LEB Slide Set 4 Choice of Law (International Private Law) Choice of Court Other Dispute Settlement Systems Matti Rudanko

2 2. International Sale of Goods Cases 1 1. B1 Ltd. and S1 Ltd. (Finnish companies) –B1 buys a paper machine from S1. It is material for B, firstly, that it can be taken in use on due date without a production interruption when the old machine is delivered to a foreign buyer. Secondly, it has to be checked that the new machine fulfils the the production volume requirement of x tons/day. A protection against production interruptions for the first year should be ensured, too. LEB Slide Set 4

3 International Sale of Goods Cases, 2 2. B2 Ltd. Finnish, S2 Ltd. Swedish –A successive deliveries of boots contract. S2 is to deliver to B2 in the beginning of every month during a year x pairs of boots according to specifications supplied by B2 separately for each lot. B2 can employ a carrier from its own group but wishes to make sure that the boots arrive in good order and condition. LEB Slide Set 4

4 International Sale of Goods Cases, 3 3. B3 Ltd. Finnish, S3 Ltd. English –B3 buys from S3 a helicopter used in shows from the manufacturer for rescue use after getting acquainted with the brochures of the seller and the object. S3 offers to bring the helicopter to the place of business of B3. LEB Slide Set 4

5 International Sale of Goods Cases, 4 B4 Ltd. Finnish, S4 Ltd. French –Delivery of three lots of cheese of x kg each from S4 to B4 at a price of y FIM/kg. The seller can take care of the carriage but wants to remain free from risks related to carriage of the goods. LEB Slide Set 4

6 International Sale of Goods Cases, 5 B5an English consumer, S5 Ltd. Finnish –Net sale of consumer goods. B5 is dissatisfied with the quality of the goods and also thinks to have received misleading information of it in the marketing. LEB Slide Set 4

7 Choice of Law 1 Case 1: a domestic sale transaction –the Finnish Sale of Goods Act (FSGA) is applicable –the parties may agree upon the application of the law of another country, too (The [Finnish] Act on the Law applicable to International Sale of Goods, 1964; Act -64) –this type of agreement is in itself no international point of reference (does not give the contract an international character) LEB Slide Set 4

8 Choice of Law 2 Case 2: a Nordic sales transaction –Act -64: choice of law questions: the law of the seller’s country of residence / headquarters (observe that nationality does not matter) the law of the buyer’s country if the order is received there here: Swedish law if the order is received in Sweden, otherwise Finnish law –FSGA / CISG (the International Sale of Goods Act) ? (no major differences between them) LEB Slide Set 4

9 Excursion 2: FSGA and CISG Both are in force as national law the CISG is an international sales act, i.e., applies to international sales relations: –if a reference is made to or a connecting factor concerns Finnish law, the CISG applies –a mere reference to the law or to a court does not render a contract international if the parties want to apply the FSGA a special reference to it has to be made However, the FSGA (and not the CISG) applies, if the places of business of the parties are situated in the Nordic countries (the reservation by Finland) –so, as Finnish law, FSGA is applicable in case 2 LEB Slide Set 4

10 Choice of Law 3 Case 2 (cont. ): –Reference to CISG state is at hand when parties have their places of business in different states and either these states are parties to the Convention or Convention state law is applicable on other grounds (according to the rules of international private law) LEB Slide Set 4

11 International Private Law Contains the so-called connecting factor (point of reference) rules according to which the applicable law is chosen the rules are highly harmonized as a rule, the connecting factor rules of the country of the court (lex fori) is applicable the rules on the international jurisdiction (general judicial power) show the competent court state (there the competent court determined by national rules) –In general: the home country of the defendant / place of contractual performance –A consumer may sue also in her home state LEB Slide Set 4

12 International Private Law II A reference to law is allowed and prescribes the applicable law –the validity of the reference is considered according to the law referred to ordre public: a foreign provision conflicting with the foundations of the national legal order is not applied in courts LEB Slide Set 4

13 Choice of Law 4 Case 3: an English seller the UK has not joined the CISG if the points of reference are ascertained in a Finnish court (and there is no reference to law in the contract) –Act 1964 does not apply to aircraft –Rome I Regulation (Reg. (EC) No. 593/2008) Law applicable to contractual obligations in general The place of residence of the party charged with the performance typical to the contract: Here: the seller -> the law of the UK (the British SGA) As Finnish law (not here), CISG would be applicable LEB Slide Set 4

