Choice of Law and Dispute Resolution. FW Law Departments Conference Geneva, March 21 and 22, 2011. CHOICE OF LAW. Reasons for choosing governing law. On the other side, what happensif the parties have not expressly chosen a governing law?
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FW Law Departments Conference
Geneva, March 21 and 22, 2011
On the other side, what happensif the parties have not expressly chosen a governing law?
Governing law will be determined by applying the applicable conflict of law rules.
Parties’ express choice of law will be respected by most courts and arbitral tribunals.
This may lead to:
As a consequence, the governing law becomes less important, if the parties have extensively dealt with each party’s obligations, rights and possible consequences in case of any breach.
However: business parties never manage to cover all possible issues in a contract
Respondents were also asked to explain why they choose their most frequently chosen law.
Most of them referred to familiarity, predictability, foreseeability and certainty.
They also referred to the existance of a “well developed jurisprudence” and “international acceptance”
English law is considered to be one of the national laws that best fulfils such criteria.
A properly drafted dispute resolution clause provides transparency and predictability: the parties know in advance where and how disputes will be resolved.
For these reasons, it is essential to devote the necessary time and care to dispute resolution clauses, and not leave this important provision to last minute negotiation and drafting.
First question to be borne in mind when drafting dispute resolution clauses is: where might it be necessary to enforce any decision reached through the chosen dispute resolution mechanism, and how easy will it be to enforce it there?
A dispute resolution clause which leads to unenforceable results is worthless.
For international contracts, serious consideration should be given to arbitration: the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards is recognized in 145 countries worldwide.
When the arbitral decision has been obtained, the specific simplified and (teoretically) quick procedure for the recognition of the award has to be followed, in accordance with the civil procedure rules of the country where the award has to be enforced (typically, the country where the client has its seat).
Where urgent or interim relief measures may be needed, or where a summary determination may be sufficient to solve an issue (e.g. payment failures), litigation should be preferred to arbitration.
Relief can be obtained quite quickly from courts . On the other side, though all major arbitration rules include provisions for temporary measures, they normally depend on the arbitral tribunal having been constituted. This can be a time consuming process, which practically frustrates the purpose of temporary measures.
Where the subject matter of a dispute is likely to be highly technical, the parties may prefer to submit the dispute to arbitrators, who will be chosen among experts in the concerned field.
This will give parties greater certainty that those who will solve the dispute have the necessary skills and experience.
In case the dispute relates to confidential issues, arbitration may be preferable, as it offers greater confidentiality and privacy.
Underthe rules of most arbitration institutions, parties have wide rights to determine the procedures to apply to arbitration. The parties may thus tailor the process to fit their dispute.
In litigation, the procedure is fixed by the applicable civil procedure code.
How are the most significant issues (rules of evidence, discovery, costs, availability of appeals, quality of the judges...) solved by the procedural systems of the competing jurisdictions?
Where are my opponents assets?
Does the applicable law impose a dispute resolution method?
What risk do I want to limit more? Is it the credit risk — the risk of non-payment? In this case proceedings before the other party’s court, where its assets are located, may be most appropriate. Alternatively, is it the risk in relation to the liability for failure of a product which is manufactured in a country and sold to a company having its seat in another country? In this case, arbitration may be more appropriate.
Are there mandatory provisions in the law of the country where the arbitral award will be enforced? Which is their content?