Lloyd's Maritime and Commercial Law Quarterly
FLOATING CHOICE OF LAW CLAUSES
Andrew Beck*
The recent prominence achieved by floating choice of law and forum clauses1 has highlighted a matter of considerable importance to both contract and private international law. The present article is concerned only with the former type of clause and attempts to show that a strict application of logical principles provides a scenario almost as absurd as that of the renvoi doctrine. It would consequently seem that a policy decision is urgently required.
It may be helpful to begin by considering the attitude of the courts to the proper law of the contracts. It was recently stated in the House of Lords that:
… [C]ontracts are incapable of existing in a legal vacuum. They are mere pieces of paper devoid of all legal effect unless they were made by reference to some system of private law which defines the obligations assumed by the parties …2
From this it follows inevitably that only one
3 legal system should govern the contract as a whole4 from its inception, and that this system should be the one in terms of which the contract was devised. It should not be possible for there to be a lacuna with no governing law during the currency of the contract:
It cannot be that the contract has to be treated as being anarchic: as having no governing law which the court, taking jurisdiction in respect of such a dispute under the contract, would apply in deciding the dispute. There must be a governing law from the outset: not a floating absence of law, continuing to float until the carrier, unilaterally, makes a decision.5
The same sentiment was recently expressed in The Iran Vojdan.6
The proper law is something so fundamental to questions relating to the formation, validity, interpretation and performance of a contract that it must, in my judgment, be built into the fabric of the contract from the start and cannot float in an indeterminate way until finally determined at the option of one party.7
As far as English law is concerned, therefore, it seems clear that a “lawless” contract is anathema and will not be tolerated by the courts. On the other hand, how-
* Senior Lecturer in Law, University of Otago.
1. Adrian Briggs’ article, “The validity of ‘floating’ choice of law and jurisdiction clauses” [1986] 4 LMCLQ 508 neatly highlights the issues and I am indebted to it for both its clear guidelines and the ideas it has generated. See also David G. Pierce, “Post-formation choice of law in contract” (1987) 50 M.L.R. 176.
2. Amin Rasheed Corporation v. Kuwait Insurance Co.[1984] A.C. 50 at 65, per Lord Diplock.
3. One at a time, at any rate: it seems that the parties are free to change their minds: see infra.
4. It is possible for different parts of a contract to be subject to different legal systems: see infra.
5. The Armar [1981] 1 W.L.R. 207 at 215, per Megaw, L.J.
7. Ibid., at 385, per Bingham, J.
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