Article published on Supply Management, March 2014
Conflict of Laws – 5 Tips
Consider the following scenario. A Korean party (Party A) has entered into a contract with a Peruvian company (Party B). Party A commenced proceedings in England, whilst Party B commenced proceedings in the US. Party B has obtained a judgment and seeks to enforce it in England. Party A disputes this, saying that the dispute should be resolved in England, where they have already commenced proceedings. There is no mention in the contract of which law applies and also no mention of where their dispute should be resolved. Whenever the English court is faced with a case like this involving one or more foreign elements, Conflict of Laws comes into play.
- 1. Jurisdiction
Rather than choosing a jurisdiction in ignorance of the actual rule that the system indicated would provide, it is likely that the Korean and Peruvian parties engaged in “forum shopping” ie searching for the forum most likely to present them with a favourable outcome. The English court must decide both whether it has the jurisdiction to hear the case and, if it has, whether another forum, for example, the US forum, is more suitable. The “open forum” policy traditionally adopted by English law has allowed Party A to resort to the English court, despite the fact that it has no connections with the country.
- 2. Choice of Law
Following classification of the case, the Choice of Law procedure involves the English court deciding how much significance to attribute to the foreign aspects of the case. According to the “traditional approach”, the English court will examine territorial factors, for example, the domicile or nationality of the parties, the location of the components comprising each cause of action and where any relevant assets (moveable or immovable) are located. It will then choose the law(s) with the greatest connection to the cause of action. The rules which direct the English court to identify the applicable law(s) are called the “Choice of Law Rules”.
- 3. Stays of English proceedings
The English court can decide to stay proceedings in England if it decides that this is necessary in order to preserve justice (The Supreme Court Act 1981). The principles outlined by Lord Goff in The Spiliada relate to the ideal of the court considering all matters in a particular case before deciding whether a stay should or should not be granted.
- 4. Restraint of foreign proceedings
In order for an anti-suit injunction to be granted, the English court must be convinced that proceedings before the US court are or would be vexatious and that England is not only the “natural” forum but also that the prevalence of justice is dependent on the restraint of proceedings in the US court. An anti-suit injunction would only be granted by the English court with the greatest caution as it could lead to unedifying disputes about competing court orders.
- 5. Recognition and enforcement of foreign judgements
Generally, unless an international agreement exists between the countries in question, a judgement delivered in one country cannot be recognised or enforced in another. However, the recognition and enforcement of foreign judgements is allowed under English law if the judgement meets certain requirements. At common law, these requirements are that the foreign court must have been a competent court of jurisdiction, that the judgement must be final and conclusive and that the judgement must be for a fixed sum. In this case, the judgement would be a judgement in personam (against a particular individual/corporation) rather than a judgement in rem (judgement creates a status that will be binding upon third parties).
Dr Alan Ma, Founder and Partner
Maxwell Alves Solicitors
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