liable to that same extent in court proceedings applying the same body of South Australian law. But were the proportionate liability laws to apply, the applicant might find themselves able to recover only a portion of their loss in the arbitration, and might then have to then pursue court proceedings against another third party wrongdoer to recover the rest: given that joinder is not possible in arbitration without consent. Read more

Who is bound by Choice of Court Agreements in Bills of Lading?

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According to the doctrine of privity of contract, only parties to a choice of court agreement are subject to the rights and obligations arising from it. However, there are exceptions to the privity doctrine where a third party may be bound by or derive benefit from a choice of court agreement, even if it did not expressly agree to the clause. A choice of court agreement in a bill of lading which is agreed by the carrier and shipper and transferred to a consignee, or third-party holder is a ubiquitous example. Read more

Way Out West? Understanding The CISG’s Application in Australia

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By Dr Benjamin Hayward

 

Way out west, where the rain don’t fall

There’s a treaty for the sale of goods that’s good news for all

But you might not know it’s here

Unless you’re livin’ and a workin’ on the land …

 

In 2009, Associate Professor Lisa Spagnolo observed – based upon her census of Australia’s CISG case law at that time – that the Convention was effectively ‘in the Australian legal outback’.  For those unfamiliar with Australia’s geography, most of its population is concentrated on the continent’s eastern coast.  Australia’s outback extends, amongst other places, across much of Western Australia.  With that geographic imagery in mind, one might not be surprised to hear that a recent decision of the County Court of Victoria – in Australia’s east – overlooked the Vienna Sales Convention’s application.

The circumstances in which this omission occurred are interesting, and provide a useful opportunity for Australian practitioners to learn more about the CISG’s application in Australia.

The case at issue is last year’s C P Aquaculture (India) Pvt Ltd v Aqua Star Pty Ltd [2023] VCC 2134.  That case involved a sale of goods dispute (concerning prawn and shrimp) between Australian and Indian parties.  Whilst the CISG has been part of Australian law since 1989, it is a well-known fact that India is not a CISG Contracting State.  It is perhaps this well-known fact – taken at face value – that led the County Court of Victoria to overlook the CISG’s application.

The C P Aquaculture judgment indicates that ‘[t]he parties are agreed that the proper law of the contracts between CP (India) and Aqua Star for the sale of shrimp or prawns is Victorian law’.  As recorded in the judgment, this followed from the plaintiff’s view that ‘India has not adopted the convention on contracts for the international sale of goods’, and from the defendant’s view that there was a ‘failure on the part of either part[y] to allege and prove the terms of any other law as a proper law’.

On either view, however, there is actually a very good basis for applying the CISG, rather than non-harmonised Victorian law.  This case therefore represents an excellent opportunity for Australian lawyers to better understand how and why the CISG applies in Australia.

Taking the plaintiff’s position first, the fact that India has not adopted the CISG is actually not fatal to the Convention’s application.  In fact, the Convention specifically provides for its application in those exact circumstances.  This follows from Art. 1(1) CISG, the treaty’s key application provision:

This Convention applies to contracts of sale of goods between parties whose places of business are in different States:

(a) when the States are Contracting States; or

(b) when the rules of private international law lead to the application of the law of a Contracting State.

 Where – as in C P Aquaculture – it is not the case that both parties are from Contracting States, the CISG cannot apply by virtue of Art. 1(1)(a) CISG.  But it can still apply pursuant to Art. 1(1)(b) CISG.  The key here is whether ‘the rules of private international law’ call for the application of a Contracting State’s law.

In an informal discussion I once had with a leading Australian barrister, I was asked ‘what does “the rules of private international law” here actually mean?’  It may be that uncertainty over the meaning of this phrase contributes to the CISG’s application being overlooked in cases like C P Aquaculture.  In short, private international law rules include choice of law rules (where a sales contract is governed by a CISG State’s law because of a choice of law clause) and conflict of laws rules (where, absent party choice of law, the forum’s rules indicate that a CISG State’s law is to apply).  In a way, Art. 1(1)(b) CISG might have been more easily understood by non-specialists if it read ‘when a Contracting State’s law is the governing law’.  Although it doesn’t read this way, that is essentially the provision’s effect, and understanding Art. 1(1)(b) CISG accordingly may better help Australian practitioners identify cases requiring the treaty’s application.

Taking the defendant’s position second, where the law of an Australian jurisdiction governs, it is actually not necessary to ‘allege and prove’ the CISG’s terms because the CISG – despite its abstract existence as a treaty – is not foreign law.  Roder Zelt-Und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd – Australia’s first ever case applying the CISG – confirmed this by explaining that the CISG is ‘part of’ Australian law and is thus ‘not to be treated as a foreign law which requires proof as a fact’.

Indeed, the Goods Act 1958 (Vic) – a statute that the defendant itself sought to rely upon in C P Aquaculture – is the very vehicle giving effect to the CISG in Victoria, via its pt IV.

All this being said, C P Aquaculture provides Australian practitioners (and lawyers representing Australian traders’ counterparts) with some useful lessons in understanding how and why the CISG applies.  If the CISG really is still in the Australian legal outback, then perhaps what Australian practitioners need is a good understanding of the lay of the land.  And to that end, private international law can be their map.