14 Choice of Law 5 Case 4: a French seller France has joined the CISG Choice of Law (Act -64): –if the decisive reference is to Finland: the order has been received there: the CISG –the reference to France: likewise the CISG LEB Slide Set 4

15 Act 1964 and CISG Act 1964 determines the choice of law scope of application: –international sales relations –limitations: consumer relations, sale of a registered ship etc. CISG concerns the contents of the sales relationship scope of application –international sales relations –limitations: household goods, securities, ships, electricity etc. –Not applicable on contracts of mainly working LEB Slide Set 4

16 Choice of Law 6 Net sales, the buyer is an English consumer –Choice of Law: L 1964 does not apply –Rome I regulation the law of the country of residence of the consumer here English law if –the transaction is based on marketing goods there and the consumer has concluded the contract there LEB Slide Set 4

17 Rome I Regulation Regulation on the law applicable to contractual obligations: connecting factors –a reference to the law –the closest reference; a contract referring to several states can also be divided –the place of residence / management / business of the party liable for the characteristic performance, unless all circumstances refer to another state LEB Slide Set 4

18 Rome I Regulation 2 Special rules: real estates, transport, employment contracts etc. The validity of a contract (term) is decided according to the law applicable in case of validity even the mandatory provisions of another Convention state matter ordre public minimum level protection of consumer rights LEB Slide Set 4

19 So-called Soft Law in International Trade 1. Model laws and general principles  UNIDROIT Principles of International Commercial Contracts  Principles of European Contract Law (EU)  UNCITRAL Model Law on Electronic Commerce General contract terms and rules  INCOTERMS  ICC Documentary Credit Rules  ICC Model International Sale Contract 1998  etc., e.g. NLM 94 (Nordic Countries: machines, mechanical, electricity and electronic devices) LEB Slide Set 4

20 Alternatives to Legally Binding Force of Contract Common voluntary arrangements to enhance party commitment to contract –Common investments etc. –Public image factors –“hostages”: e.g. advance performances, securities (collaterals) –Common organizations Public enforcement is still required as last resort (parties usually want to avoid it)

LEB Slide Set 4 21 Agreed Conflict Management Means Reconciliation or settlement in court –ICC Rules of Optional Conciliation –Nb. Also official bodies (e.g. the Finnish Consumer Complaint Board) competent only to issue recommendations  Intention to continue business relations  Avoiding market disorders  The uncertainty, slowness and expensiveness of trial in court  The uncertainty of enforcement

LEB Slide Set 4 22 Court System General courts –Council Regulation (EC) 44/2001 on the jurisdiction of courts and the recognition and enforcement of judgments in civil and commercial law matters (Brussels I Regulation) The international jurisdiction (general judicial power) –the competent court state (there the competent court determined by national rules) –In general: the home country of the defendant / place of contractual performance (at the plaintiff’s choice) Determined according to the applicable law –A consumer may sue also in her home state

LEB Slide Set 4 23 General courts The parties may in general agree upon the competent court Consumer and insurance disputes: the court of the home state of the consumer (a mandatory provision: no scope for contracting; a conflicting term is invalid)

LEB Slide Set 4 24 The recognition and enforcement of judgments In general foreign judgments are not recognised Exequatur procedure necessary (in court of the enforcing state) Brussels I Regulation the jurisdiction of courts and the recognition and enforcement of judgments in civil and commercial law matters –Bilateral or local multilateral conventions e.g. between the Nordic countries Arbitration awards: very extensive enforceability under the New York convention (large coverage)

LEB Slide Set 4 25 Arbitration Private court system with competence to issue awards enforceable by official authorities Quickness, expertise, flexibility, secrecy of trial  New York convention on recognition and enforcement of arbitration awards  UNCITRAL model law and Arbitration Rules  Parties agree upon site, language, legal order applied and the members of the tribunal  Arbitration clause is binding only upon parties to the agreement  Ad hoc / permanent arbitration institutes  ICC, Finnish Central Chamber of Commerce: appointment of arbitrators, rules etc.