Conflict of laws
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Conflict of laws, or private international law, or international private law, is that branch of international law and interstate law that regulates all lawsuits involving a "foreign" law element, where a difference in result will occur depending on which laws are applied as the lex causae. Firstly, it is concerned with determining whether the proposed forum has jurisdiction to adjudicate and is the appropriate venue for dealing with the dispute, and, secondly, with determining which of the competing state's laws are to be applied to resolve the dispute. It also deals with the enforcement of foreign judgments.
Foundation of conflict of Laws
Conflict of laws has its foundation in using the appropriate law which is the most rational and fundamental in the understanding of the case at hand. The stability of the matter has its foundation in the pertinent applied law to bring about a fair result.
Its three different names are generally interchangeable, although none of them is wholly accurate or properly descriptive. Within local federal systems, where inter-state legal conflicts require resolution (such as in the United States), the term "Conflict of Laws" is preferred simply because such cases are not an international issue. Hence, the term "Conflict of Laws" is a more general term for a legal process that deals with resolving similar disputes, regardless if the relevant legal systems are international or inter-state; though, this term is also criticized as being misleading in that the object is the resolution of conflicts between competing systems rather than "conflict" itself.
The first instances of conflict of laws can be traced to Roman law, where parties from foreign countries would go before a praetor perigrinus in Rome to plead their case. The praetor perigrinus would often choose to apply the law native to the foreign parties rather than Roman law.
The birth of the modern conflict of laws is generally considered to have occurred at Northern Italy of the late Middle Ages and, in particular, at trading cities such as Genoa, Pisa, and Venice. The need to adjudicate issues involving commercial transactions between traders belonging to different cities led to the development of the theory of statuta, whereby certain city laws would be considered as statuta personalia "following" the person to wherever the action took place, and other city laws would be considered as statuta realia, resulting in application of the law of the city where the action under dispute was located (cf. lex rei sitae).
The modern field of conflicts emerged in the United States during the nineteenth century, with the publishing of Joseph Story's Treatise on the Conflict of Laws, in 1834. Story's work had a great influence on the subsequent development of the field in England, such as those written by A.V. Dicey. Much of the English law then became the basis for conflict of laws for most commonwealth countries.
The stages in a conflict case
- The court must first decide whether it has jurisdiction and, if so, whether it is the appropriate venue given the problem of forum shopping.
- The next step is the characterization of the cause of action into its component legal categories which may sometimes involve an incidental question (also note the distinction between procedural and substantive laws).
- Each legal category has one or more choice of law rules to determine which of the competing laws should be applied to each issue. A key element in this may be the rules on renvoi.
- Once it has been decided which laws to apply, those laws must be proved before the forum court and applied to reach a judgment.
- The successful party must then enforce the judgment, which will first involve the task of securing cross-border recognition of the judgment.
In those states with an underdeveloped set of Conflict rules, decisions on jurisdiction tend to be made on an ad hoc basis, with such choice of law rules as have been developed embedded into each subject area of private law and tending to favor the application of the lex fori or local law. In states with a more mature system, the set of Conflict rules stands apart from the local private civil law and adopts a more international point of view both in its terminology and concepts. For example, in the European Union, all major jurisdictional matters are regulated under the Brussels Regime, for example, the rule of lis alibi pendens from Brussels 1 Regulation applies in the Member States and its interpretation is controlled by the European Court of Justice rather than by local courts. That and other elements of the Conflict rules are produced supranationally and implemented by treaty or convention. Because these rules are directly connected with aspects of sovereignty and the extraterritorial application of laws in the courts of the signatory states, they take on a flavor of public rather than private law, because each state is compromising the usual expectations of their own citizens that they will have access to their local courts, and that local laws will apply in those local courts. Such aspects of public policy have direct constitutional significance whether applied in the European context or in federated nations, such as the United States, Canada, and Australia where the courts have to contend not only with jurisdiction and law conflicts between the constituent states or territories, but also as between state and federal courts, and as between constituent states and relevant laws from other states outside the federation.
