Conflict of laws

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. 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 for resolving similar disputes, regardless if the relevant legal systems are international or inter-state, though this term is also criticised as being misleading in that the object is the resolution of conflicts between competing systems rather than "conflict" itself.

History

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 modern field of conflicts emerged in the United States during the 19th 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

1. The court must first decide whether it has jurisdiction and, if so, whether it is the appropriate venue given the problem of forum shopping.
2. The next step is the characterisation 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).
3. 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.
4. Once it has been decided which laws to apply, those laws must be proved before the forum court and applied to reach a judgment.
5. 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 favour 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, e.g. 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 flavour 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:

1. the court will apply the law of the forum (lex fori) to all procedural matters (including, self-evidently, the choice of law rules); and
2. 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, e.g. 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 place 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 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 harmonise the conflictual system have not reached the point where standardisation of outcome can be guaranteed.

Pre-dispute provisions

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; or
• (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 Americain 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 labour 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, e.g. 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." See Walton v. Arabian American Oil Co., 233 F.2d 541 (2d Cir. 1956).

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.

Harmonisation

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 organisation 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 specialised 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 EU, 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

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 a 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.

References

ISBN links support NWE through referral fees

• Clarkson, C.M.V.; Jaffey, A.J.E.; Hill, Jonathan, The conflict of laws, Oxford: NY: Oxford University Press, 2006. ISBN 0-199-28913-1
• Collier, John G., Conflict of laws, Cambridge; NY: 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

Further reading

• American Law Institute. Restatement of the Law, Second: Conflict of Laws. St. Paul: American Law Institute.
• 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.
• North, Peter & Fawcett James. (1999). Cheshire and North's Private International Law (13th edition). London: Butterworths.
• Reed, Alan. (2003). Anglo-American Perspectives on Private International Law. Lewiston, N.Y.: E. Mellen Press.

See also

• List of Hague Conventions on Private International Law
• Place of the Relevant Intermediary Approach

External links

• American Society of Comparative Law http://www.comparativelaw.org/
• ASIL Guide to Electronic Resources for International Law http://www.asil.org/resource/pil1.htm
• Hague Conference on Private International Law official website.
• British Institute of International and Comparative Law (BIICL) http://www.biicl.org/private_international_law_seminar_series/
• International Chamber of Commerce http://www.iccwbo.org/
• International Court of Arbitration http://www.iccwbo.org/index_court.asp
• International Institute for the Unification of Private Law (UNIDROIT) http://www.unidroit.org/
• News and views in private international law - CONFLICT OF LAWS .NET
• United Nations Commission for International Trade Law (UNCITRAL) http://www.uncitral.org/
• U.S. State Department Private International Law Database http://www.state.gov/www/global/legal_affairs/private_intl_law.html
• Why the Hague Convention on jurisdiction threatens to strangle e-commerce and Internet free speech, by Chris Sprigman

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