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I. Topic One: Introduction to Conflict of Laws THE FOUR CLASSIC APPROACHES 1. SINGLE CONCEPTS OR PRINCIPLES – THE FIRST APPROACH The Statuists: from the 13th to the 18th C, the statuists tried to find a solution to conflicts arising from the multiplicity of small states and their local laws. The simplistic theory was used. Napoleon, Mancini and the law of the citizen: Influenced by the personal law theory of the statuists, the French Civil Code invoked the law of the citizen for questions of status and capacity. Because the C.C. was considered superior, all French citizens should benefit from it, wherever they were. Mancini advanced the lex patriae theory further in the second half of the 19th C. The law of the ship’s flag, as a concept, is very similar to the concept of the law of the citizen of Napoleon and Mancini. Savigny: suggested that there could be a common theory of conflicts for all nations. It was necessary to classify legal relationships, not laws, and not by their object, but rather by their place (or “seat”) The seat was determined by 4 factors or contacts: (1) the domicile of the parties; (2) the geographic location of the object or thing in dispute; (3) the place of performance of a juridical act, or (4) the forum. Story, Territoriality and vested Rights: based his writings on ‘comity,’ the principle that one state should recognize the legitimate laws of another so that the laws of the first state will also be recognized when appropriate. Appropriateness was usually found in the recognition of the laws of a particular territory. Law of the flag can be described as an off-shoot of the territoriality theory. Lex Fori – Cook & Ehrenzweig: Local law (lex fori) provides virtually the only justice in conflicts cases. The Proper Law: the ‘proper law of the contract’ was used by Westlake who defined it as “the law of the country with which the contract has its most real connection.” See more at p.10. Also ‘most significant relationship’ The American Conflicts Revolution: American courts do not necessarily follow any particular contemporary conflicts theory but often apply one theory, or part of it, on one occasion and another theory (when seemingly convenient) in other circumstances. Currie was instrumental in developing the distinction between true and false conflicts. In false conflicts, only one state had a genuine interest in having its law applied. This state was usually the forum. In true conflicts, where both states had such a genuine interest, Currie advocated application of the lex fori in all cases, refusing to weigh the competing interests if the laws concerned, on the ground that such a task belonged to Congress, and not the courts. The American Conflicts revolution has led the world in development of choice of law rules in both contract and tort. Problems with the American approach at p. 17 (TEXT) National in Theory National in Practice No stimulus to look outward How to evaluate ‘interests’ Is equity the criterion Problems with the legal system Cri de coeur American Public Social Services Distributive vs. corrective (American) justice Conclusion – American conflicts theory: One may conclude that the American system of conflicts of law is very advanced, is the subject of intense legal writing and thinking, but in many respects is very peculiar to the US. The social and legal system in America is corrective rather than distributive in approach. And it is the private insurance industry which is expected to provide the benefits to society after suit, rather than the government, which in most other industrialized countries provides social services to the whole population without suit through social programmes. The American system thus favours litigation rather than government distribution of benefits and this, in turn, causes a different approach to problem-solving in the conflict of laws. Inequalities in compensation are thus generated by the system. Because of these inequalities, many of the various forms of American conflict of law theory look to equity to solve conflict problems, rather than seeking the properly applicable law. 2. MULTIPLE NUMBERED RULES (“PRIVATE CONFLICT CODES) – THE SECOND APPROACH Dicey & Morris: present conflicts of law rules as decided by English courts and occasionally disagree with the decisions and present alternatives. McLeod: proposes 205 rules: The first 4 refer to generalities and to jurisdiction, but the remainder consist of specific and detailed rules for very particular questions. Accepts that issues such as domicile, residence and situs are really only connecting factors. The First Restatement (1934): The Restatement Second (1969): Similar to Savigny’s legal relationship but the relationship is the government’s or the state’s whose interests are such that the law of that state should apply: “a court, except for constitutional restrictions and a directive of its own state, will choose the law which best reflects the relevant needs, policies and interests of the interested states on the question, providing the law so chosen also reflects the principles of certainty, predictability and uniformity, as well as providing ease of determination and application.” This provides the most authoritative solution to conflicts of laws in the U.S. 3. GENERAL TEXTS, COMMENTARIES AND ESSAYS – THE THIRD APPROACH P.25 4. THE MODERN APPROACH – NATIONAL LEGISLATION AND INTERNATIONAL CONVENTIONS – THE FOURTH APPROACH If the most important recent theoretical finding in conflict of laws has been the most significant relationship or closest and most real connection theory, the most important recent approach to resolving conflicts has been international conventions and national legislation on conflict of laws. National Laws: p.28 The Hague Convention: provide great authority and influence, attaining at times the stature of customary international law. Rome Convention (1980): see p.30. Applies uniform choice-of-law rules to contracts with very few exclusions applies to contract conflicts in 12 states and overrides their domestic laws applies to conflicts between different legal systems in a single state because ‘country’ is defined in a.19 as one of several territorial unites in a single state Applies to conflicts involving the laws of states not party to the Convention, whenever those laws are subject of consideration under the Convention. Thus, it will apply to Canadian contracts when they come before the courts of the signatories of the Rome Convention. applies to commercial as well as to consumer and employment contracts and contracts between non-merchants. A.18 reinforces the international character of the rules and the desirability of achieving uniformity in their interpretation and application. The Rome Convention has effect outside the EU, and any European Nation may adopt it, as Finland has done. The New national maritime conflict laws: p.32 The new doctrine: p.32 Conclusions: General advances in the state of conflicts law will not come from the courts, which are weighed down with diverse and heavy work loads. Although doctrinal writings of the past have been replaced in large part by national legislation and international conventions, the profs must continue to refine and publish their theories. II. Topic Two: General Conflict of Laws Theory But even the 4th approach, national conflict laws and international conflict conventions, is not a complete answer. The courts, practitioners and academics require a consistent method and order to apply those laws and conventions when solving a particular conflicts problem. What is called for is a consistent and uniform methodology. I. SOME GENERAL PRINCIPLES OF CONFLICT OF LAWS 1. Substance & Ancillaries v. Formalities (as opposed to substance v. procedure) (p.47 TEXT) Traditionally, matters which were substantive were subject to their own law, even if it was a foreign law. Matter which were deemed procedural were subject to the law of the forum (lex fori). Most authorities start out with the procedural/lex fori rule, but then present so many exceptions and have such difficulty in distinguishing substance from procedure that little remains of the doctrine. This should be replaced by distinguishing between substance and ancillaries, and formalities of the forum court. Furthermore, it is preferable to determine the proper law of each relationship or of each ancillary. Substance: the legal relationships (contracts and torts/delicts) which have a proper law of their own and which proper law is usually not the forum. Ancillaries: the time limitations, cross-defences, rules of evidence, presumptions, burdens of proof, order of proof, etc., which affect or quality the legal relationship. They were classically deemed procedural (and thus of the forum) but, in reality, ancillaries have a proper law of their own, which is usually identical to the proper law of the contract or tort/delict to which they are connected. Formalities of the forum court: are of the forum only and are administrative: the method of drawing up and serving the writ, when, where and how the court sits, how the trial is conducted, who questions the witnesses, whether there is a trial by jury, how foreign law is proven, etc. a) Substance and Procedure – The Unrealistic Distinction The classic substance/procedure dichotomy of the conflict laws was to declare that matters of procedure are governed by the domestic law of the forum. Despite the absolutism of their dicta, the authorities always follow with a general plea of the difficulty in making the substance/procedure distinctions. i.e. “The difficulty in applying this Rule lies in discriminating between rules of procedure and rules of evidence.” And thereafter follows a long discussion of exceptions with respect to witnesses, presumptions, estoppel, set-off and counterclaim, priorities, statutes of limitations, etc. Lord Wilberforce in Miliangos: expresses best the ambivalence of the current UK position on substance and procedure. The dichotomy is accepted but it must be circumvented if it causes injustice. The HoL was able to order the payment of a debt in Swiss francs, as claimed by the creditor, rather than in pounds sterling, which a strict application of UK procedural rules would have mandated, because the proper law of the contract was Swiss, as were the money of account and the money of payment: “though English law (lex fori) prevails as regards procedural matters, it must surely be wrong in principle to allow procedure to affect, detrimentally, the substance of the creditor’s rights. First Restatement: all formalities are governed by the law of the forum. Ancillaries are declared to be subject to the same treatment. Despite the averment of the First Restatement, however, ancillaries do have a proper law of their own. Second Restatement: Breaks the mould and does not attempt to distinguish substance from procedure. Rather, it properly describes procedure as the law with which the forum state has the most significant relationship. s.122: “A court usually applies its own local law rules prescribing how litigation shall be conducted even when it applies the local law rules of another state.” Thus sections of ch.6 which designate the law of the forum as the applicable law in all cases deal with formalities rather than procedure: see examples at p. 52. However, certain procedural rules in Ch.6 a contain exceptions which allow the court to apply a foreign law under given circumstances: “when the substantial rights and duties of the parties would be affected by the determination of the issue (s.125), where another state has “the dominant interest in the question”, and where “the primary purpose of the relevant rules of the state of the otherwise applicable law is to affect decision of the issue rather than to regulate the conduct of the trial.” Conclusion: the Restatement Second does not invoke the procedure/substance dichotomy but invokes the ‘local law of the forum’ which determines the question ‘unless the substantial rights and duties of the parties would be affected’ by the determination of the issue by the law of the forum. This is admirable. National Laws: see p.53ff. Many national laws invoke procedure and substance in varying degrees. Quebec: a.3132: procedure is governed by the law of the court seized of the matter. Fortunately, the role of procedure would seem to be limited because certain issues, which normally might be considered procedural, have been given a proper law of their own. See a.3130 (evidence), 3131 (prescription) and 3133 (arbitration). Rome Convention 1980: Excludes evidence and procedure from its ambit (a.1(2)(h)). It does, nevertheless, include provisions on specific issues traditionally considered procedural. (see p.60) Each is governed by its own proper law. The conflicts rule concerning modes of proof is more flexible: any mode of proof is admissible if acceptable either in the lex fori or the law under which the contract is properly and formally valid, ‘provided that such mode of proof can be administered by the forum.” A reading of the Rome Convention demonstrates that the substance/procedure distinction is no longer of major importance. b) Ancillaries – A Proper Law of their Own Formalities of the forum court are decided by the lex fori, including the preparation of writs and written pleadings and forms and their service in the jurisdiction. Decisions, too, are taken by the forum court in respect of other matters, but the forum court does not necessarily apply the lex fori. Thus, ancillaries (time limitations, presumptions, cross-defences, BoP, etc.) which were traditionally deemed procedural, have a proper law of their own, which may be the foreign law or the lex fori, but usually the law of the subject matter to which they are ancillary. Cross-defences: despite the generalization of many authorities, are not necessarily procedural and are not necessarily subject to the lex fori. Time Limitations: are not necessarily subject to the lex fori, rather, they are rights, each of which has a proper law of its own, usually attached to the right which it prescribes. While the proper law may be a foreign law or may be the lex fori, it is better to start with the generalization that time limits are not of the forum. Burden of Proof rules: have proper laws of their own and are not necessarily subject to the lex fori, even if rebuttable. Damages: damages, including interest (rate and date from which it runs) and currency were historically left to the forum as being procedural. Subsequently, remoteness and heads of damage were deemed substantive and the calculation of damages was deemed procedural. See also Burden of Proof, order of Proof (substantive), conduct of the trial (lex fori) and formalities of the forum court (lex fori), parol evidence rule (proper law of the contract), and statute of frauds (proper law of the contract) at p.64-5. c) Formalities of the Forum Court Include the method whereby a writ is drawn up and served; when, where and how a court sits; whether a civil jury trial may be held; who questions witnesses; etc (p.65). Formalities of the court follow the lex fori and are unconnected to any right or accessory right. The Australian Law Reform Commission referred to this as the “mechanisms of litigation.” The Arrests of Ships Convention (1952) reflects a proper understanding of “procedure” as consisting of the formalities of the forum court. The 3 limitation of shipowners’ liability conventions generally deal with the substance versus formality distinction, as well as the classic substance vs. procedure dichotomy. In conclusion, the substance/procedure distinction must be discarded for 3 principal reasons: 1) because it is difficult to make; 2) because the distinction usually results in a “forum bias”; and 3) because matter procedural are not necessarily of the lex fori. A better distinction is between substance and ancillaries, and formalities of the court. In every case, it would be better is the proper law of each legal relationship (contract or tort/delict) and of each ancillary should be determined individually, by the employment of a consistent methodology. In this way, the forum court may well decide to recognize a foreign law as the proper law in respect of torts (i.e. ship collisions) or contracts (i.e. marine insurance, charterparties, bills of lading) as well as such ancillary matters as time limitations, presumptions and cross defences (set-off, recoupment, compensation and counterclaim), burden of proof and order of proof. All of which ancillaries may or may not have the same proper law as the principal proper law. The forum court should only apply the lex fori if it is the proper law of the legal relationship or ancillary, or in the case of a genuine formality of the forum court system. 2. Renvoi Rejected (p.73 TEXT) Renvoi is the application of the conflict rules of one state by the court of another state, in order to solve a conflict problem. Renvoi is a procedure which seems worthwhile in only a very few cases, where its application is so very arbitrary that its place in the conflict of laws is questioned. Renvoi is specifically excluded by the Rome Convention 1980. Single renvoi: the referral by the forum court to the conflict rules of a foreign state (but not the foreign state’s renvoi rules). Thus the forum court applies the domestic law specified by the foreign conflict rules. If there is a reference back to the forum’s domestic law, this is known as ‘remission.’ If there is a reference on to the domestic law of a third state, this is known as ‘transmission.’ Double Renvoi: is the referral by the forum court to the conflict rules (including the renvoi rules) of a foreign state. Thus the forum court applies the law specified by the foreign conflict rules including the foreign renvoi rules. In the case of double renvoi and remission, it is possible that the forum court will send the case back again, resulting in an endless game of judicial ping-pong. Similarly, once transmission has taken place in the case of double renvoi and the recipient (third) state invokes its conflict rules, the renvoi may go onwards or back again and endless judicial orbiting could ensue. History of Renvoi: see p.74 Purpose: Renvoi was developed to counteract the territorial theory (of J.Story), the citizenship theory (Napoleon and Mancini) and law of the flag in maritime law. These 19th C. theories often resulted in incongruous solutions to conflict problems, with the result that, in many cases, renvoi was chosen as the solution, albeit artificial. Renvoi was adopted by modern theories to overcome occasional absurdities and incongruities of result. However, with the more realistic ‘closest and most real connection’ (‘most significant relationship’) test in the forefront, renvoi is no longer necessary. For example, an early American decision, The Coastwise, used renvoi when the ‘most significant relationship’ test would have reached the same conclusion by a more convincing route. Renvoi, it was argued, would achieve uniformity in conflicts cases, regardless of where a judgement was rendered. In other words, the application of the conflict rules of a foreign state with an interest in the conflict was supposed to result in the same solution that the foreign court would have provided. True uniformity of decisions, however, is difficult to achieve in this manner because renvoi, by its nature, is applied indiscriminately (à la pièce) for a short-term solution. Renvoi was often used as a crutch to obtain an ‘equitable’ or ‘convenient’ result, before the development of the most significant relationship test. Proper, uniform and consistent conflict of law rules, theory and methodology should be applied in order to obtain the just and proper result, not renvoi, which is an indiscriminate and uncontrollable conflict of law tool. Renvoi is an antiquated escape hatch, no longer necessary under modern private international law theory, national conflict statutes and international conflict conventions (all of which, incidentally, usually have escape hatches exceptions based on the closest and most real connection). Renvoi is accepted less and less today. It is nevertheless interesting to see how renvoi has been treated by authorities. First restatement: did not permit renvoi except in cases of foreign law involving title to land or divorce. Second Restatement: rejects renvoi but with 2 exceptions: 1) when the forum’s conflict rules aim to ‘reach the same result’ as would be reached in the other state’s court; or 2) when the forum has no ‘substantial relationship’ to the issues, and when the local law rule would be chosen by all interested states. In other words, renvoi is permitted when there is no real conflict of laws. It would have been better to have rejected renvoi altogether and to have applied the most substantial relationship rule. English Authorities: have usually accepted renvoi, only to qualify their acceptance by explanations, criticisms and restrictions. Thus, Dicey & Morris, and Cheshire & North conclude that English courts have rejected it, except in very limited cases (i.e. essential validity of wills and intestate successions, certain claims regarding moveables and foreign immoveables and some questions of family law). French Authorities: an accepted doctrine according to Pierre Mayer, especially prevalent in matters of succession and divorce. Renvoi is justified on the basis of 1) delegation; 2) subsidiary rules; and 3) coordination. The exceptions provided, however, seem to contradict his whole general theory of renvoi, because they fail to contribute to uniformity of result, which is his aim. Batiffol & Lagarde: accept renvoi as being workable in practice in some cases, although recognizing the theoretical objections to the concept and opposing its general application. They justify it as achieving the goal of international coordination of conflicts rules, and offer 2 solutions to the problem which arises when the conflicts rules to the designated country refer back to the law of the previous country (the ‘ping-pong’ problem). They reject renvoi in areas where the party autonomy principle applies, such as contracts and matrimonial regimes. However, this theory does not seem workable since they propose no uniform, consistent or logical application. See others: at p.79ff UNCITRAL Model Law 1985: p.80 The 1955 Hague Convention on Renvoi: p.81 Rome Convention: p.81 The Convention on Nuclear Ships (p.81) National Laws: p.82ff CCQ: rejects renvoi at 3080. Renvoi is the reference by the court of one state to the conflict of law rules of another state. It should not be confused with the specific choice by the parties of the conflict of law rules to be applied to a contract. The Rome Convention 1980, for example, at art.15 does not exclude the choice of conflict rules by the parties to a contract. Choice of law rules, however, should not be assumed to be part of a general reference in a contract to a state’s laws. The choice of conflict rules in a contract should be express and should exclude renvoi to avoid all the problems that renvoi entails. See example at p.86. Renvoi and Maritime Law: One suggested application of renvoi to maritime law is in the sale of ships, when the ship lie within the jurisdiction of another state. Three authorities have opined in respect to title to moveables that it could be important for the forum, through renvoi, to ensure that the result it reaches will accord with what would be obtained by a court in the foreign state. What the authorities should have held is that the proper law of the registration of title is the law of the place of the ship’s registry, but that the proper law of the agreement to transfer the title may be some other law. This will satisfy the seeming necessity to reconcile the laws of the 2 jurisdictions. They might also have suggested that this is a case of forum non conveniens and the forum state should stay the action, sending it to the place of the proper law for decision. Maritime Law Decisions on Renvoi: See cases at 88ff. The decisions illustrate that renvoi, when used, has for its intention the avoidance of an unpleasant result, but is carried out without any basic and consistent application or methodology. Conclusions: Renvoi has never been a fully understood or developed principle. It has had diverse (but rare) uses and many exceptions. It has been the subject of many definitions and as a principle has no uniform body of doctrine, reported cases or legislation. Renvoi is therefore a rare exception which cannot be applied with any legal consistency. Renvoi has been used to counter incongruities arising from the application of the 19th C territorial rules, the nationalistic ‘citizen theory’ of Napoleon and Mancini and the prime maritime conflict rule of the past – the law of the flag. It is on occasion used today to avoid the oppressive pressures of the lex fori. Renvoi is no longer necessary when the most significant relationship test is used to assist in determining the proper law. Renvoi is quite unnecessary in a consistent methodology, used to reach the properly applicable law. Most cases which have been solved by renvoi would have been better solved by the closest and most real connection test or by forum non conveniens. Reference in a contract to the law and conflict of law rules of a particular state is not renvoi, and is valid unless the public order/policy or mandatory rules of the otherwise proper law are not being evaded. Renvoi should not be used as a means to apply what the forum court may deem to be an equitable solution. Equity should not be the principal role of renvoi or even of conflicts of law. Justice can be obtained in a conflicts case through proper conflict rules applied in a consistent methodology. The judicious use of forum non conveniens is a part of that methodology and will usually avoid the need to invoke renvoi. Renvoi is a short-term conflict rule which abandons the whole rational philosophy of private international law. It is a virtually uncontrollable, indiscriminate, solution to a single problem which in turn places any rational system of conflict of laws at risk, if it does not abandon it completely. Therefore, renvoi has no place in the conflicts of law. 3. Public Order/Policy (p.99 TEXT) Domestic public order: concept of civilian jurisdictions and consists of high standards of morality and social conduct in a civilized society. It is rarely precisely defined, rather, it is usually invoked in general terms in a basic article of a state’s civil code. Domestic public policy: concept of common law jurisdictions and consists of fundamental principles of natural justice found in a state’s constitution, bill of rights, laws, regulations, precedents and accepted custom. Public policy is usually deemed less inclusive than public order, but in practice plays a similar role. Public order (ordre public) has been translated on occasion as ‘public policy.’ This has unified the law between the common law and the civil law, at the expense of accuracy. domestic public order/policy of the forum is different from international public order/policy of the forum. For example, a bigamous marriage would not be permitted under the domestic public order of most Western countries. Nevertheless, once the second marriage has been validly (formally and materially) carried out in some Eastern country, the Western state would not consider the second marriage contrary to international public order/policy. This is because, in the conflict of laws, it is the forum’s international public order/policy which is applied and, under that public order, the foreign bigamous marriage, which is valid under the law of the foreign state, is not offensive. Mandatory rules: compulsory rules of law found in applicable international conventions or national statutes, which cannot be contracted out of. They are usually found in a business or commercial context and sometimes override an express choice of some other law by the parties to a contract. Mandatory rules have virtually the same authority in domestic law as public o/p, but have a different and lesser role in the conflict of laws, as in the Rome Convention. Mandatory rules might also be defined as binding rules of law imposed by legislation or international convention. Mandatory rules (overriding statutes) have very appropriately been described as ‘crystallized rules of public policy.” Obligatory forum court statutes: mandatory national statutes (or international conventions) which oblige a particular court, whenever hearing any case on the subject referred to in that statute, to apply that statute (i.e. UK Merchant Shipping Act 1979: makes the Convention apply whenever any shipowners’ limitation proceedings are taken in an English court in respect to an incident arising anywhere in the world). Thus, the UK Admiralty Court must apply the 1976 Convention when limitation proceedings are brought before it, even in the case of a Canadian and a US ship colliding in Canadian or US waters, although neither country has adopted the 1976 Convention. What distinguishes obligatory forum court statutes from public order or mandatory rules is that obligatory forum court statutes are obligatorily applied by the forum court, whenever they come before that court, rather than because of any connecting factor with the forum. Most authorities have not distinguished obligatory forum court statutes from public order or mandatory rules. Most authorities have not distinguished obligatory forum statutes from public order or mandatory rules. Obligatory forum court statutes should have no place in any system of international law. Fortunately, they are rare and can be overcome in those jurisdictions which have adopted the principle of forum non conveniens. Civilian Public Order in the Conflict of Laws (p.103) CC: a.6 provides the principal stipulation as to ordre public in French domestic law: No one may, by private agreement, contravene the laws of public order and good morals. To Mayer, internal French public order consists of basic standards of morality and justice, while in Pr. International law, public order was extended to the protection of principles of ‘natural law’, the preservation of the political and social foundations of French civilization, and the safeguarding of certain legislative policies. Batiffol & Lagarde: Distinguish between domestic public order, consisting of laws which parties may not derogate by contract, and international public order, which opposes the application in France of a foreign and repugnant law that would otherwise apply under French conflicts rules. They consider that public order authorizes France courts to disregard foreign laws deemed incompatible with order public, even when such laws are rendered applicable by treaties. According to Loussouarn & Bourel, see public order in pr. International law as a mechanism controlling the application of the otherwise applicable foreign law, quite distinct from domestic public policy. International public order embraces both Western notions of morality and justice, and also certain moral, social and economic purposes flowing from French legislative policies, and directed at furthering vital interests of French civilization. Public order defends the French national legal system and French civilization against what are deemed to be intolerable foreign laws and practices. The distinction of the Rome Convention between mandatory rules of the forum (a.7(2)) and mandatory rules of a closely connected law (a.7(1)) was strongly influenced by French writers. Quebec: domestic public order @ a.8: no person may renounce the exercise of his civil rights, except to the extent consistent with public order. See also a.3081 and 3155(5). See also PQ and Louisiana @ p.106. Common Law Public Policy in the Conflict of Laws English Law: Scarman, J. in Re Fuld’s Estate states: “Whether the point be described in the language of public policy, discretion, or the conscience of the court, an English Court will refuse to apply a law which outrages its sense of justice or decency. But before it exercise such power it must consider the relevant foreign law as a whole. Dicey & Morris write that English courts will not enforce a foreign law which would be inconsistent with the fundamental public policy of English law. Cheshire & North emphasise that the meaning of public policy is, and should be, narrower in international than in domestic law. To them public policy may be invoked in England as a basis for refusing to recognize a foreign law (I) where its enforcement would offend some moral, social or economic principle sacrosanct in English eyes; or (ii) would offend some feature of internal policy. While in the former case, the foreign law will be unenforceable in all actions, in the latter situation, the law will be unenforceable only if the governing law is English. The UK Law Commission’s report on Choice of Law in Tort and Delict 1990, a s.4(1) recognizes that international public policy of the forum differs from domestic public policy of the forum. Canadian common law authorities: see p.110. Australian Authorities: see p.111. International Public Order/Policy of the Forum and Domestic Public Order/Policy of the Proper Law International Public Order/Policy of the Forum: The original concept of public order/policy was originally tied to the law of the forum in both common law and civil law jurisdictions. The doctrine as a device whereby courts ensured that its local ideas of justice, morality and civilized society prevailed over alien laws. The modern concept of public order/policy of the forum in conflict of laws, however, is the forum’s international public order/policy. This more limited concept, unlike the older one, does not require foreign laws to be ignored or struck down merely because they differ from local rules or ideas. Domestic Public Order/Policy of the Proper Law: If one recognizes a foreign law as the proper law, then logically one must also recognize the public order/policy of that foreign proper law as being part and parcel of that law. This was, nevertheless, a difficult concept for some courts to stomach and, in consequence, domestic public order/policy of the foreign proper law was often introduced into the system only to prevent some illegality under the foreign law of the place of performance of a contract. In such cases, the foreign law so upheld was frequently not deemed public order policy, but referred to as merely a law intended to protect some economic, social or administrative interest or purpose of the foreign state. Having the forum court take account of foreign legalities as part of the forum’s international public order/policy thus resulted in the partial, if indirect and unacknowledged, recognition of foreign public order/policy in some contract conflict cases in traditional common law. see 2 cases at p.114. A truly ‘international’ (i.e. universal) public policy of a foreign state may therefore be upheld at common law because of its similarity to the local public order/policy of the forum (see Lamenda at p.114). On the other hand, a purely domestic foreign public policy will seldom, if ever, be recognized. The decision in Man (Sugar) v. Haryanto (No.2) is unfortunate as it refuses to acknowledge that where the foreign law is the proper law, the foreign public policy – however ‘purely domestic’ it may be – is part and parcel of the foreign law and as such entitled to recognition and enforcement, unless it directly confronts with the forum’s international public order/policy. Recognition of out-of-state fundamental policy – US: p.115. Recognition of the domestic public policy of the proper law is part and parcel of American government interest analysis. Principles laid down in Barnes Group (p.115) show an effort by some US courts to recognize the ‘fundamental policy’ of the more ‘interested’ US state, when confronted with a ‘serious’ conflict between laws of 2 or more American states. The traditional concept of public policy, however, is submerged under the interest-analysis vocabulary of the Restatement Second. Moreover, it is unclear whether these rules apply to international as opposed to interstate conflicts. The Rome Convention 1980 and Public Order/Policy It permits refusal of the rule of law of any country but only if its application is manifestly incompatible with the public o/p of the forum (a.16). See p.117 for more info. Public Policy in the Conflict of Laws – US The concept of public policy in American conflict law has been so enmeshed with interest analysis, with domestic public policy and at best with conflicts between US states, that it is dealt with as