Choice of law rules
Courts faced with a choice of law issue have a two-stage process:
- The court will apply the law of the forum (lex fori) to all procedural matters (including, self-evidently, the choice of law rules)
- It counts the factors that connect or link the legal issues to the laws of potentially relevant states and applies the laws that have the greatest connection; for example, the law of nationality (lex patriae) or domicile (lex domicilii) will define legal status and capacity, the law of the state in which land is situated (lex situs) will be applied to determine all questions of title, the law of the location where a transaction physically takes place or of the occurrence that gave rise to the litigation (lex loci actus) will often be the controlling law selected when the matter is substantive, but the proper law has become a more common choice.
For example, suppose that A, who has a French nationality and residence in Germany, corresponds with B, who has American nationality, domicile in Arizona, and residence in Austria, over the internet. They agree to the joint purchase of land in Switzerland, currently owned by C who is a Swiss national, but they never physically meet, executing initial contract documents by using fax machines, followed by a postal exchange of hard copies. A pays his share of the deposit but, before the transaction is completed, B admits that although he has capacity to buy land under his lex domicilii and the law of his residence, he is too young to own land under Swiss law. The rules to determine which courts would have jurisdiction and which laws would be applied to each aspect of the case are defined in each state's laws so, in theory, no matter which court in which country actually accepts the case, the outcome will be the same (albeit that the measure of damages might differ from country to country which is why forum shopping is such a problem). In reality, however, moves to harmonize the conflict systems have not reached the point where standardization of outcome can be guaranteed.
Conflict of law rules in private international law
Private international law is divided on two major areas:
- Private international law sensu stricto, comprising conflict of laws rules which determine the law of which country (state) is applicable to specific relations.
- Private international law sensu lato, which comprises private international law sensu stricto (conflict of laws rules) and material legal norms which have direct extraterritorial character and are imperatively applied (material norms of law crossing the borders of State)—usually regulations on real property, consumer law, currency control regulations, insurance, and banking regulations.
Conflict of law rules in matrimonial cases
In divorce cases, when a Court is attempting to distribute marital property, if the divorcing couple is local and the property is local, then the Court applies its domestic law, lex fori. The work of the Judge and the lawyers in the case becomes much more complicated if foreign elements are thrown into the mix, such as the place of marriage is different than the territory where divorce was filed, or the parties' nationality and residence do not match. Or if there is property in foreign jurisdictions, or the parties have changed residence several times during the marriage. These are just a few examples, and each time a spouse invokes the application of foreign law, the process of divorce slows down, as the parties are directed to brief the issue of conflict of laws, hire foreign attorneys to write legal opinions, and translations of the foreign law are required, at an extensive cost to both sides.
Different jurisdictions follow different sets of rules. Before embarking on a conflict of law analysis, the court must determine whether a property agreement governs the relationship between the parties. The property agreement must satisfy all formalities required in the country where enforcement is sought.
Whereas commercial agreements or prenuptial agreements generally do not require legal formalities to be observed, when married couples enter a property agreement, stringent requirements are imposed, including notarization, witnesses, special acknowledgment forms, and in some countries, it must be filed (or docketed) with a domestic Court, and the terms must be “so ordered” by a Judge. This is done in order to ensure that no undue influence or oppression has been exerted by one spouse against the other. Upon presenting a property agreement between spouses to a Court of divorce, that Court will generally assure itself of the following factors: Signatures, legal formalities, intent, later intent, free will, no oppression, reasonableness and fairness, consideration, performance, reliance, later repudiation in writing or by conduct, and whatever else concepts of contractual bargaining apply in the context.
Many contracts and other forms of legally binding agreement include a jurisdiction or arbitration clause specifying the parties' choice of venue for any litigation (called a forum selection clause). Then, choice of law clauses may specify which laws the court or tribunal should apply to each aspect of the dispute. This matches the substantive policy of freedom of contract. Judges have accepted that the principle of party autonomy allows the parties to select the law most appropriate to their transaction. Obviously, this judicial acceptance of subjective intent excludes the traditional reliance on objective connecting factors, but it does work well in practice.
