BPP University College Of Professional Studies Limited (BPP)
Notes on International Trade and Transactions for the LPC at BPP University.
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International Trade And Transactions
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CONFLICT OF LAWS – CONTRACT • Art 4(1)(c) If conveyancing contract/lease for 6+ months –
governing law: law of country where property is situated.
If a contract has an international element, two questions arise: • Art 4(1)(d) If lease for 6 months or less – governing law: law of
1. In which country might proceedings be brought? country where landlord is habitually resident.
2. Which country’s laws govern the contract? - This relates to • Art 4(1)(e) If franchise contract – governing law: law of country
choice of law (conflict of laws). Two topics: choice of law in where franchisee is habitually resident.
contract and choice of law in tort. • Art 4(1)(f) If distribution contract – governing law: law of
country where distributor is habitually resident.
Rome I Regulation: • Art 4(1)(g) If sale of goods contract (sale by auction) –
• Rome I came into force on 17 Dec 2009. It applies to contracts governing law: law of country where the auction takes place.
falling within its scope which were concluded on or after 17
December 2009. Art 19 Habitual residence = place of central administration or (for sole
• Rome I is in force in all EU Member States except Denmark. traders) principle place of business.
• Rome I begins with recitals to aid interpretation.
If the contract covers more than one points in Art 4(1), ascertain which
GOVERNING LAW PROBLEM QUESTIONS: party is the characteristic performer under Art 4(2) (see below).
The contract does not fall within the Art 4(1) list, is not a contract of
Which country’s laws govern the parties’ contract? carriage, a consumer contract, an insurance contract or an individual
employment contract.
Rome I - Structure:
1. Does the Rome I Reg apply? If none of the above applies, go through the below.
2. Have parties made a choice of law? Art 3 Freedom of choice Even if one of the above applies, check the below to see if your
conclusion can be displaced by a weaker party provision or Art 4(2)-(4).
3. Rules in the absence of a choice:
• Art 4 Sale of goods, provision of services or distribution Weaker party provisions: *Takes precedence over Art 4*
contracts • Art 5 If contract of carriage – governing law: country where
• Art 6 Consumer contracts. carrier is habitually resident if this is the same where consignor
• Art 8 Employment contracts is situated. If not, then place of delivery. – Never comes up
• Art 9 Overriding mandatory provisions
Art 21 Public policy
•
•
Art 6 If consumer contract – governing law: law of country
4. Conclusion where the consumer is habitually resident.
Art 6(1) Consumer contract: if contract concluded by natural
Step 1. Does the Rome I Reg apply? person for a purpose outside his trade/profession with person
If both are satisfied, then yes – go onto the next step. – always yes. acting in the exercise of his trade or profession and:
(a) professional pursues its commercial or professional
Material Scope: Art 1 Breach of contract – yes, applies. activities in the country where the consumer has his/her
• The court must be faced with a conflict of laws. habitual residence; or
• The case must relate to a contractual obligation. (b) by any means, directs such activities to that country or
• Matter must relate to civil and commercial matters. to several countries including that country.
• Art 1 Matter type not excluded.
Recital 24 The rules also apply to distance selling contracts.
Temporal Scope:
Art 28 Contract must have been concluded on or after 17 Dec 2009. • Art 7 If insurance contract (weaker party provision) – governing
The contract was entered into after Rome I came into force. law: law of country where the insurer is habitually resident.
Never comes up
Yes, both the material + temporal scopes are satisfied. Rome I applies.
• Art 8 If employment contract – Art 8(2) governing law: law of
Step 2: Have the parties made a choice of law? country where employee habitually performs work.
If no – go onto the next step. This won’t change if employee is temporarily employed in
another country.
General rule: Freedom of choice Recital 36 Temporary = if employee is expected to resume
Art 3(1) Contract or part of it will be governed by the chosen law. Is working in country of origin after tasks abroad are completed.
there a choice of law clause? – Check if it is with the correct entity. Art 8(4) Another country’s law may apply if contract is more
Art 3(2) Parties can change the governing law at any time. But the closely connected with that other country.
change will not prejudice the contract and will not adversely affect the
rights of third parties. If none of the above applies, go through the below.