a theory apart from the theory and practice of civilian and other CL jurisdictions. The traditional American understanding has been expounded by Story: “There is one exception to the rule as to the universal validity of contracts, which is, that no nation is bound to recognize or enforce any contracts which are injurious to its own interests, or to those of its own subjects.” Story associated his public policy doctrine with 3 types of cases: 1) contracts which are in evasion or fraud of the laws of a particular country; 2) contracts against good morals or religion or public rights; 3) contracts opposed to the national policy and institutions. See also Cardozo J. in Loucks v. Standard Oil: The courts are not free to enforce a foreign right at the pleasure of the judges, to suit the individual notion of expediency or fairness. They do not close their doors unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal. Cardozo was concerned that the narrow American concepts of justice at that time would be used to thwart broad foreign rights and principles, but his view was deemed too liberal in Mertz v. Mertz where it was held that public policy could only be found in the constitution, statutes and judicial decisions or, in other words, the positive law of the forum. There has been a slow movement in American Jurisprudence towards a better understanding of public policy and away from associating it with the internal public policy of states. (see cases at p.119) Restatement second: Along with the principle of ‘most significant relationship’, is found the principle of interests and policies. S.6 specifically invokes ‘policies of the forum, policies of other interested states and the relative interests of these states and policies underlying the particular field of law. S.187(2) limits the law that the parties may agree to apply in a contract when the chosen law is contrary to a “fundamental policy” of a state which has a “materially greater interest.” Similarly, s.90 and 117 invoke public policy of the forum in respect to jurisdiction and recognition of foreign judgements. As noted in the Restatement Second and in Kilberg v. Northeast Airlines, there is a relationship between the application of public policy and governmental interest analysis. The tendency of American courts to subsume the classic concept of public policy under the umbrella of interest analysis is largely attributable to the fact that so many American conflicts cases involve interstate rather than international situations. Governmental or state interests appear not only to include, but to extend well beyond, public policy considerations in the traditional sense. Interest analysis, in other words, seems to have absorbed public policy in American conflict of laws theory, although some authorities see public policy as interfering with interest analysis. Equity (favour of justice for the weaker party) is a major factor of public policy. Despite the pervasive influence of interest analysis on public policy in the US, it should be remembered that the American courts will, on occasion, apply public policy in the classic sense, although it is usually domestic public policy rather than international public policy. Mandatory Rules: Just as the definition of public o/p has broadened in the present century, so has the concept of mandatory rules taken on importance. The Hague Rules 1924, the Visby Rules 1968, the Hamburg rules 1978, the Multimodal Convention 1980 and the Terminal Operators Convention 1991 establish regulations defining the rights and responsibilities, immunities and liabilities of international carriers of goods. These sets of rules are examples of mandatory rules, being intended to be compulsory norms governing international carriage of goods by the nations of the world. Acceptance of mandatory rules in the conflict of laws may be seen in the Rome Convention 1980, establishing standards governing the interpretation and enforcement of contracts involving at least one party in a EC country. CCQ invokes the mandatory rules of the forum by implication at a.3076. It then expressly mentions foreign mandatory rules in a.3111 on the content of juridical acts (contracts). There are also provisions designed to prohibit evasion of the mandatory rules of the law of the consumer’s place of residence in respect of consumer contracts (a.3117) and of the worker’s habitual place of work in respect of employment contracts (a.3118). The courts have been slow to recognize the compulsory character of some sets of international mandatory rules, out of a strong respect for party autonomy in contract, coupled with a failure to grasp the utility of compulsory common standards and rules in international shipping. See Vita Food Products at p.125. Even if one will not accept the mandatory nature of international conventions such as the Hague Rules, they should at least be accepted as a very strong contact in the choice of the proper law of the k. International mandatory rules provide a strong indication as to the proper law of the contract in a conflicts case. In other words, the very international and obligatory character of the Hague Rules at the time the parties contracted, militated in favour of their great significance as a contact in identifying the proper law of an international shipment from a jurisdiction that had adopted them. Mandatory rules are part of the applicable foreign proper law, and should be applied whenever a court decides that foreign law is the proper law. To date, unfortunately, courts in the UK, France and Canada have been reticent to apply foreign mandatory rules, even when they form part of the putative proper law. A.7(1) of the Rome Convention permits contracting states to apply the mandatory rules of the law of another country with which the situation has a close connection. A.3079 of the CCQ is to the same effect. It is to be hoped that states will recognize the important role played by mandatory rules on controlling international commerce and that, in due course, mandatory rules will be recognized in the courts and legislatures of the world. The Rome Convention 1980 and Mandatory Rules Under the Rome Convention, the ‘law applicable’ to a contract, as determined principally by a.3 and 4, includes the mandatory rules of that law, although there is no precise wording to that effect in the Convention. Various provisions of the Rome Convention do, however, explicitly recognize mandatory rules of certain types, safeguarding them against evasive choice of law clauses and, in some cases, even against the law applicable absent any choice. See specific examples at p.128. Although the basic choice of law rules of the Convention at a.3 provides that the contract is governed by the law expressly or impliedly chosen by the parties, a.3(3) ensures that local mandatory rules cannot be contracted out by simply choosing a foreign law to govern a contract where all the elements of the contract apart from that choice are connected with the domestic law. For example, the UK unfair Contract Terms Act 1977 cannot be contracted out of by merely choosing another system of law, if all other contacts are with the UK. A.3(3) is thus an evasion/fraude à la loi provision which overrides express choice of foreign law when a mandatory rule of the sole connected law is applicable. See other special rules at p.129. a.7(1) contemplates the mandatory rules of a third country and not of the forum or of the applicable law. It has 3 conditions for its application: 1) there must be a close connections of the situation with the state to which the mandatory law belongs; 2) the law must be mandatory no matter what law is applied to the contract; and 3) the court is still not obliged to apply the mandatory rules, but shall give consideration to their nature and purpose and to the consequences of their application and non-application. Thus, the evasion/fraude à la loi character of a.7(1) prevents evasion of mandatory rules of a third state which has a close connection to the contract. However, reservations to this provision may prevent English courts from applying the principle of evasion which already existed (implicitly if not explicitly) in the CL. A.7(2) guarantees that the forum’s applicable mandatory rules may be applied regardless of the law otherwise applicable. Obligatory Forum Court Statutes These are a particular form of mandatory rules of the forum. They are statutes (or international conventions) which declare themselves to be compulsory whenever proceedings instituted under the statute are taken in a particular court. It matters not how closely connected the case may be to any other jurisdiction; the statute applies merely because the proceedings are taken in the court concerned. Thus, under the UK Merchant Shipping Act, the Convention imposes itself on all limitation proceedings taken in a UK court, no matter where the ship collision may have arisen. It matters not how closely connected the case may be to any other jurisdiction; the statute applies merely because the proceedings are taken in the court concerned. This type of statutory lex fori could potentially short-circuit the normal operation of private international law, arbitrarily overriding all other competing laws, even if these latter have much stronger contacts with the circumstances in question. Such statutes may have been intended to contribute indirectly to the harmonization of international admiralty law, but the means is questionable. The only method whereby a court may avoid the imposition of such a statute would be to invoke forum non conveniens. Legislatures should not adopt obligatory forum court statutes. Conclusions The forum applies its international definition of public order/policy, not its domestic notion, in respect of conflict of laws the domestic public o/p of the putative foreign proper law should be applied as part of the proper law. Mandatory rules of the putative foreign proper law should also be recognized, while legislators should avoid creating obligatory forum court statutes. The place of public o/p and mandatory rules in the solution of a conflict of law problem is best found in a consistent methodology to solve all conflicts problems. 4. Evasion/Fraude à la loi (p.139 TEXT) Evasion of the law/fraude à la loi is the intentional and improper manipulation of contacts (connecting factors) in order (i) to avoid invalidity under the principle of public o/p; (ii) to avoid a mandatorily applicable law; or (iii) to avoid the most appropriate forum. Avoidance of the law is the antithesis of evasion/fraude à la loi. Avoidance is the acceptable arrangement of connecting factors for a legitimate purpose in an agreement, usually between 2 equally bargaining parties, in order to select an applicable law or jurisdiction. Evasion of the law/fraude à la loi can be invoked in 3 main branches of conflict of laws: (i) choice of law, (ii) choice of jurisdiction; and (iii) recognition of foreign judgments. Evasion/fraude may be the act of one person (in a contract of adhesion or standard form contract such as a bill of lading) or of 2 persons (when both parties to a divorce travel to another jurisdiction to avoid the applicable imperative law), or of two parties against a third party (in the case of the shipper and carrier so contracting that the normal law of estoppel benefiting a third party consignee of a bill of lading is not applicable). Evasion/fraude always involves (i) the international public o/p of the forum, or (ii) the domestic public o/p of the properly applicable law, or (iii) a mandatory rule of the properly applicable law; or (iv) the appropriate jurisdiction. evasion/fraude may occur at the time of the contract or after it (as in the case of forum shopping). E/F must be INTENTIONAL and IMPROPER Evasion is improperly doing indirectly, what one may not do directly, and is an essential part of any rational conflicts theory. Civil Law –Fraude à la loi Three elements: There must be a conscious manipulation of conflict rules by a modification of a connecting factor. There must be a subjective intention to improperly circumvent the law and there must be a law that is evaded. See example at p.142. Fraude has roots in the Latin principle: fraus omnia corrumpit: fraud corrupts all. The sanction is nullity of the resulting contract or juridical act, or of an offending clause, at least as regards the party responsible for the evasion. One justification for enforcing such sanctions is the respect for, and adherence to, domestic civil law. In the example above, if all the contractual links of a transaction are with France and the parties are nevertheless able to incorporate a foreign law by reference, despite MANDATORY French provisions, the imperative nature of French law is undermined. Traditionally, French courts do not invoke fraude in the case of evasion of a mandatory foreign law. This is not realistic: suppose a BoL which is issued in France (where the Hague/Visby Rules are mandatory) contains a clause to the effect that a lower limit on liability (than permitted by the Rules) will apply. The BoL is then intentionally brought for enforcement in the courts of a foreign state to which the Rules do not apply. IT should be evident to the forum court that to uphold the BoL would be in effect to assist in the evasion of the mandatory foreign law (the law of France, the place of issuance of the BoL and of the shipment – in effect the properly applicable law). Fortunately, this is changing. The trend is strongest where one foreign law has been avoided in favour of another foreign law. The Rome Convention has come into force in France: it’s a.3(3), 7(1) and 16 will prevent the evasion of foreign mandatory rules and international public order of the forum in at least the most flagrant cases. Forum shopping is often looked upon with disfavour in the civil law and has been described as trying to obtain indirectly what may not be obtained directly. One response to forum shopping is non-recognition of the resulting foreign judgement, which a tacit recognition that forum shopping is a branch of fraude. However, where parties of equal negotiating strength agree to a clause calling for suit in another jurisdiction as a judicial convention to both, and not to evade a law mandatorily applicable to either party, then this avoidance should not be considered fraude. a.3079 CCQ invokes mandatory rules of another country and thus provides a basis for refusal of an express choice of law on the grounds of fraude. The use of 3079 in case of fraude would depend on whether preventing the law of another state from being evaded through the Quebec courts would qualify as ‘legitimate and manifestly preponderant interests’ of that state, in the circumstances of the case. Evasion is specifically prohibited in consumer (a.3117) and employment contracts (3118) and non-marine insurance (a. 3119). Common Law – Evasion Either the doctrine of evasion of the law is said not to exist under the traditional common law or it receives little attention. This is understandable considering the subjective basis of evasion: there must be an intention to manipulate a connecting factor in order to obtain an improper result. CL contracts, however, have an objective basis. To decide whether a contract is valid in the CL, one looks objectively at the actual words of the contract, not subjectively at their motives at the time of contracting. Other reasons for the minor role of evasion in the CL: There is a tradition of CL judges to construe statutes strictly and enforce those obligations which come within the letter of the statute. The CL also insists that exceptions to pr. International law rules should also be made as seldom as possible, that out of fidelity to the rule of law, judges should limit their influence on the development of law. Furthermore, the CL insists that acts and intentions (not motives) should be the elements of legal liability and that the evasion doctrine is, in any event, contrary to the English ideal of the connection between liberty and law. In particular, evasion of the law, in its widest application, requires the recognition of foreign mandatory rules and of international public o/p. The English courts have been reluctant to recognize these in the past, especially foreign penal and revenue laws. Despite the foregoing, the evasion doctrine exists in the CL, but unfortunately, its application by the courts is rare and lacks consistency. US: it has been said that there is no general doctrine of evasion in the US, although examples of evasion abound. Knauth noted that “our courts regard evasive clauses as null and void.” Rabel has said that public policy fulfils the role of the doctrine of evasion. Some American authorities recognize the doctrine of evasion but only in respect of American law. Avoidance and evasion differentiated in dictum of Holmes J. in Bullen v. Wisconsin. The Restatement Second leaves open the door very slightly to the doctrine of evasion at a.187(2)(b). The forum is thus left with the task of determining what would be a ‘fundamental policy’ and a ‘materially greater interest.’ While s.187(2)(b) does not expressly mention evasion, it does provide the forum with the means of substituting another law for a law which would be contrary to a fundamental policy. S.187(2)(a) requires the state of the parties’ expressly chosen law to have a substantial relationship to the parties or the transaction. In other words, the express choice cannot evade a law most closely connected to the appropriate governmental interest. One may also add that it is difficult to evade the law under governmental interest analysis, because of the right of the court to intervene and impose what it believes is the ‘fundamental policy’ of the appropriate government as to the proper law. Evasion in the US is also closely connected to unconscionability and equity which pervade US interest analysis. Thus, in Bremen and Zapata, the US Supreme Court ruled that forum selection clauses may not be unreasonable and unjust, nor may they result in fraud or overreaching. England: Prior to the Contracts Act, it was generally agreed that the doctrine of evasion did not exist. While evasion may not have been expressly invoked, results equivalent to those produced by the doctrine did arise, notably through the effect of English public policy: “English courts will refuse to enforce any contract which they result as contrary to English public policy. They will refuse to do so even though the contract is governed by a foreign law under which it is lawful. Evasion of an English mandatory rule could even cause an English court to refuse to apply the foreign law expressly chosen by the parties, if the closest connection was with English law. Evasion and foreign public policy: AN English court would not directly refuse to uphold a contract because it violated the public policy of a foreign state. It must be English public policy which has been offended. Nevertheless, English public policy was invoked to prevent the enforcement in England of contracts the performance of which would have directly violated the laws of friendly foreign states, even where English law had been chosen or was arguable the proper law of the contract. In more recent times, some English courts have even recognized foreign mandatory rules. Results equivalent to those obtainable through the application of an evasion doctrine were also made possible through the English courts’ acceptance of Vita Foods. In that case, Lord Wright expounded the important principle that contracting parties are free to choose the governing law, as long as the intention expressed is bona fide and the law chosen is not against public policy. A number of authorities have found that bona fide should mean that there must not have been evasion of a mandatory law. One English author, JJ Fawcett, just prior to England’s adherence to the Rome Convention, recognized the problem caused by evasion of the law and referred to the ‘ad hoc’ approach of the then English law. He noted that English practice was to rely on statutes to prevent evasion (i.e. the Unfair Contract Terms Act 1977 and the Carriage of Goods by Sea Act 1971), and he called for some principle to deal with cases of evasion where there is unfairness and in cases where the national interests is affected. He called for the adoption of the continental concept of mandatory rules as the best way to take account of unfairness and of the national interest in marriage and contract cases of evasion. Fawcett approvingly noted a.3(3), 5,6, 7 (which support the doctrine of evasion) of the Rome Convention but he did not criticize the English Reservation with respect to a.7(1). He thus gave support for the principle that: “The application of a foreign law would be subject to the proviso that this is without prejudice to the application of rules of English law which are mandatory, i.e. rules of such socio-economic importance that they should apply regardless of the wishes or actions of the parties. In this way, evasion of the law can be prevented in those cases in which it is objectionable, but disregarded in those cases in which it is not.” Canada: doctrine of evasion has been deemed acceptable in Canada, while at least six Canadian judgments have accepted the ‘bona fide and legal’ requirements of the English CL for an express choice of law, as in Vita Foods: Proper law must not have been chosen to evade a mandatory provision of the law with which the contract has its closest and most real connection. The consequences of the jurisprudence is that at least with respect to contracts, the evasion doctrine, as it existed in contract law up to 1990 is being applied in Canadian CL courts. Canada is not a party to the Rome Convention 1980. “No court should give effect to a choice of law clause if the parties intended it to apply solely to avoid the mandatory provisions of the system of law with which the transaction had its most substantial and real connection. The onus is on the person seeking to uphold the choice. Australia: see p.152ff Examples of Evasion/Fraud and Avoidance – Maritime Law Taking steps so that one law is applicable rather than another can be proper or improper, acceptable or unacceptable, much like tax avoidance, which it within the law, and tax evasion, which is not. Evasion/fraude is the term best used to describe improper circumvention of the law and avoidance is the term for acceptable circumvention. Contracts: Refusal to recognize to a particular juridical act because of evasion/fraude is a valid and important constituent part of conflicts theory and practice. Most conflicts theory also recognize the right of the parties to expressly choose the proper law of the k. But, the parties’ intention must be (i) bona fide; (ii) the law chosen must not be contrary to public policy; (iii) nor contrary to an applicable mandatory law. Charterparties: see p.155 Bills of Lading: Most BoL clauses which invoke a carriage of goods by sea law other than the mandatory applicable Hague or Hague/Visby Rules of the place of shipment, are an evasion/fraude, of the package/kilo limitation of the carrier, unless a higher limit of responsibility of the carrier is invoke. The rationale is that the Rules are mandatory, while the BoL is a standard form contract, not entered into freely. Rather, it is prepared and signed only by one party and is usually issued after the ship sails. Sale of a Ship: p.156 Marine Insurance Policies: Some marine insurance clauses promote evasion of the law because they stipulate a law with little relation to the assured object or the risk, thus circumventing the properly applicable law of the contract. Such clauses are usually unnecessarily favourable to the insurer and strongly unfavourable to the assured. Although an insurance policy is a standard form contract, it is not always drawn up by the insurer alone, except in life and non-commercial insurance. In Commercial and marine insurance, the assured is represented by brokers or experienced staff, so that the contract is note necessarily unfavourable to the assured. Evasion in such cases cannot be invoked, unless it was carried out by both parties to the detriment of a third party. The restatement Second limits the choice of the law by the parties only in the cases of life, fire, surety or casualty insurance contracts. An underwriter may strongly argue that the choice of a certain jurisdiction was not evasion because of the acknowledged expertise and skill of the market there, with its brokers, agents, attorneys and courts, which benefit all parties. Floating Law Clauses: p.157: Allow one party to a contract (i.e. an insurance contract) to choose the applicable law after the event. Hire of Seamen: p.158 Flags of Convenience: p.158: used to be seen as avoidance, now is evasion because the flag state has neither control over, nor a genuine link with the shipowner. The result is that there is considerable flag shopping (the choosing of flag states which favour the shipowner in questions of crew pay, crew comfort and safety, taxes, and ship safety). Lifting the corporate veil: Evidence that flags of convenience are deemed to be evasion of the law is seen in the modern attitudes of the courts which ‘lift’ the corporate veil (to determine the true control or genuine link) or ‘pierce’ the corporate veil (to find the shareholders responsible for the liabilities of the company). Amiables Compositeurs: p.160 Choice of jurisdiction (“Courts of Convenience) Jurisdiction clauses in charterparties: not evasion: p.160 Jurisdiction clauses in towage contracts: p. 160 Jurisdiction clauses in bills of lading: A jurisdiction clause in a BoL which calls for suit in a place which has no real connection to the place of the contract or the ports of loading or discharge is usually an evasion of the jurisdiction, particularly when favourable to the carrier who has drawn up the BoL. Such clauses are especially questionable when the jurisdiction is one which would not normally apply to the properly applicable law of the contract. In The Morvikem, the HoL held that a clause in a BoL invoking Netherlands law in a shipment from England to the Netherlands Antilles was void as relieving the carrier of responsibility, contrary to a.3(8) of the Schedule to the UK Carriage of Goods by Sea Act 1971, the UK version of the Hague/Visby Rules. The jurisdiction provision of the same clause, calling for suit in the Netherlands was also void for the same reasons. Lloyd’s Standard Form: p: 162 Arbitration clauses: p.162 Forum shopping – maritime liens: p.163. Forum shopping – limitation: p.163: forum shopping in order to obtain a higher limitation fund is common practice and should be opposed. See Swibon: “Applying the Korean limitation will discourage claimant from forum shopping. Perhaps if claimants had believed there was no advantage to filing a claim here, this case would be in Korean courts, clearly the optimum forum from the standpoint of judicial economy.” Floating jurisdiction clauses: p.164 Passenger tickets: p.164: Forum selection clauses in US ship passenger tickets are not evasion of the law unless it can be shown that they are unreasonable and unjust, or they result from fraud or overreaching, or that their enforcement would contravene a strong public policy of the forum. Recognition of foreign judgments and jurisdiction Evasion/fraude can also be invoked to prevent a foreign judgement from being recognized: a) when the judgement was based on a law chosen as a result of an evident case of fraude/evasion; b) when the judgement was rendered as the result of a choice of jurisdiction arrived at through evasion/fraude. See French examples at p.166 The Rome Convention 1980 – Mandatory Rules and Public Order The Rome Convention applies to the whole gamut of mandatory rules and public order with few exceptions and nuances, so that evasion/fraude is impliedly and even expressly prohibited in many cases. Mandatory Rules are dealt with in a peculiar fashion in three general articles: a.3(3), 7(1) and 7(2), as well as in three more particular provisions: (a.5(2), 6(1) and 9(6)). a.3(3) is an exception to the freedom of choice of law provisions of 3(1). It effectively prohibits the parties to a contract from choosing the law of one country. Instead, it imposes the mandatory rules of another country where all the other elements at the time of the choice are connected with that country, Mandatory rules are defined under a.3(3) as rules which may not be contracted out of. i.e. the UK Unfair Contract Terms Act 1977 cannot be contracted out of by merely choosing another system of law, if all other contacts in the situation are with the UK. A.3(3) is thus an evasion/fraude provision, which overrides an express choice of law when a local mandatory rule of the sole connected law is applicable. a7(1) allows the Court, in its discretion to give effect to a mandatory rule of a third, closely connected country (a country which is neither the forum state nor the country of the putative proper law), even where there are elements connecting the contract with one or both of those countries. This has been reserved by the UK, Germany, Luxembourg and Ireland. Three conditions: 1) there must be a close connections of the situation with the state to which the mandatory law belongs; 2) the law must be mandatory no matter what law is applied to the contract; and 3) the court is still not obliged to apply the mandatory rules, but shall give consideration to their nature and purpose and to the consequences of their application and non-application. Thus, this prevents evasion of international mandatory rules of a third state. a.7(2) upholds the mandatory application of the rules of the forum, regardless of the law otherwise applicable. These include obligatory forum court statutes such as the UK version of the Limitation of Liability for Maritime Claims Convention 1976. a. 5(2): specifically makes applicable certain mandatory consumer laws of the consumer’s habitual residence, despite a contrary express choice of law in a consumer contract. This is an anti evasion/fraude measure. a.6(1): has as its purpose the protection of employees in their contracts against express choice clauses in employment contracts. a9(6): protects against evasion of the mandatory rules of the situs of IM property. a. 16 is the public o/p provision inherent in any system of conflict of laws. It permits refusal of the law of any country but only if its application is manifestly incompatible with the public o/p of the forum. Evasion/fraude can be counteracted by invoking public o/p of the forum (intended here, of course, is the international public order/p of the forum)/ a.21: means that Rome Convention does not affect the operation and mandatory force of the Hague Rules, the Hague/Visby Rules, the Hamburg Rules and the Multimodal Convention in their application to the carriage of goods by sea. The Rome Convention, by its provisions on mandatory rules and public policy, enshrines the principle of evasion/fraude because these provisions require the recognition of the mandatory rules of the properly applicable law and the international public o/p of the forum. Conclusion Evasion/Fraude is an exception to the otherwise valid choice of the proper law and may also be invoked in cases of choice of jurisdiction and recognition of foreign judgments. Evasion/Fraude is the intentional manipulation of connecting factors in order to improperly circumvent the mandatorily applicable law of a juridical act or to sidestep applicable public policy or to elude the most appropriate jurisdiction. It can also result in a forum court justifiably refusing to recognize a foreign judgement as having been reached improperly. E/F depends on the facts in each case. Manipulation of connecting factors equivalent to evasion is most likely to occur wherever there are unequal bargaining positions, as in contracts of adhesion (ship passenger tickets) or in standard form contracts (bills of lading, insurance contracts). In general, it can be said that choice of law clauses and forum selection clauses may lead to E/F if they were not freely bargained for and if they create additional expense for one party or deny one party a remedy or defence it would normally have. Avoidance is the acceptable arrangement of connecting factors for a legitimate purpose in an agreement, usually between 2 equal bargaining parties, in order to select an applicable law or jurisdiction. Whether there has been E/F should be considered whenever the proper law is being determined in a conflict of law problem and in every case of recognition of a foreign judgement. II. A METHODOLOGY Even the fourth approach, national conflict laws and international conflict conventions, is not a complete answer. The courts, practitioners and academics require a consistent method and order to apply those laws and conventions when solving a particular conflicts problem. Innovations of the Methodology: rejection of single rules or single themes or multiple, all-embracing rules Rejection if the distinction based on procedure and substance: only formalities of the court are of the lex fori. On the other hand, foreign remedies, time limitations, presumptions, etc. can and may be recognized as soon as their proper law has been established Rejection of the distinction based on right and remedy Rejection of renvoi International public order/p and mandatory rules are defined Public o/p and mandatory rules are connected to, and form part of, the theory of evasion/fraude. One must understand the alternative consequences of the choice of law faced in each conflict situation Express choice of law in contract must be bona fide and legal; otherwise, one turns to the most significant relationship or the closest and most real connection as the next step. Implied choice is ignored. Public o/p is distinguished from interest analysis and equity. The Canadian and English tort rules of actionable and not justifiable and double actionability, respectively, are shown to be merely excessive public policy. Depecage is used, but usually to divide the problem into many parts rather than 2. A ship collision could result in the necessity of discovering the proper law of seven or eight contracts or torts or ancillaries resulting from the collision. The properly applicable law of the tort or the contract or of the ancillary is sought, in every case, through the methodology. The use of Forum Non Conveniens is emphasized as a possible final step in the methodology. III. QUICK PROCESSING OF A CHOICE OF LAW PROBLEM 1. Describe the facts of the conflict problem 2. Categorize the conflict: a) Is it a question of: i) choice of law ii) choice of jurisdiction iii) recognition of a foreign judgement iv) a multiple of the above b) Is it a question of: i) contract ii) tort (delict) iii) an ancillary question iv) multiple of the above c) What laws of what States are involved? 3. Decide if the forum court has apparent (or initial) jurisdiction over the subject matter and whether that subject matter is within the court’s territorial authority 4. Apply the forum’s conflict rules (which, it is hoped, follow this methodology), including applicable international conflict of law conventions such as the Rome Convention 1980. Specific conflict rules of the forum should also be applied (i.e. s.275 of the Canada Shipping Act which calls for the application of the law of the ship’s port of registry to matters relating to the ship and crew, absent a specific provision in the statute). 5. In no case is renvoi contemplated or permitted, following a.15 of the Rome Convention 1980. 6. Look at the general content of the foreign law and the law of the forum. Understand the alternative applicable laws and the different consequences if applied to the facts at hand. This is an American contribution to the theory of conflict of laws and is intended to eliminate false conflicts. 7. Obligatory forum court statutes. Apply any applicable choice of law directive found in the statutes of the forum when these statutes are obligatory in the forum court, as the U.K. version of the 1976 Limitation of Liability for Maritime Claims Convention. Thus, the UK statute imposes itself on any limitation proceeding whatsoever, taken before an appropriate UK court. If these directives are applicable, then the rest of the methodology need not be followed except in respect to forum non conveniens. If the application of the obligatory forum court law results in an absurdity or incongruity, then the court should invoke forum non conveniens (i.e. suit taken in the UK to limit liability between 2 US ships colliding in US waters). 