The status of foreign law
Generally, when the court is to apply a foreign law, it must be proved by foreign law experts. It cannot merely be pleaded, as the court has no expertise in the laws of foreign countries nor in how they might be applied in a foreign court. Such foreign law may be considered no more than evidence, rather than law, because of the issue of sovereignty. If the local court is actually giving extraterritorial effect to a foreign law, it is less than sovereign, and so acting in a way that is potentially unconstitutional. The theoretical responses to this issue are:
- (a) That each court has an inherent jurisdiction to apply the laws of another country where it is necessary to achieving a just outcome
- (b) That the local court creates a right in its own laws to match that available under the foreign law. This explanation is sustainable because, even in states which apply a system of binding legal precedents, any precedent emerging from a conflicts case can only apply to future conflicts cases. There will be no ratio decidendi that binds future litigants in entirely local cases.
- (c) That the notional court, when applying a foreign law, doesn't give an extraterritorial effect but recognize, through its own "conflict of laws rule," that the situation at hand falls under the scope of application of the foreign rule. In order to understand this argument one must first define the notion of extraterritorial application of a rule. This notion is susceptible to two distinct meanings:
On the one hand, this notion is used to describe the situation where a local court applies a rule other than the Lex fori (local law).
On the other hand, it could mean that the rule is being applied to a factual situation that occurred beyond the territory of its state of origin. As an example of this situation, one can think of an American court applying the British Torts Statute to a car accident that took place in London where both the driver and the victim are British citizens but the lawsuit was brought in before the American courts because the driver's insurer is American. One can then argue that, since the factual situation is within the British territory, where an American judge applies the English Law, he doesn't give an extraterritorial application to the foreign rule. In fact, one can also argue that the American judge, had he applied American Law, would be doing so in an extraterritorial fashion.
Once the lex causae has been selected, it will be respected except when it appears to contravene an overriding mandatory rule of the lex fori. Each judge is the guardian of his or her own principles of ordre public (public order) and the parties cannot, by their own act, oust the fundamental principles of the local municipal law which generally underpin areas such as labor law, insurance, competition regulation, agency rules, embargoes, import-export regulations, and securities exchange regulations. Furthermore, the lex fori will prevail in cases where an application of the lex causae would otherwise result in a fundamentally immoral outcome, or give extraterritorial effect to confiscatory or other territorially limited laws.
In some countries, there is occasional evidence of parochialism when courts have determined that if the foreign law cannot be proved to a "satisfactory standard," then local law may be applied. In the United Kingdom, in the absence of evidence being led, the foreign law is presumed to be the same as the lex fori. Similarly, judges might assume in default of express evidence to the contrary that the place where the cause of action arose would provide certain basic protections; for example, that the foreign court would provide a remedy to someone who was injured due to the negligence of another. Finally, some American courts have held that local law will be applied if the injury occurred in an "uncivilized place that has no law or legal system."
If the case has been submitted to arbitration rather than a national court, say because of a forum selection clause, an arbitrator may decide not to apply local mandatory policies in the face of a choice of law by the parties if this would defeat their commercial objectives. However, the arbitral award may be challenged in the country where it was made or where enforcement is sought by one of the parties on the ground that the relevant ordre public should have been applied. If the lex loci arbitri has been ignored, but there was no real and substantial connection between the place of arbitration and the agreement made by the parties, a court in which enforcement is sought may well accept the tribunal's decision. But if the appeal is to the courts in the state where the arbitration was held, the judge cannot ignore the mandatory provisions of the lex fori.
Development of a world uniform system
There are two major streams of legal thought on the nature of conflict of laws. One view regards conflict of laws as a part of international law, claiming that its norms are uniform, universal, and obligatory for all states. This stream of legal thought is called "universalism." Others maintain the view that each State creates its own unique norms of conflict of laws pursuing its own policy. This theory is called "particularism."