Recital 12 to Rome I A choice of law clause need not be expressly stated Apply the below in order:
in contract; it can also be implied if choice is clearly demonstrated by 1. Art 4(2) Governing law is the law of country where
the terms of contract or circumstances of the case. – Difficult to prove. characteristic performer of contract is habitually resident.
Giuliano-Lagarde report Characteristic performer = person
Helps to prove implied choice if: performing an act for which payment is due.
• Contract is a standard form contract Art 19 Habitual residence = place of central administration or
• There has been previous course of dealing between the parties (for sole traders) principle place of business.
with an express choice clause but this time, the clause has been
deliberately omitted. 2. Art 4(3) Court applied Art 4(1) or (2) but the contract appears
to be manifestly more closely connected with another
Choice of law can be overridden by the below: country.
1. Art 3(3)-(4) Provisions of law: apply chosen law subject to For this to operate, the court must decide, in its discretion, to
mandatory provisions of relevant country’s law if another apply Art 4(3) notwithstanding Art 4(1) or (2).
country’s law is also relevant. – eg. s.27(2) UCTA There must be clear grounds for doing so.
2. Art 6 Consumer contract: Choice of law cannot deprive the
client of protection afforded to him by English law that cannot List all connections to each country eg. England: Defendant is
be derogated from by agreement. incorporated in England, France: Claimant is incorporated in
3. Art 8(1) Employment contract: Even if there is a choice, check France and payment was to be in euros.
governing law in case if there is no choice. If no choice,
governing law: law of country where employee habitually 3. Art 4(4) Country that is most closely connected.
carries out work performance. If choice is more detrimental to
employee than governing law in the absence of choice, then Your conclusion can be overridden by the below:
governing law in the absence of choice applies. Use only if law you concluded is NOT English law.
1. Art 9 Overriding mandatory provisions – takes precedence over
Step 3: Rules in the absence of choice: provisions of law.
If there is a choice of law, skip this and go to conclusion. 2. Art 21 Public policy: court can disapply any foreign law if that is
manifestly incompatible with public policy.
If no choice, see if contract falls into one or more of the definitions:
• Art 4(1)(a) If sale of goods contract – governing law: law of Step 4. Conclusion?
country where Seller is habitually resident. Good arguments that suggest English law should govern the contract
under Art 4(1)(b). If English law applies, Art 9 and 21 (on overriding
• Art 4(1)(b) If provision of services contract – governing law: law mandatory provisions and public policy) will be irrelevant; the English
of country where service provider is habitually resident. court will be applying English law.
International transactions – Revision notes | Page 1 of 14
, Art 23(1) Habitual residence = place of central administration
CONFLICT OF LAWS – TORT or (for sole traders) principle place of business.
Rome II Regulation: • Art 4(3) Where it is clear from all the circumstances that tort
• Rome I came into force on 11 Jan 2009. It applies to contracts was manifestly more closely connected with another country,
falling within its scope which were concluded on or after 11 Jan that country’s law will apply.
2009.
• Rome II is in force in all EU Member States except Denmark. Exceptions to Art 4: *Popular in exams*
• Rome II also begins with recitals to aid interpretation. 1. Art 5 Recital 20 Product liability: where damage is caused by a
product.
GOVERNING LAW PROBLEM QUESTIONS: Art 5 will take precedence over Art 4(1).
Art 4(2) takes precedence over Art 5.
Which country’s laws govern the tort?
Art 5(1)(a) Governing law will be the law of country where the
Rome II - Structure: person sustaining damage was habitually resident when the
1. Does the Rome II Reg apply? damage occurred, if the product was marketed in that country.
2. Have parties made a choice of law? Art 5(2) All the circumstances suggest that the tort is manifestly
Art 14(1) Freedom of choice before or after the event. more closely connected with another country, in that case, that
country’s laws may apply.
3. Rules in the absence of a choice:
• Art 4 General rule to governing law 2. Art 7 Recital 24 Environmental damage:
• Exceptions to Art 4 Environmental damage eg. if property damage has been
sustained as a result of environmental damage.
4. Scope of applicable law
5. Forum shopping Claimant will have a choice:
6. Conclusion (a) Law under Art 4(1) – Governing law of country where
7. OPTIONAL: Common law rules + Concurrent duties damage occurs or
(b) Law of country in which the event giving rise to damage
Step 1. Does the Rome II Reg apply? occurred.