8. Apply the law of the forum in respect to formalities of the court. 9. Look for connecting factors. See 7 in Lauritzen v. Larsen and the eighth in Hellenic Lines v. Rhoditis. In looking at flags of convenience, one is entitled to look at the place of business of the actual ship operating company and with respect to questions of conflict of law, one is entitled to ‘lift’ the corporate veil, to discover the genuine contact. 10. The general rule is that the properly applicable law of the contract or tort is the law with which the contract or tort has its closest and most real connection (or most significant relationship), based on the connecting factors. 11. Exceptions: 1) If the contract specifies an express choice of law, that choice, if bona fide1 and legal2, will overcome the closest and most real connection. If there is no express choice or such choice is not bona fide and legal, one passes directly to the law of the closest and most real connection. One does not first look at ‘implied choice’ whose constituent parts are merely contacts to be treated along with the other contacts. 2) In contract and tort, where the international public order/public policy of the forum or the domestic public order/policy of the putative proper law has been contravened. 3) In contract or tort, where a mandatory rule of the applicable law has been contravened (i.e. the Hague/Visby Rules, a.10) 4) In contract, where there has been an evasion of the law (fraude à la loi) of public/order policy (as in 2) or of a mandatory rule (as in 3). 12. Choose the properly applicable law: the law which has the most significant relationship or the closest and most real connection in light of the above. 13. Solve any accessory questions by applying the whole methodology again (i.e. to such accessories as time limitations, presumptions, cross-defences, BoP). 14. Solve additional principal questions in the same manner. Thus, more than conventional dépaçage is accepted; one divides in more than 2. Thus this is really severability or true dépaçage. For example, in a collision at sea there is not one properly applicable law, but many, and each properly applicable law must be determined by the methodology. The possible applicable laws in a collision of 2 ships at sea are: a) the law of responsibility between the ships; b) the law of damages, including pure economic loss; c) the law of contract between passengers on one ship and that ship; d) the law between the cargo on one ship and that ship; e) the law applicable between cargo and passengers on one ship and the other ship; f) the law of the right to limit liability of each shipowner; g) the law of the calculation of the limitation fund of each ship and h) the law of the distributing and marshaling of the fund. 15. Decide if the forum court, in light of the law chosen, has jurisdiction or if there is forum non conveniens. If the forum court is not comfortable applying foreign law, then it is better to stay the suit conditionally, preserving the rights of the claimant, attained by the suit pending resolution of the claim by commencement of suit within a certain reasonable 1 2 A choice freely made between 2 relatively equal parties to the k. a choice of law which is essentially and formally valid under its proper law. delay in the more convenient forum. FNC clears up the problems of incongruities, such as the “obligatory forum court statutes” which declares that a court of a particular state must apply that particular statute. III. Topic Three: History and Definition of Maritime Law The General Maritime Law (p.91-105 CSBK) The lex maritima is a ius commune exists today in the US, the UK, Canada and many of the world’s shipping nations as the “general maritime law.” It has 2 sources: 1) the lex maritima, which developed as part of the lex mercatoria and evolved primarily from the Roles of Oléron of the 12th C. There are traces of its existence, however, as back as the Rhodian law of the 8th or 9th C B.C. The attachment, maritime liens and general average are examples of the lex maritima, which continues to exist even today. 2) the common forms, terms and practices of the shipping industry, particularly with respect to carriage of goods by sea under bills of lading and the hire of ships and their services under charterparties, are international examples of accepted general maritime law. Maritime arbitration in the 20th C is developing a ius commune to be found in a respectable number of reported arbitration awards. American conflict of laws theory, in its latest ‘teleological’ manifestations, has also turned to what has been called a theory of ius commune to solve tort conflicts. The ius commune or jus commune is a law common to a whole jurisdiction or more than one jurisdiction. It is composed of broad, general principles and is usually unwritten at first and then often codified. The lex mercatoria is a ius commune, is as the lex maritima, which latter is known as the ‘general maritime law’ today. A ius commune applies in a particular state, unless there is a specific statute limiting it. The general maritime law is a ius commune, is part of the lex mercatoria and is composed of the maritime customs, codes, conventions and practices from earliest times to the present, which have had no international boundaries and which exist in any particular jurisdiction unless limited or excluded by a particular statute. The Origins of the Lex Maritima: p.92 CSBK: Roles of Oleron, Consola del Mare, and Laws of Wisbuy. See also role of CVL at p.93. Early Maritime Law was not characterized by conflicts because until at least the end of the 16th C in Europe, there was considerable homogeneity in maritime law. Thus, European courts did not have to choose between different systems of substantive law when hearing a dispute that had links to more than one state. See more at p.93-94. As for conflicts between the laws of nations, the tradition of the CL courts was to refuse to hear foreign cases or at least to refuse to apply foreign law. This practice thus rejected both conflicts and the ius commune. Lex Maritima (The General maritime Law) – UK: Admiralty law is founded in (1) the Civil Law, (i) as embodied in the Law Merchant, especially in the Law of Oleron, (ii) as introduced by subsequent clerical judges, mainly in procedure; (2) in subsequent written and customary rules, adopted in view of the developments of commerce. Another distinguishing characteristic of English maritime law is that it is based on jurisdiction: p.94: once a courts’ jurisdiction is established in the UK, the substantive law is found in the general maritime law. Canada Maritime law is under federal jurisdiction: p.95 Canadian Maritime law defined at s.2 of the Federal Court Act: p.95. See also Buenos Aires Maru at p.95. SCC extended definition: see p.95-6. General Maritime law is acknowledged in Canada in all matter of navigation and shipping. Its role has been expanded by the SCC. US (p.96) The Attachment & other features: p.97. Arbitration and modern Lex Mercatoria Debate over lex mercatoria exists in international commercial arbitration (p.101). Amiables compositeurs: p.101. UK vs. US Arbitration. P.103: A lex mercatoria is being created in international arbitration in the US and on the continent. In the UK, it is being resisted but perhaps it is too late. Ius Commune in the Conflict of Laws: p.103. See conclusion at p.104 Schiffaharts Leonhardt v. A Bottacchi (p.104 CSBK) The intention of the framers of the Constitution was to place the entire subject of maritime law, its substantive as well as its procedural features, under national control because of its intimate relation to navigation and to interstate and foreign commerce (from Panama Railroad v. Johnson). Federal courts are empowered to apply maritime procedure and law as it existed at the time of the Constitution’s adoption, with such modifications as changing needs and circumstances require, subject to congressional alterations of that law. IV. Topic Four: Law of the Person 1. Law of the Flag (p.179 TXT) Traditionally, the ship’s flag has been used as the sole and definitive indicator of the applicable maritime law. In the 19th C, it was acceptable and usually practical to apply the law of the flag to the relations involving the master, crew, ship, and third parties. The agreement for hire of the crew would follow the law of the ship’s flag, as would most contracts entered into by the master for supplies, repairs, etc. (see Lloyd v. Guibert). Modern legislation may even impose the law of the flag as the applicable law in a particular case (i.e. a.9 of the Greek Code of Private maritime Law). Problems: what in the case of ships wearing a flag of convenience, or in cases of double flagging, or in collisions on the High Seas between ships of different flags? Ship’s flag is still important today, but only a one of many indicators or contacts necessary to determine the governing law. Early History – Before the law of the flag: Early maritime law was not characterized by conflicts because of the homogeneity in European maritime law until the end of the 16th C. Thus, European courts did not have to choose between different systems of substantive law when hearing a dispute that had links to more than one state. The main source of legal uniformity in maritime matters was an oral lex maritima, which came to be accepted by European merchants between the 9th and 12th C. The Lex Maritima was a branch of a wider customary mercantile law, the lex mercatoria. The influence of lex maritima increased when it was codified and customs thereby became formalized. Three codes exerted the most influence: the Roles of Oleron (12th C; accepted in Northern and eastern Europe from Scandinavia to the Atlantic coast of Spain), the Consolato del Mare (Mediterranean affairs), and the Visby Rules (based on the Roles of Oleron; controlled trade in the Baltic) (see p.182). In the 15th C, the uniformity of European maritime law began to erode due to nationalism. The coalescence of nation-states in Europe was accompanied by a desire for national laws, which would take into account the needs of each country. The existence of different national laws, however, ensured that conflicts would arise, which were solved by the 16th C on the basis of what became known as the territorial theory. The sovereigns of Europe, having succeeded in the creation of nation-states where smaller political units had formerly existed, were naturally interested in controlling all matters within their dominions. As a result, contracts were governed by the law of the place where they were entered into, while torts or delicts were subject to the law of the place of the wrongful act. The territorial theory even affected the general maritime law, because the territorial sea was considered part of a sovereign’s domain and thus subject to his laws. Thus, the subjects of the sovereign are not the only persons amenable to this jurisdiction. It extends to strangers navigating within it. They are considered temporary citizens and members of the same political body. This territorial theory was upheld by Story J. in Pope v. Nickerson and Marshall C.J. in Schooner Exchange v. M’Faddon. Nationalism also spawned the theory of the law of the ship’s flag – the ship being considered an extension of the national territory. And another terms was coined when the law of the ship’s flag was upheld under the ‘floating island’ theory. Acts committed and contracts entered into on board ship were deemed to have taken place in the jurisdiction of the nation to which the ship owed allegiance. Both the territorial principle and the floating island theory result from an insistence on a state’s territorial sovereignty; floating island status cannot, however, coexist with another state’s unrestricted claim to regulate all matters occurring within its territory. The law of the ship’s flag is not unlike the Napoleonic concept of citizenship and the law. In the CC, French citizens were granted the benefits and application of the civil law not only in France, but wherever they happened to be as well: a.3(3): The laws in respect to the status and capacity of persons apply to French citizens, even resident in foreign countries. The law of the flag, like the principle of portable French law for French citizens, can be the cause of difficult conflicts of law when it confronts the territorial sovereignty of other nations. Examples of law of the flag directives: Canada: s.275 Canada Shipping Act: Where in any matter relating to a ship or to a person belonging to a ship there appears to be a conflict of laws, if there is in this part any provision on the subject that is hereby expressly made to extend to that ship, the case shall be governed by that provision, but if there is no such provision, the case shall be governed by the law of the port at which the ship is registered. (p.185), UK (p.186), France (p.185) Greece (p.185) etc. See also International Conventions at p.187, many of which stipulate the law of the flag in respect to choice of law. Authorities: Dicey and Morris: the ship’s flag will govern only as a last resort, should it not be otherwise possible to discern the proper law of the contract. Also advocate the American approach where the law of the flag is applied to maritime torts involving only one ship which are committed in the territorial waters of another state, provided that everything takes place within the ship itself, without having any effects on the littoral state or persons external to the ship. Cheshire & North: Apply the English double actionability rule to torts aboard a single ship on the High Seas. The foreign law under that rule is the law of the ship’s flag. First Restatement: a.45: “Except as limited by public international law, international agreement or constitutional provision, a state has jurisdiction over all vessels flying its flag.” The First Restatement was based on the lex loci contractus, the law of the place of contracting, and thus the territorial theory which accorded with the vested rights doctrine. By s.358, performance of a contract and all related matters were subject to the law of the place of performance. Intention of the parties was not a real consideration. On the other hand, the law of the flag was used very frequently for maritime torts. By s.405, torts committed in territorial waters and affecting only the internal economy or discipline of the ship were subject to the law of the flag. If the tort was committed on board ship on the High Seas, s.406 stipulated that “the law of the state whose flag the vessel flies” determined the liability. The same principle applied, pursuant to s.408, to determine the “liability for an alleged tort in the navigation of a vessel on the high seas outside the territorial waters of any state.” For torts by collision committed on the High Seas, s.410 also referred to the law of the flag. If the ships involved in the collision few the same flag, the law of the flag would govern. If different flags, the lex fori would apply. By s.127, the validity of a marriage on board a vessel on the High Seas would be governed by the law of the flag. S.426 also provided that a nation could make punishable an act done upon a vessel flying its flag or within its border seas and subject to its jurisdiction. Second Restatement: Far wiser, making only an implicit reference to the law of the flag at s.56. see p.193 Third Restatement: invokes law of the flag at s.501, 502(2) (see p.194) French Authorities: law of the flag accepted as necessary to achieve consistency because ships travel to places over which no state has sovereignty, and crews are often composed of many nationalities. An example it the case of delicts committed in one state’s internal or territorial waters, and where the act is confined to the ship itself. Of course, the state in whose waters the delict took place would also assume jurisdiction and apply its laws if the delict affected the state itself or one of its citizens. Delicts committed on the High Seas are also subject to the law of the flag. Other aspects governed by the law of the flag are contracts made on the High Seas, the status of the ship, charterparties, and questions concerning the crew. Labour disputes involving crewmembers are governed by the law of the ship’s flag. A collision on the High Seas between ships of different flags is to be determined, not by the law of the flag, but by the lex fori. One authority does suggest that a matter not directly related to the ship, such as a contract to transport goods, is best governed by a law other than the law of the flag. Lauritzen v. Larsen (1953) The flag is only one contact of seven: “perhaps the most venerable and universal rule of maritime law relevant to our problem is that which gives cardinal importance to the law of the flag. Each state under international law may determine for itself the conditions on which it will grant its nationality to a merchant ship, thereby accepting responsibility for it and acquiring authority over it. Nationality is evidenced to the world by the ship’s papers and its flag. The US has firmly and successfully maintained that the regularity and validity of a registration can be questioned only by the registering state. The court has said that the law of the flag supersedes the territorial principle, even for purposes of criminal jurisdiction of personnel of a merchant ship, because it is deemed to be a part of the territory of that sovereignty whose flag it flies, and not to lose that character when in navigable waters within the territorial limits of another sovereignty. On this principle, we concede a territorial government involved only concurrent jurisdiction of offences aboard our ships. Some authorities reject, as a rather mischievous fiction, the doctrine that a ship is constructively a floating part of the flag-state, but apply the law of the flag on the pragmatic basis that there must be some law on shipboard, that it cannot change at every change of waters, and no experience shows a better rule than that of the state that owns her. Decisions and Examples of the law of the flag The decisions are discordant and inconsistent amongst themselves, so that there is no consistent national, let alone international, theory of the law of the flag. Ship discipline: Wildenhus’s Case: law of the flag governs the internal discipline and