To apply one national legal system as against another may never be an entirely satisfactory approach. The parties' interests may always be better protected by applying a law conceived with international realities in mind. The Hague Conference on Private International Law is a treaty organization that oversees conventions designed to develop a uniform system. The deliberations of the conference have recently been the subject of controversy over the extent of cross-border jurisdiction on electronic commerce and defamation issues. There is a general recognition that there is a need for an international law of contracts: For example, many nations have ratified the Vienna Convention on the International Sale of Goods, the Rome Convention on the Law Applicable to Contractual Obligations offers less specialized uniformity, and there is support for the UNIDROIT Principles of International Commercial Contracts, a private restatement, all of which represent continuing efforts to produce international standards as the internet and other technologies encourage ever more interstate commerce. But other branches of the law are less well served and the dominant trend remains the role of the forum law rather than a supranational system for Conflict purposes.
Even the European Union, which has institutions capable of creating uniform rules with direct effect, has failed to produce a universal system for the common market. Nevertheless, the Treaty of Amsterdam does confer authority on the Community's institutions to legislate by Council Regulation in this area with supranational effect. Article 177 would give the Court of Justice jurisdiction to interpret and apply their principles so, if the political will arises, uniformity may gradually emerge in letter. Whether the domestic courts of the Member States would be consistent in applying those letters is speculative.
Place of the Relevant Intermediary Approach and its impact on society
The Place of the Relevant Intermediary Approach, or PRIMA, is a conflict of laws rule applied to the proprietary aspects of security transactions, especially collateral transactions. It is an alternative approach to the historically important look-through approach, and was in its earliest form the basis for the initial draft of the Hague Securities Convention.
Unlike the look-through approach, PRIMA does not look through the various tiers of intermediaries to the underlying securities. Rather, it stops at the level of the intermediary immediately above the parties to the pledge or transfer. Its important advantage is that it subjects an investor's interest in securities to the law of a single jurisdiction, even where evidence of underlying securities is situated in many different countries, or where various issuers in a single portfolio is involved. This provides certainty and clarity for all parties involved.
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- Collier, John G. Conflict of Laws. New York: Cambridge University Press, 1987. ISBN 0-521-32395-9
- Scoles, Eugene F. Conflict of Laws. St. Paul, MN: Thomson/West, 2004. ISBN 0-314-14645-5
- Dicey and Morris on the Conflict of Laws (13th edition) (edited by Albert V. Dicey, C.G.J. Morse, McClean, Adrian Briggs, Jonathan Hill, & Lawrence Collins). London: Sweet & Maxwell 2000. ISBN 0-421-88360-X
- Hayward, LLB; Mayss, Abla, J. Conflict of Laws. London, UK; Portland, OR: Cavendish, 2006. ISBN 1-859-41972-0
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- ASIL Guide to Electronic Resources for International Law http://www.asil.org/resource/pil1.htm Retrieved September 8, 2007.
- Hague Conference on Private International Law official website. Retrieved September 8, 2007.
- British Institute of International and Comparative Law (BIICL) http://www.biicl.org/private_international_law_seminar_series/ Retrieved September 8, 2007.
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- International Institute for the Unification of Private Law (UNIDROIT) http://www.unidroit.org/ Retrieved September 8, 2007.
- News and views in private international law - CONFLICT OF LAWS .NET Retrieved September 8, 2007.
- United Nations Commission for International Trade Law (UNCITRAL) http://www.uncitral.org/ Retrieved September 8, 2007.
- U.S. State Department Private International Law Database http://www.state.gov/www/global/legal_affairs/private_intl_law.html Retrieved September 8, 2007.
- Why the Hague Convention on jurisdiction threatens to strangle e-commerce and Internet free speech, by Chris Sprigman Retrieved September 8, 2007.
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