 

Dr Benjamin Hayward

Associate Professor, Department of Business Law and Taxation, Monash Business School

X (Twitter): @LawGuyPI

International Trade and International Commercial Law research group: @MonashITICL

Lex Fori Reigns Supreme: Indian High Court (Finally) Confirms Applicability of the Indian Law by ‘Default’ in all International Civil and Commercial Matters

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Written by Shubh Jaiswal, student, Jindal Global Law School, Sonipat (India) and Professor Saloni Khanderia, JGLS. 

In the landmark case of TransAsia Private Capital vs Gaurav Dhawan, the Delhi High Court clarified that Indian Courts are not automatically required to determine and apply the governing law of a dispute unless the involved parties introduce expert evidence to that effect. This clarification came during the court’s examination of an execution petition stemming from a judgment by the High Court of Justice Business and Property Courts of England and Wales Commercial Court. The Division Bench of the Delhi High Court invoked the precedent set by the United Kingdom Supreme Court in Brownlie v. FS Cairo, shedding light on a contentious issue: the governing law of a dispute when parties do not sufficiently prove the applicability of foreign law.

The Delhi High Court has established that in the absence of evidence proving the applicability of a foreign law identified as the ‘proper law of the contract’, Indian law will be applied as the default jurisdiction. This decision empowers Indian courts to apply Indian law by ‘default’ in adjudicating international civil and commercial disputes, even in instances where an explicit governing law has been selected by the parties, unless there is a clear insistence on applying the law of a specified country. This approach aligns with the adversarial system common to most common law jurisdictions, where courts are not expected to determine the applicable law proactively. Instead, the legal representatives must argue and prove the content of foreign law.

This ruling has significant implications for the handling of foreign-related civil and commercial matters in India, highlighting a critical issue: the lack of private international law expertise among legal practitioners. Without adequate knowledge of the choice of law rules, there’s a risk that international disputes could always lead to the default application of Indian law, exacerbated by the absence of codified private international law norms in India. This situation underscores the need for specialized training in private international law to navigate the complexities of international litigation effectively.

Facts in brief

As such, the dispute in Transasia concerned an execution petition filed under Section 44A of the Indian Civil Procedure Code, 1908, for the enforcement of a foreign judgment passed by the High Court of Justice Business and Property Courts of England and Wales Commercial Court. The execution petitioner had brought a suit against the judgment debtor before the aforementioned court for default under two personal guarantees with respect to two revolving facility loan agreements. While these guarantee deeds contained choice of law clauses and required the disputes to be governed by the ‘Laws of the Dubai International Finance Centre’ and ‘Singapore Law’ respectively, the English Court had applied English law to the dispute and decided the dispute in favour of the execution petitioner. Accordingly, the judgment debtor opposed the execution of the petition before the Delhi HC for the application of incorrect law by the Court in England.

It is in this regard that the Delhi HC invoked the ‘default rule’ and negated the contention of the judgment debtor. The Bench relied on the decision rendered by the Supreme Court of the United Kingdom in Brownlie v. FS Cairo, which postulated that “if a party does not rely on a particular rule of law even though it would be entitled to do so, it is not generally for the court to apply the rule of its own motion.”

The HC confirmed that foreign law is conceived as a question of fact in India. Thus, it was for each party to choose whether to plead a case that a foreign system of law was applicable to the claim, but neither party was obliged to do so, and if neither party did, the court would apply its own law to the issues in dispute. To that effect, the HC also relied on Aluminium Industrie Vaassen BV, wherein the English Court had applied English law to a sales contract even when a provision expressly stipulated the application of Dutch law—only because neither party pleaded Dutch law.

Thus, in essence, the HC observed that courts would only be mandated to apply the chosen law if either party had pleaded its application and the case was ‘well-founded’. In the present dispute, the judgment debtor had failed to either plead or establish that English law would not be applicable before the Court in England and had merely challenged jurisdiction, and thus, the Delhi HC held that the judgment could not be challenged at the execution stage.

Choosing the Proper Law

The mechanism employed to ascertain the applicable law under Indian private international law depends on whether the parties have opted to resolve their dispute before a court or an arbitral tribunal. In arbitration matters, the identification of the applicable law similarly depends on the express and implied choice of the parties. Similarly, in matters of litigation, courts rely on the common law doctrine of the ‘proper law of the contract’ to discern the applicable law while adjudicating such disputes on such obligations. Accordingly, the proper law depends on the express and implied choice of the parties. When it comes to the determination of the applicable law through the express choice of the parties, Indian law, despite being uncodified, is coherent and conforms to the practices of several major legal systems, such as the UK, the EU’s 27 Member States, and its BRICS partners, Russia and China – insofar as it similarly empowers the parties to choose the law of any country with which they desire their disputes to be settled. Thus, it is always advised that parties keen on being governed by the law of a particular country must ensure to include a clause to this effect in their agreement if they intend to adjudicate any disputes that might arise by litigation because it is unlikely for the court to regard any other factor, such as previous contractual relationships between them, to identify their implied choice.