administration of a ship. i.e. all matters of discipline and all things done on board which affected only the vessel or those belonging to her. The exception was matters affecting the peace or dignity of the country, or the tranquillity of the port. In PattonTully v. Turner, the court held that a ship’s internal management and discipline were to be governed by the law of the flag. See William Brooks (p.198) which applied Liberian law (the law of the flag) despite the multitude of American contacts. Marriage on the High sea: traditionally applied the law of the ship’s flag. Charterparties: p.199: Coast Lines: other things being equal, the law of the ship should govern. Contracts entered into in distant ports: p.201: law of the flag is no longer the sole or most important contact. Tort and delicts on the high seas: p.201: law of the flag often rules, but better solution is to look at all contacts Torts and delicts on the high seas on a ship of a bijuridical state: p.202 Crime on ships in port or in territorial waters: has not been applied consistently: flag is but one factor to take into account: p.204. Single ship allision on the high seas: p.205: split between substantive and procedural issues Two ship collision – ships of the same flag: p.206: the principal contact is the common flag, provided that neither is a flag of convenience. Two ship collision – different flags but both states parties to the Collision Convention 1910: law of the flags apply pursuant to the Convention. Two ship collision – ships of different flags (High Seas): p.207 Rome Convention: Law of the flag is contrary to a.4(1) where, in the absence of express or implied choice, a contract is governed by the law of the country with which it is most closely connected. England: if 2 or more ships are involved in a tort on the High Seas, the English court would apply English maritime law. The law of the flag constitutes the lex loci only in cases of torts on a board a ship on the High Seas and torts occurring on board a ship while in foreign territorial waters. Netherlands: p.211 China: p.212 Problems: Unregistered ships: Where the ship is unregistered, the flag flown is a useful contact. See examples at p.212. Flags of convenience (flag shopping): a flag shown by a ship registered in one state, with which the ship has few or no connections, while in reality the ship is owned in, or operated from, another state. A flag of convenience usually exists for economic reasons: shipowners often seek to avoid high taxes, maintenance costs, certain international conventions and the obligation to hire certain nationals. There must be control by the flag state: see p.214 for examples. There must also be a genuine link but that’s not certain (see p.215). Bareboat chartering – Flagging out: see p.216: the law of the flag, in a case where the bareboat charter is registered, is the law of the state where the bareboat charter is registered, and not the law of the state where the ship is registered. Ad hoc, bareboat chartering out: p.217 The Italian double registry system: p.218 2 flags in board: where a ship flies 2 flags, it has been treated as outside the protection of the law of either nationality it is claiming. See p.219 for examples Federal or bijuridical state: the flag or registry as sole criterion is unsatisfactory. Lifting and piercing the Corporate veil: Two juridical devices which serve as solutions to many of the problems arising from flags of convenience are the lifting of the corporate veil (to look at the shareholdings for some legal purpose such as ‘contacts’ in the conflicts of law) and the piercing of the corporate veil (where the rights and liabilities of the corporation are also of the shareholders). See examples starting at p.219. Courts have often deemed the ship not connected to the state of its flag but connected rather to the state of the persons actually controlling and owning the ship. At the very least the domicile or nationality of those persons is a strong contact that may be considered when fixing the properly applicable law. See Rainbow Line v. M/V Tequila (p.221). Registration remains prima facie evidence of a ship’s nationality and that there would seem to be presumption that a ship belongs to the country in which she is registered. Thus, in the US, the ship’s flag as a contact has often been discarded by the courts when the flag is merely one of convenience. Note contrary case at p.222 (when mention is explicit). Conclusions: Law of the flag is the maritime equivalent of the land principles or ‘territoriality’ and ‘nationality.’ Law of the flag is particularly unsuitable as a rule today because of flags of convenience which render the flag an especially questionable contact. Much better is the concept of closest and most real connection. Flag shopping (the sue of flags of convenience and double registries under bareboat charters) has tolled the death knell of the law of the flag as a single solution to conflicts of law. The law of the flag can only be one indicator or contact among many, and rarely if ever, the sole consideration in determining the proper law of the contract or of the tort. Even the place of business of the owners of a ship, in most one-ship operating companies, must be looked at whilst lifting or even piercing the corporate veil. Nor is it a question of the law of the flag being determinative when all other factors cancel themselves out. Rather, one must consider all the contacts and follow a logical, constant and consistent process or methodology in each conflict case, in order to arrive at the properly applicable law. 2. Lauritzen v. Larsen (p.114 CSBK) Danish seaman, employed by Danish flag vessel, owned by Danish citizen, under articles written in Danish and stating that crew members’ rights would be governed by Danish law, joined ship in NY (and was returned to NY), injury occurred in Havana. US is state of the forum. Seaman wants US law to apply: “a ship owner is liable under the laws of the forum where he does business as well as in his own country.” He claims that the ship owner’s commerce and contacts with the ports of the US are frequent and regular. Maritime law has attempted to avoid or resolve conflicts between competing laws by ascertaining and valuing points of contact between the transaction and the states or governments whose competing laws are involved. The criteria appear to be arrived at from weighing of the significance of one or more connecting factors between the shipping transaction regulated and the national interest served by the assertion of authority. Place of the wrongful act: the solution most commonly accepted as to torts in US and international law is to apply the law of the place where the acts giving rise to the liability occurred, the lex loci delicti commissi. This rules of locality, often applied to maritime torts would indicate application of the law of Cuba. The test of location of the wrongful act, however sufficient for torts ashore, is of limited application to shipboard torts, because of the varieties of legal authority over waters she may navigate. We have asserted territorial rights, as when we held that foreign ships voluntarily entering our waters become subject to our prohibition laws and other laws. This would seem to indicate Cuban law. But the territorial standard is so unfitted to an enterprise conducted under many territorial rules and under none that it usually is modified by the more constant law of the flag. The flag law of a merchant ship overbears most other connecting events in determining the law applicable to events on board, unless some heavy counterweight appears. Allegiance or Domicile of the injured: see case for more details Allegiance of the Defendant Shipowner: Place of contract: Place where a seaman’s contract is made is of less importance that the flag. Inaccessibility of the foreign forum: Inaccessibility of the forum of the ship’s flag is not persuasive as to the law by which a seaman’s case shall be judged, especially when (1) home rights are available through a consul; and (2) free passage home is offered. Law of the forum On the basis of these connecting factors, court chose Danish law. V. Topic Five: Contract Chapter VIII – Contracts in General Express Choice – Part Autonomy: Express choice: express choice is the first rule of choice of contract law in the US, Canada, Australia, England, France, whether or not the Rome Convention 1980 applies. Usually, there need not be any connection between the contract and the applicable law if the choice is bona fide, but not all jurisdictions follow this view. Plus, there are exceptions to any choice of law rule for public p/o, mandatory rules, illegality and evasion of the law. The parties, by express choice or mutual agreement may change the applicable law after the contract has been entered into under all systems of law. Where there is no express choice, the choice may be implied or inferred in many jurisdictions. Rome Convention at a.3(1) suggests a subjective test – what the parties really intended, not what the court believes reasonable people in the place of the contractants would have intended. The intent is drawn from ‘the terms of the contract’ or ‘the circumstances of the case’, demonstrated with reasonable certainty. Prof thinks that the Restatement Second 1969 method of proceeding from express choice directly to closest and most real connection (without considering implied choice) is preferable. In the absence of express choice (or implied or inferred choice in those jurisdictions which apply them) one must choose the law to which the contract has its closest and most real connection. This is the rule in the US, Canada, Australia, Switzerland, Quebec (a.3112) and Rome Convention. Under the latter, there is a rebuttable presumption of characteristic performance in a.4(2): that the contract is most closely connected with the country where the party is to perform the contract has its habitual residence, or in the case of a company, its central administration or in the case of a party’s trade or profession, its principal place of business. In questions of carriage of goods, the above presumption does not apply and is replaced by the law of the place where the carrier has his principal place of business, if it is also the place of loading or discharge or the place where the shipper has his principal place of business (a.4(4)). This is rebuttable pursuant to a.4(5). Essential (material) and formal validity The law applicable to the formalities of a contract is usually known as the law of its ‘formal validity’ and the law applicable to the contract itself and the obligations of the parties as the law of its ‘essential or material validity.’ Usually, the 2 laws are identical. Contractants are advised to so specify in their choice of law clauses. Essential validity: Essential validity has normally been subject to the proper law of the contract and to the lex loci solutionis. Any right claimed must be essentially valid (legal) under the proper applicable law (see Vita Food Products). Just as one should not enforce a contract if it contradicts international public o/p of the forum or the public law p/o of the proper law or the mandatory rules of the putative proper law, so the essence of the contract must be valid under the putative proper law. The contract must also be essentially valid under the law of the place where it is performed. Otherwise it will be unenforceable in the forum. The Rome Convention stipulates that the existence and validity of a contract shall be subject to its putative proper law (a.8(1)). However, exception at 8(2): instead of the putative proper law, a party may rely on the law of his habitual residence to establish that he did not consent, if it appears from the circumstances that the application of the putative proper law would lead to an unreasonable result. The foregoing rule is really the application of the closest and most real connection. Blacking: In the Evia Luck (no.27), a ship was “blacked” in Sweden and consequently, crew contracts written in the Philippines were voided by the shipowner and replaced by more generous agreements. The blacking was at the insistence of the International Transport Worker’s Federation which had convinced Swedish dock workers to refuse to discharge the ship unless better contracts were entered into by the ship with the ship’s crew. Blacking and resulting new contracts are valid in Sweden and in the Philippines. In England, blacking can result in voidance of the resulting new contracts. A suit was brought in England. The HoL did not invoke public o/p since blacking is not contrary to either Swedish domestic public policy or English international public policy. The court did hold, however, that because the parties had agreed to the application of English contract law, the contracts would be void in contract under English law because of duress. The contracts were essentially invalid under the proper law – English contract law, the putative proper law chosen by the parties. This illustrates that 1) blacking is not of public p/o in England but a question of essential validity (legality); 2) Essential validity (legality) of the contract should be judged under the putative proper law of the contract. Formal Validity Formal Validity of a contract was usually established by either its proper law or the lex loci contractus, subject to the exception of public order. Rome Convention does not define formal validity but the Giuliano and Lagarde Report defines form as every external manifestation required on the part of a person expressing a will to be legally bound, and in the absence of which such expression of will would not be regarded as fully effective. Rome Convention at a.9(2) is broad and stipulates that a contract concluded between persons in different countries is formally valid under the law which governs under the Convention or the law of one of those countries. See also p.326 for contract concluded by agent. It would have been better if 9(2) stipulated that the formal validity of a contract depends on the proper law of the agreement, while the formal validity of its performance depends on the proper law of its performance. Capacity Capacity of a person to enter into a contract has been the subject of dispute as to whether the question is to be decided by the law of the place where the contract was entered into as the domicile or residence of the person in question or by the proper law of the contract. Australian Law Reform Commission: supports a rule that capacity according to either law of the relevant party’s residence or the proper law of the contract should suffice to make a valid contract. (p.237) Prof thinks that decision as to capacity of the person should be part of the general decision as to whether the contract is valid, in a uniform methodology, which takes into account public o/p, mandatory rules, evasion and all the exception. Dépeçage This is the dividing into two or more parts and, in conflicts of law, means that a legal relationship (a contract or delict) can have two or more different parts, each subject to a different law. Thus is an arbitration proceeding, one law may apply to the agreement to arbitrate a dispute, the contract under dispute may be subject to another law; the arbitration proceedings themselves to yet a different law and rules, and the performance of the award to even another law. Those who have difficulty in accepting dépeçage in respect to conflict of contract laws should look at the principles of formal and material validity: the possibility of different laws affecting a contract’s formation and content. Formal and material validity as a distinction is an admission that depecage exists in the conflict of contract laws. In the same way, the drawing of a distinction between the law of a contract and the law of its performance is another example. Depecage is more and more accepted to contract, as seen in the Rome Convention (a.3(1) and 4(1)) and in the Restatement Second, Revisions, 1988. Contract and Tort: It is often very difficult to distinguish between claims in tort and claims in contract. Very often, the claimant has both rights available or at least as alternatives. It is dangerous to have different conflict rules for tort and contract. This is why a general rule such as the closest and most real connection for both contract and tort is sensible. Conflict Presumptions of the Closest and Most Real Connection: useful as pointing in a certain direction, but can be dangerous unless they themselves have an escape hatch allowing them to be avoided at the discretion of the judge. The multiple rules of the Restatement First and Second, of Dicey & Morris and of McLeod are presumptions based on a basic principle – the closest and most real connection – added to which are escape hatches allowing the court to revert to the law of the closest and most real connection (at its discretion) when injustice otherwise is likely to occur. It would be better apply the closest and most real connection immediately. Escape Clauses: 2 types: 1) those found in codes or statutes permitting a different law to apply as a general rule and 2) those which permit a particular rule or presumption to be ignored if the court believes it is wise to do so. Escape clauses allow a choice of law rule or choice of law presumption to be circumvented when it is clear that the law chosen has only a slight connection to the facts of the case and another law has a much closer connection. A general escape clause is found in a.15 of the Swiss Federal Statute on Private International Law (p.239 TEXT). See also a.3082 CCQ. See Restatement Second at p.240. See p.240 for examples of particular escape clauses: Rome Convention (a.4(5), 5(2), 6(2), 7(2), 8(2)). Conclusion: Formal and material validity, capacity, choice of law (express or otherwise) cannot be adjudged on their own. There are too many exceptions, such as public order, legality, mandatory rules, evasion of the law, all of which are subject to conflict presumptions, which, in turn, are subject to escape hatches. Doctrinal rules, national laws and international conventions of conflict of laws provide piecemeal, often incoherent, unrelated directions. Rather, each choice of law question should be decided by means of a uniform, consistent methodology which faces each question