If both are satisfied, then yes – go onto the next step. – always yes. Do not make a choice on client’s behalf, just explain that clint
has a choice.
Material Scope: Art 1 Breach of contract – yes, applies.
• The court must be faced with a conflict of laws. Step 4. Scope of governing law:
• Art 2 The case must relate to a non-contractual obligation. Art 15 and Art 22 Scope of the applicable governing law:
• Matter must relate to civil and commercial matters. •Basis and extent of liability
• Art 1(2) Matter type not excluded. •Limitation or division of liability – eg contributory negligence
Art 1(2)(g) Defamation is excluded, common law applies •Damages
instead. – If defamation claim, go to step 7. •Limitation
•Burden of proof
Temporal Scope:
Art 31-32 Events giving rise to damage (and related proceedings) must Step 5. Forum shopping:
have occurred after 11 Jan 2009. – If tort occurred before 1 May 1996, Factors:
go to step 7. •Cost of commencing or pursuing proceedings
•Length of proceedings
Yes, both the material + temporal scopes are satisfied. Rome II applies. •Funding methods: Conditional Fee Agreements available?
•Availability of interim orders (Injunctions or security for costs)
Step 2: Have the parties made a choice of law? •Mode of trial - trial by jury or judge
If no – go onto the next step. •Extent of disclosure obligations
•Ability to join 3rd parties to proceedings
General rule: Freedom of choice •Ability to make a counterclaim
Art 14(1) Choice of law made after the event: valid if both parties agree •Available remedies
Art 14(1) Choice of law made before the event: •Level of costs recovery
1. Parties must be pursuing commercial activity and •Enforcement methods
2. Choice is binding if freely negotiated – you may assume unless
told otherwise. Step 6. Conclusion?
Consider in detail possibility of an express or implied choice of law. If you concluded FOREIGN law:
Example of express choice of law: Your conclusion can be overridden by the below:
“This contract and any and all matters, (whether contractual or non- • Art 16 Overriding mandatory provisions of English law – subject
contractual) arising out of or in connection with the contract will be to law of forum.
subject to X law”. – wording is wide enough to include non-contractual • Art 26 Court may disapply foreign law if it is manifestly
matters. This agreement was entered into before the event. incompatible with English public policy.
• Art 17 Recital 34 Court will use discretion to take into account
Usually there is no choice of law in qs and you go on to apply Art. 4. rules on safety and conduct in country where tort occurred
which were in force at the place and time when it occurred.
Consumer or employee cases: parties can only choose governing law When assessing Defendant’s conduct under the applicable law, the
after the event. court will have regard to the relevant French rules of safety and
conduct; i.e. was D complying with local rules in force at the relevant
Art 14(2)-(3) Parties cannot try to circumvent one country’s laws by time?
choosing another. Where all elements indicate that laws of another
country should be applied, apply chosen law subject to mandatory If you concluded ENGLISH law:
provisions of relevant country’s law. Art 17 Recital 34 Court will use discretion to take into account rules on
safety and conduct in country where tort occurred which were in force
Art 6(4) and Art 8(3) No choice is allowed if it would lead to: unfair at the place and time when it occurred.
competition, restriction of competition or IP infringement. English law will apply pursuant to Art 5. The court will consider the rules
of safety and conduct in force of the country where the tort occurred,
Step 3: Rules in the absence of choice: at the place and time of the event.
If there is a choice of law, skip this and go to conclusion.
Step 7. OPTIONAL – Common law rules on choice of law:
If no choice: *Only go through these rules if prompted by the notes or specifically
• Art 4(1) Applicable law will be the law of the country in which asked in the q.*
the damage has occurred.
Art 17 Where damage occurred = where injury or damage to Use this section if: tort occurred pre-1 May 1996 or if defamation claim.
property sustained.
If purely financial loss: no guidance yet. Possibly where act of Philips v Eyre For action to continue, claimant must show that there is
reliance took place (negligent advice) or where loss suffered. double actionability - Claimant must show that tort is:
• Actionable under laws of the forum hearing the dispute, and
• Art 4(2) Where Claimant and Defendant are habitual residents • Not justifiable under laws of country where tort occurred
in the same country – that country’s laws govern tort. The above two means the same, in essence must have a cause of action
in both countries.
International transactions – Revision notes | Page 2 of 14
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