Questioning the Assumed: Manoeuvring through the Intricate Terrain of Private International Law and Party Autonomy in the Indian Judicial System

By reiterating the ‘default rule’ in India and presenting Indian courts with another opportunity to apply Indian law, this judgment has demonstrated the general tendency on the part of the courts across India to invariably invoke Indian law – albeit in an implicit manner – without any (actual) examination as to the country with which the contract has its closest and most real connection. Further, the lack of expertise by the members of the Bar in private international law-related matters and choice of law rules implies that most, if not all, foreign-related civil and commercial matters would be governed by Indian law in its capacity as the lex fori. Therefore, legal representatives should actively advocate for disputes to be resolved according to the law specified in their dispute resolution clause rather than assuming that the court will automatically apply the law of the designated country in adjudicating the dispute.

Foreign parties may not want Indian law to apply to their commercial contracts, especially when they have an express provision against the same. Apart from being unclear and uncertain, the present state of India’s practice and policy debilitates justice and fails to meet the commercial expectations of the parties by compelling litigants to be governed by Indian law regardless of the circumstance and the nature of the dispute—merely because they failed to plead the application of their chosen law.

This would inevitably lead to foreign parties opting out of the jurisdiction of the Indian courts by concluding choice of court agreements in favour of other forums so as to avoid the application of the Republic’s ambiguous approach towards the law that would govern their commercial contracts. Consequently, Indian courts may rarely find themselves chosen as the preferred forum through a choice of court agreement for the adjudication of such disputes when they have no connection to the transaction. In circumstances where parties are unable to opt out of the jurisdiction of Indian courts – perhaps because of the lack of agreement to this effect, the inconsistencies would hamper international trade and commerce in India, with parties from other jurisdictions wanting to avoid concluding contracts with Indian businessmen and traders so as to avert plausible disputes being adjudicated before Indian courts (and consequently being governed by Indian law).

Therefore, Indian courts should certainly reconsider the application of the ‘default rule’, and limit the application of the lex fori in order to respect party autonomy.

Badr on Religion, Colonialism, and Legal Pluralism: The Story and Legacy of the Egyptian Choice of Law Rules for Personal Status International and Interpersonal Conflicts of Law

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Yehya Badr (Associate Professor, College of Law, Al-Yamamah University, KSA) presents his recent publication entitled “Religion, Colonialism, and Legal Pluralism: The Story and Legacy of the Egyptian Choice of Law Rules for Personal Status International and Interpersonal Conflicts of Law“, published in the Indiana Journal of Global Legal Studies, Issue 1 of Volume 31, 2024. The paper addresses the important issue of Egyptian choice of law rules for international and interpersonal conflicts of law.

The detailed summary, kindly provided by the author, reads as follows: Read more

Choice of Law in the American Courts in 2023

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The thirty-seventh annual survey on choice of law in the American courts is now available on SSRN. The survey covers significant cases decided in 2023 on choice of law, party autonomy, extraterritoriality, international human rights, foreign sovereign immunity, adjudicative jurisdiction, and the recognition and enforcement of foreign judgments. So, on this leap day, we thought we would leap into the new month by looking back at the old year.

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An Answer to the Billion-Dollar Choice-of-Law Question

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On February 20, 2024, the New York Court of Appeals handed down its opinion in Petróleos de Venezuela S.A. v. MUFG Union Bank, N.A. The issue presented—which I described in a previous post as the billion-dollar choice-of-law question—was whether a court sitting in New York should apply the law of New York or the law of Venezuela to determine the validity of certain bonds issued by a state-owned oil company in Venezuela. The bondholders, represented by MUFG Union Bank, argued for New York law. The oil company, Petróleos de Venezuela, S.A. (“PDVSA”), argued for Venezuelan law.

In a victory for PDVSA, the New York Court of Appeals unanimously held that the validity of the bonds was governed by the law of Venezuela. It then sent the case back to the federal courts to determine whether the bonds are, in fact, invalid under Venezuelan law.
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Rivista di diritto internazionale privato e processuale (RDIPP) No 4/2023: Abstracts

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The fourth issue of 2023 of the Rivista di diritto internazionale privato e processuale (RDIPP, published by CEDAM) was just released. It features:

Cristina Campiglio, Professor at the University of Pavia, Giurisdizione e legge applicabile in materia di responsabilità medica (ovvero a proposito di conflitti di qualificazioni) [Jurisdiction and Applicable Law in Matters of Medical Liability (Namely, on the Issue of Conflicts of Characterisation); in Italian]

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Croatian Academy of Science and Art

Roundtable: Private international law and global trends, Zagreb, 22 January

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The Croatian Academy of Science and Art organises the roundtable titled “Private international law and global trends“, which will be held on Monday, 22 January 2024, at 11 h, in the premises of the Faculty of Law in Zagreb in Cirilometodska street, 4 (due to ongoing renovation of the Academy’s building which suffered damage in the earthquake of 2020, as visible in the photo when expanded). Attendance is open to all, but your intention to join should be communicated to Ms. Muhek at zmuhek@hazu.hr.

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