and exception in turn. Chapter X – Bills of Lading: See Origins at p.292. Bills of lading are contracts for the carriage of goods, unlike charterparties, which are contracts for hire of the ship or of her services. A bill of lading is a contract of carriage, a receipt and a document of title, while a waybill is a nonnegotiable bill of lading, i.e. it is a contract of carriage and a receipt but not a document of title. A ‘straight bill’ is a waybill, as defined specifically under the terms of the excellent US Bills of Lading Act, known as the Pomerene Act 1916. The modern contract of carriage includes not only a bill of lading and a waybill, but also a ship’s delivery order and electronic documents. A BoL is signed by only one party and is issued only after the ship sails. It is not the contract, but only the best evidence of the contract. The real contract includes the offer, the oral and written agreements for shipment, the advertisements of the carrier, the booking note, the carrier’s tariff, as well as the bill of lading itself, and even certain practices of the carrier known to, and accepted by, the shipper. A BoL itself is not a contract of adhesion, but a standard form contract – a printed form to which various items and details are added by one of the parties (usually the carrier). On occasion, however, shipowners will have copies of various carriers’ bills of lading on and it is the shipper who will insert the description of the cargo into these documents, which are then returned to the carrier for completion and signature. The shipper, who usually sees the BoL only after the ship has sailed, will not be bound by special terms which are contrary to what he had particularly agreed upon. Nor should the consignee or endorsee of such a BoL be so bound. BoL vs. Charterparty: Both are contracts for transportation of goods, but the BoL is a contract of carriage of goods while a charterparty is a contract of hire of the ship or of her services. More at p.295). BoL are used, for the most part, in the ‘liner’ trade, where a common carrier offers to transport the public’s goods on a pre-arranged route (or line) at pre-arranged times. Voyage charterparties, on the other hand, are used in the private carriage of goods, usually a single shipper from one place to another. Time charterparties are for the hire of the ship’s services over a period of time and a bareboat charter is the hire of the ship itself devoid of master and crew. A demise charter is a bareboat charter where the master and crew are named by the owner but serve under the responsibility and control of the charterer. Carriage by BoL is similar to riding on a bus route; voyage chartering is similar to hiring a taxi for a day’s outing, and demise chartering is similar to leasing a car for a very long time with a driver chosen by the owner but paid and controlled by the passenger. A bareboat charter is similar to the long-term lease of a car without a driver. In many, of not most, contracts of transportation of goods, a BoL and at least one charterparty are involved. It is therefore essential, in deciding which law is applicable, to first decide if it is the BoL or the charterparty which is the contract under consideration. A BoL in the hands of a charterer who is also the shipper is only a receipt and it is the charterparty which is the contract of hire (and of transportation) between the parties. This is important because the charterparty is not subject to the compulsory provisions of the Hague or Hague/Visby or Hamburg Rules, unless they are incorporated into the charterparty by reference. On the other hand, a bill of lading issued under a charterparty, but transferred to a third party acting in good faith, is the contract of carriage between the third party, on the one hand, and the contracting and actual carrier, on the other. In this case, the mandatory provisions of the Hague or Hague/Visby or Hamburg Rules apply. Directives in Carriage of Goods Conventions International carriage conventions are mandatory: Unlike transport under charterparties, is subject in most cases to the compulsory application of one or other of the international carriage of goods conventions. These carriage of goods conventions contain mandatory directives as to their applicability. The Hague Rules (1924): mandatory as seen from a.3(8) and 10, but do not contain a statement indicating that they have ‘force of law’ as do the Visby rules. Nevertheless, most courts and authorities have considered them as having force of law. The Hague/Visby Rules (1968 & 1979): Mandatory because of a.3(8), while a.10 states that each contracting state shall apply the provisions of this Convention, thus giving them force of law. The UK Carriage of Goods by Sea Act 1971, implementing the Visby Rules, specifically gives the Rules ‘force of law’ at s.1(2), 1(3) , 1(6) and 1(7), thus expressly answering the Privy Council in Vita Food Products. A paramount clause is not necessary under a.10 of the Visby Rules, and was never really considered under the Hague Rules. Hamburg Rules (1978): apply to all contract of carriage by sea, not merely BoL, and to contracts for shipment inward and outward, but only if a contracting state is involved. The Hamburg Rules (a.2(1)) gives the plaintiff the choice of jurisdiction (but not choice of law, the Hamburg Rules being mandatory). The plaintiff, either shipper (most often) or carrier (more rarely) may sue before the competent court in either: 1) the principal place of business of defendant or, in the absence of such a place, the place of the defendant’s habitual residence; 2) the place where the contract was made, provided the defendant has a branch, agency or office there through which the contract was made, 3) the port of loading or discharge; or 4) any other place designated in the contract of carriage. Suit may also be taken in the courts of any port or place in a contracting State where the carrying vessel or one of its sister ships may have been arrested, subject to the defendant’s right to have the case removed to a court mentioned in a.2(1) on giving security (a.21(2)). Moreover, after the cargo claim has arisen, the parties may agree on a place for instituting the action (a.21(5)). The Hamburg Rules at a.22(3) and (6) have stipulations similar to a.21(1) and (5) respectively as the choice of jurisdiction in questions of arbitration, but again, the only applicable law is the Hamburg Rules, because they are mandatory. The Multimodal Convention (1980): see p.298. Directives in Conflict Conventions & Laws Montevideo Convention (1940): a.25-6: when the goods are transported within a single Treaty State or when transport contracts are to be executed in one of the Treaty States, such contracts are governed by the law of that State, regardless of the place where the contracts were concluded. The place of execution refers to the port where the merchandise is unloaded or the passengers are disembarked (a.26) Rome Convention (1980): a.3(1): contains a conflicts directive as to a choice of law, whether express or implied, whereby the contract is subject to the law chosen by the parties, or the choice of which is demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. In the case of absence of express or implied choice, a.4(1) stipulates that the contract shall be governed by the law of the country with which it is most closely connected. A.4(2) sets out a rebuttable presumption that the most closely connected country is the one which the party who is to effect the characteristic performance has his habitual residence or its ‘central administration’ or in some cases, his principal place of business. Under a.4(4), however, the presumption in a.4(2) does not apply to ‘contracts of carriage of goods’ which term includes ‘single-voyage charterparties and other contracts the main purpose of which is the carriage of goods.” Rather, there is a rebuttable presumption that the country of the carrier’s principal place of business is the most closely connected country, if it is also the country in which the loading or discharge took place or where the consignor’s principal place of business is located. Escape hatch (a.4(5): The presumptions established by a.4(2) and 4 are to be disregarded if it appears from the circumstances as a whole that the contract is more closely connected with another country. Nor does a.4(2) apply if the characteristic performance cannot be determined. a 21 stipulates that the Rome Convention may not prejudice the application of international conventions to which the contracting state is or becomes a party. This means that in a direct confrontation between a law chosen under the Rome Convention and a shipment from a EC state which is party to the Hague/Visby rules, the latter shall apply. Australian Law reform: p.300-301 Various conflict of Law Theories and Bills of Lading (see p.302ff) For a conflict of law to result, there must be at last 2 competing legal systems. Until the end of the 16th C, the maritime law of Europe, the lex maritima, was universally accepted and applied as an acknowledged part of the law merchant, the lex maritima. Because there was only one law, there was no conflict. Law of the Flag: The law of the ship’s flag was perhaps the earliest single criterion used to decide applicable carriage of goods law. The law of the flag is less relevant to BoL than to Charterparties, which latter concern the hire of a specific ship (with its flag) and its services, while BoLs are more concerned with the goods being transported. Territorial theory: 1) lex loci contractus: If a BoL is issued in a particular jurisdiction, then that jurisdiction must have had a prime significance for the parties, unless the contractants expressed a contrary intention. However, this is not always satisfactory. In particular, it ignores the place of performance, the place of suit or arbitration, the currency of performance, the place of payment, the nationalities of the parties, their place of business, etc., and in fact the place of the formation of the contract may be entirely fortuitous. Applying this theory may be consistent, but does not necessarily result in the properly applicable law. 2) lex loci solutionis: as described in Chatenay v. Brazilian Submarine, this depends upon both parties having to perform their obligations in the same country. Thus, the two most integral acts to result from a contract are united in one jurisdiction. Like the ship’s flag and the place of contracting, the place of performance is but a single factor, which taken in isolation, should not determine the applicable law. It must be considered, along with other factors surrounding a contract. Express choice: Since at least 1796 and the decision in Gienar v. Meyer, and even as early as 1760 in Robinson v. Bland, English courts have held that the governing law is that chosen by the contracting parties. Even under the territorial theory, express choice of the parties was a binding consideration in the choice of contract law. The parties’ free choice would not be upheld, however, if there was a violation of the public policy of the forum or if the choice was not bona fide or legal. One such limitation was underscored in The Hollandia, where it was held that the parties could not avoid the Hague/Visby Rules by virtue of a contractual provision. Implied, inferred or imputed choice: When no express choice of law clause appear in the contract, English and other CL courts next attempt to find implied intention by such evidence as an arbitration or jurisdiction clause. A contractual term which is valid under one law but invalid under another might point to the law under which the term is still usable. A BoL clause incorporating the terms of a charterparty has been held to imply an intention that the law governing the charterparty is to be applied to the BoL. The use of certain forms, as well as the use of certain expressions, has been found to indicate the parties’ implied intentions. These same criteria continue to be useful in inferring the actual intention of the parties as to choice of law under the Rome Convention. Their utility has also been confirmed in Australia. The principle of contra proferentem, however, has been used against the carrier where there was ambiguity in its BoL. Proper Law of the contract: the closest and most real connection: In 1951, an English court formally recognized that the proper law to govern a contract could be arrived at objectively, by looking at the contract terms and circumstances surrounding it, without the parties’ implied intention being the sole criterion (Bonython v. Commonwealth of Australia). In that case, the court referred to the closest and most real connection as a test to ascertain the proper law of the contract. (See example at p.306) The Lex fori – the desire to promote local jurisdiction: a) England and London: Suit or arbitration in London can provide efficient and sound justice by competent courts, arbitrators and counsel; it is therefore in the interest of many foreigners to resolve their disputes there. (more at p.307) Courts are seen to cooperate in that regard. It is noteworthy that even if a contract has bot been entered into or even been breached in the UK, it can be litigated here if English law is stipulated as being applicable. For all the above reasons, English law is at times applied by English courts, even when some other law would seem to be the properly applicable law. See the San Nicholas and Mineracoas v. E.F. Marine (p.307-8). b) US: The seemingly unanimous desire of the English merchants, barristers, solicitors (and even courts) to promote the application of English law, necessary in many cases to find English jurisdiction, is not too different from the approach of American courts in applying governmental interest analysis. Many reasons are given to accept American Jurisdiction, usually because of the desire of litigants and courts to be able to award high sums of money to the victims improperly treated. Negotiations of Bills of Lading: see p.308ff to see why BoL are documents of transfer and not negotiable instruments. Thus, Rome Convention applies. In order for a document to be a negotiable instrument, it must be transferable by delivery, or by indorsement and delivery, so as to confer a good title on a bona fide transferee, despite defects in the transferor’s title. A BoL is not a negotiable instrument because the endorsee does not get a better title to the goods than his assignor merely by virtue of the endorsement of the bill. Vita Foods Decision: Despite the mandatory nature of the Hague Rules, the Privy Council held that the Hague Rules were not mandatory if the paramount clause was not present in the bill of lading. The court applied the conflict principle of express choice of the parties, ignoring the compulsory nature of the Hague Rules as in a.3(8) and 10. Fortunately, the decision has been distinguished or ignored on all sides, by-passed by the Visby Rules, by private agreement, and by the lack of any reference to paramount clauses in the Visby Rules, the Hamburg Rules and the multimodal Convention. See p.316ff for opposition to the decision. Therefore, the decision, although not approved for the mandatory nature of the Hague Rules, is nevertheless good law as to the expressed choice of the parties being a fundamental criterion or contact in determining the proper law of a contract. US Carriage of Goods by Sea Act: applies to shipments both inward to the US and outward from the US in foreign trade (instead of outward only as in most other Hague Rules nations). This violates the principle comity of nations3 and the basic principles of conflict of laws. The inward application of COGSA was perhaps useful in the past for American consignees, when the package limitations of many nations were derisory or non-existent as compared with the US$500. Today, it is often a handicap in the light of the higher limits of Visby and Hamburg and the drop of the value of $500 from 1936 to the present. The inward/outward application of COGSA also violates the s.197 of the Restatement Second (validity of the contract for the transportation, absent express choice, is determined by the local law of the state of departure, unless a more significant relationship is established). The Philippines, Liberia, and Belgium also apply the Hague Rules inwards and outwards. see p.321 for how Hague/Visby rules are more/less favourable to cargo than Hague Rules (COGSA) The result of the US application of COGSA inwards is unfortunate. American courts have applied COGSA (and its lower package limit) even to shipments from Hague/Visby nations, which have a higher package as well as a kilo limit. Fortunately, American courts have permitted BoL clauses which increase the carrier’s liability rather than relieving or lessening liability. Thus a shipment from Belgium, Spain, Sweden, or Italy to the US hash been held subject the higher Visby package and kilo values (see Daval Steel v. Acadia Forest and Associated Metals v. M/V Lumbe) Similar decisions should have been rendered in other shipments from Visby nations, but the clause incorporating the Visby Rules was not deemed clear enough (Sunds Defibrator v. Atlantic Star). In each case, the Visby Rules should have been deemed applicable, being the proper law of the contract and also because of their mandatory nature. Nine Package and Limitation Regimes (see p.322) The Hamburg Rules and Conflicts with Hague and Hague/Visby Hamburg rules also apply inwards and outwards. Since the entry into force of the Hamburg Rules (1992), we now have 3 international carriage of goods by Sea conventions and 9 package and kilo regimes. As a consequence, various conflicts may arise, and will generally be resolved by applying the regime which favours the cargo claimant, in virtue of the Hague and Hague/Visby Rules at a.3(8) and 5, the Hamburg Rules at a.23(1) and (2). See scenarios at p.325. and Hamburg Rules vs. Hague and Hague/Visby Rules. Conclusions Ocean BoL are only documents of title (or documents of transfer) and not negotiable instruments. In consequence, a.1(2)(c) of the Rome Convention, at best, only exclude BoL from its scope in respect of the so-called ‘negotiable character’ but not in respect of their character as contracts of carriage. The 3 international Conventions (Hague Rules, etc.) do resolve certain conflicts revolving around BoLs, by virtue of the mandatory nature of these international regimes. Their compulsory nature is now generally acknowledged as overriding unbridled freedom of choice of law by the parties (à la Vita Food Products) and is even beginning to be recognized by American courts as they give effect to higher Visby package/kilo limitations on shipments inbound to US ports, despite COSGA. Regrettably, the coming into force of the Hamburg Rules, with its compulsory inwards/outwards application, promises to generate new conflict of laws, while other conflicts in respect of the nine package/kilo regimes may arise, even between States ostensibly party to the same carriage by sea convention. With BoL, as with other contracts, single rules of thumb, such as law of the flag, lex loci contractus or lex loci solutionis are outmoded and inadequate tools to determine the properly applicable law and should be discarded in 3 By the principle of comity, courts in one country will respect the law and judgements of other countries, with the exception that this respect will be reciprocated. Comity was first enunciated by Story. For judicial treatment, see Somportex v. Philadelphia Chewing Gum, Atlantic Ship Supply v. The M/V Lucy. However, a criticism of comity by Cheshire & North. favour of the closest and most real connection (or most significant relationship). Better still is the use of a consistent methodology, as proposed in ch.2. Sunds Defibrator v. Atlantic Star (p.120 CSBK) Carrier claims that if it is liable for any damage, it is only liable to a maximum of $500/package pursuant to the terms of the BoL and the US Carriage of Goods by Sea Act (COGSA). Plaintiff claims that more generous limitation of liability provisions of the 1968 Visby Amendments to the 1924 Hague Rules apply. Both agree that COGSA applies to this carriage of goods and that it provides a $500 limitation. However, plaintiff argues that the terms of the BoL adopt the higher limitations of the Visby Amendments. Defendant argues that the BoL contains no such agreement. The BoL does not adopt the Visby Amendments, even giving liberal sway to the principle of construing contracts of adhesion against the drafter. The clause in question does not mention the Visby amendments. Its reference is to the 1924 version of the Hague Rules and to the Act of Congress which adopted those rules, establishing them as binding law in the US. Daval Steel v. Acadia Forest (p.121 CSBK) BoL issued in Belgium, where Hague rules and Visby Amendments are in force. Since all foreign shipments to or from the US are governed by COGSA, the defendant argues that the clause in question was intended to apply only to intra-European shipments, or to shipment between Europe and ports not in the US. COGSA allows for higher liability if parties so decide. The contractual rule that ambiguities are to be construed against the party proffering the contract is applicable to bills of lading. The BoL (clause 3) has the effect of incorporating into the BoL the relevant Body of Rules (Hague/Visby Rules). The BoL having been issued in a jurisdiction where the Hague/Visby rules apply, calls for incorporation of the higher per package limitation contained in those rules. To the extent that there is any ambiguity whatever in the BoL, there is every reason to construe it against the defendants who are parties responsible for proffering it. Court found that “rules, thereto annexed” referred to Visby amendments. Associated Metals v. M/V Lumbe (p.123 CSBK) BoL states that the Hague Rules as enacted in the country of shipment shall apply. Thus, Argentinean limitation applies. VI. Topic Six – Contract, Insurance Maritime Insurance The law of Marine insurance contract should be determined by studying and weighing all the contacts, especially express choice of the parties, as well as considerations of public order, mandatory rules, evasion of the law, etc. The same process should be used to examine other matters related or ancillary to the marine insurance contract, in order to identify their properly applicable laws. Such matters are the arrangements between the broker and the insured and between the broker and the insurer, the direct action claim and the reinsurance contract, all of which are not necessarily subject to the same law. See Definitions of maritime insurance for CVL and CL at p.336ff. PQ: a.2389, 2390, 2505. The substantive Domestic Law of Marine Insurance UK: the Marine Insurance Act 1906 not only governs marine insurance but also guides other insurance in the UK, and to some extent, marine insurance in the US and Canada as well, since it largely codifies the CL as it was in 1906. Nevertheless, in England and the Commonwealth, insurance contracts are subject to the law applicable to contracts in general, but with rules particular to insurance, such as the basic principle of good faith. US: In principle, marine insurance is governed by federal admiralty law, which is interpreted, wherever possible, so as to be consistent with English admiralty law. See more at p.340 France: p.341 Canada: Insurance is a provincial matter in Canada, or at least that is true with respect to the law affecting the insurance contract. Marine insurance has been the subject of provincial legislation, as has general insurance. In 1983, the SCC in Triglaw v. Terrasses Jewellers held that there was a federal maritime law, of which marine insurance law was an integral part, without explaining where it was to be found. In 1993, the federal Maritime Insurance Act came into force. Its effect on provincial marine insurance legislation remains undecided. Marine insurance contract can be subject to more than one law. The authors in the UK are of this view, although the courts lean toward a single law. In the US and Canada, courts have accepted that more than one law can govern a marine insurance contract. For example, there can be 1) the law of the contract per se between insured and insurer, 2) the law of the arrangements of the insurance broker with the insured; 3) the law of the broker/insurer arrangement, 4) the law of the reinsurance; 5) the law applicable to a right of a third party to proceed in direct action against the insurer. These properly applicable laws are not necessarily the same. EU: Marine insurance is considered a ‘large risk.’ a.7(1)(f) specifies that, in the case of ‘large risks’ the parties to the insurance contract are free to choose ‘any law’ to govern their contract Consequently, it appears that the Directive would permit the choice of a law other than that of a MS of the EU (i.e. US law) to govern a marine insurance policy, even where the risk is situated in an EU MS and both parties to the contract are based in the EU, and even if the policy is issued there and the loss occurs there. Mandatory rules: 1) a.7(1)(g), like a.3(3) of the Rome Convention, seems intended to forestall any attempt at evasion of the mandatory provisions of the properly applicable law by means of a choice of law clause, where the contract is otherwise connected with only a single jurisdiction whose mandatory rule is at stake; 2) a.7(2) first para.: “nothing in this Article shall restrict the application of the rules of the law of the forum in a situation where they are mandatory, irrespective of the law otherwise applicable to the contract.” 3) a.7(2) second para. MS may stipulate that the mandatory rules of a MS in which the risk is situated or which imposes the obligation to take out insurance shall be applied. The 3 restrictions are limited, so that direct marine insurance enjoys a regime of considerable freedom of choice of law, under the conflicts rules of the EU. Failing an express choice of law in the policy or an implied choice which can be demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case (a.7(1)(h)), the applicable law is that of the country with which the contract is most closely connected, being either the law of the place where the risk is situated or the law of the habitual residence or the central administration of the policy-holder. There is a rebuttable presumption that the contract is most closely connected with the place where the risk is situated (a.7(1)(h)), which at least for hill and liability policies, would seem to be the country of the ship’s registry (a.2(d)), and for cargo insurance, the place of habitual residence or establishment of the policy-holder to which the policy relates (a.2(d)). Depeçage is also permitted (7(1)(h)), thereby allowing a severable part of the contract to be governed by a law with which it is more closely connected. See Third Directive at p.349 UK: The Contracts Act 1990, being the UK version of the Rome Convention does not apply to marine insurance risks in the EU, but does apply to risks outside the EU. All reinsurance inside and out, is covered by the Act. The Rome Convention follows traditional English conflicts law, providing that the express choice of the parties is the first alternative, then implied choice and then the law of the country to which the contract is most closely connected. There is also a presumption in the Rome Convention that the applicable law is the law of the country where the party who is to effect the performance characteristic of the contract has its central administration or (where the contract is entered into in the course of that party’s trade or profession) its principal place of business. This would mean, with respect to English underwriters, that English insurance law is presumed. US: Federal choice of law rules govern the determination of which state law or foreign law applies to marine insurance contracts. Express choice governs, then most significant relationship. There is no implied choice. See p.352-3. Where there is no express choice of law in the contract, the US courts, when following the Second Restatement in respect to marine insurance will look to the most significant relationship, because in marine insurance there is usually no ‘principal location of the insured risk’ as stipulated in s.193. Parties to a marine insurance contract are usually of equal bargaining strength, which makes the principle of freedom of express choice acceptable. In the absence of express choice, the contacts (most significant relationship) test, sometimes coupled with the governmental interest test, has been followed in relation to marine insurance in the US. (see Homes v. Dick, p.353). Canada: Marine insurance contract would appear to be subject to the law expressly chosen by the parties, then inferred by the court, then by the most closely connected law (interpreted as the head office or principal place of business of the insurer). Under the CCQ, a marine insurance contract, unlike other insurance contracts, would appear to be governed, like juridical acts generally, by the law expressly or implicitly designated by the parties (a.3111(1)) and otherwise by the most closely connected law (a.3112). This freedom of choice is subject to the general restrictions of public order ‘as understood in international relations’ (a.3081), mandatory rules of Quebec (a.3076), mandatory rules of the sole connected country (a.3111(2)) and possibly, those of another closely connected country (a.3079). The restrictions resemble those of a.16, 7(2), 3(3) and 7(1) respectively of the Rome Convention. A. 3113 also establishes a rebuttable presumption of characteristic performance similar to that of a.4(2) of the Rome Convention. France: p.355 Contacts used to Discover the Properly Applicable law (p.357) Many contacts should be considered to determine the properly applicable law in marine insurance. 1. Express choice: most important and usually only contact if the choice is validly made, does not contravene public order/policy or mandatory rules and is not intended to evade the otherwise applicable proper law. 2. Law of the country of contracting or of the place of performance: has lost much of its significance. At most, the lex locu solutionis may determine the currency of payment and may prohibit the performance of some act called for by the contract if that act is illegal under the law of the place of performance. 3. Law of the country in which the insurer carries on its business (or if more than 2, the law of the country in which its head office is situated): 4. Law of the insurance market with reference to which, the contract was made: exception to point #3. 5. The “place of machinery” or “centre of gravity” (place where the whole process of formation of the contract occurs: p.357 6. Policy holder’s residence or place of central administration 7. Forms and the language of the contract: see p.358 8. Location of risk: see p.359 9. Jurisdiction or arbitration clauses 10. The “follow London” clause 11. Inference “in favorem negotii”: insurance contracts are normally held to be subject to the rules of a legal system under which such contracts are valid, rather than to those of a legal system which regards them as illegal. Summary: The foregoing elements assist in fixing the properly applicable law in marine insurance, the law with which the policy is most closely connected. Of course, it is best to determine that law by a means of a consistent methodology. Reinsurance: the insurance of a risk or part of a risk, by the principal insurer with another insurer known as the reinsurer. Marine reinsurance policies are contracts of indemnity. The reinsurance contract may be subject to a law different from the law of the principal contract. See forsik Vesta v. Butcher at p.362. In most jurisdictions, the insured may not sure the reinsurer of his insurance, in the absence of an express stipulation in the policy (direct action). The applicable law: Dicey & Morris reject the law of the place of business/head office of the insurance. Much better is the law of the place where the reinsurance was written: Citadel Ins v. Atlantic Union (p.363): “Mechanics of creation” test. See more cases at p.363. Where many different insurance policies, subject to many different laws, are reinsured by one reinsurance treaty, then greater consideration will be given to the law of the place where the reinsurance is managed. The Rome Convention does not apply to maritime insurance of risks in the EU but does apply to marine insurance, covering risks outside the EU and to all reinsurance, inside and out. The law of the country of the principal place of business of the insurer is generally to be paramount in marine insurance and reinsurance under the Convention, where no other law has been expressly or implicitly chosen by the parties (following presumption of characteristic performance at a.4(2), rebuttable at 4(5)). In short, the proper law of the contract generally governs reinsurance, which is not necessarily the proper law of the underlying primary insurance policy. The proper law is normally determined by the ‘mechanics of creation’ (centre of gravity) test, although the place of management (usually the reinsurer’s head office) factor is more prominent in the case of reinsurance treaties. Direct Action is precluded unless expressly authorized. Direct Action: the process whereby a third party, who has a liability claim against an insured, may proceed directly by suit against the insurer, usually because the insured has, at this point, been declared bankrupt. The third party may so proceed although he has not directly contracted with the insurer. The right is particularly justified in those cases where it is public knowledge that certain contractants, such as ocean carriers, are insured or where the carrier’s own publicity may declare that it is so insured. a statute is almost always required to give the third party such an extraordinary right, although some rare jurisdictions accept stipulations to benefit third parties under the general law. Some statutes permit suit against the insurer whether or not the insured is bankrupt. Other statutes permit suit against the insured or the insurer or both. True direct action does not require that the third party first obtain a judgement against the insured before proceeding against the insurer. Indemnity policies are less adapted to direct action than liability policies because they require that the insured have paid a claim before the insurer is obliged to indemnify the insured. A insurer should not be able to oppose a direct action against it by claiming that under the terms of the policy it is not reasonable until the insured (now bankrupt) has paid the claim to the third party. Thus, the indemnity defence would destroy the whole purpose of a direct action statute. In the same way, however, under a proper (and equitable) direct action statute, the insurer should be able to raise against the third party: 1) all the legitimate defences that the insured would have had against the third party, including late suit by the third party; and 2) all the legitimate defences of the insurer (up to the time of the loss) against the insured under the policy, such as material misrepresentation of the risk at the time of the contracting, default payment of premiums or calls, time for suit, statutory limitation of liability, etc. Just as the insurer should not have different defences under the law, as against the insured and the third party, similarly, the third party should not have more rights than the insured under the law. Direct Action – International Maritime conventions Nuclear Ships Convention 1962: a.XVIII allows an action for compensation for nuclear damage to be brought either against the operator of the ship or against the nuclear damage insurer or any person who has provided the operator with financial security, provided that such a direct action is provided for under the ‘applicable national law.’ CLC Convention: p.367 Direct Action UK: see p.368. Direct Action US: Whether suit is permitted against marine insurers, indemnity insurers and P & I Clubs depends on the wording of the state statute and at times the terms of the insurance contract. See p.369 “Liman Agreements” at p.371 Direct Action Canada: In CL, direct action by third parties against the liability insurers of their bankrupt or insolvent tortfeasors is generally permitted only if a judgement has been obtained against the insured. This is not really direct action. CVL: direction action is specifically permitted in non-marine liability insurance under a.25002502 CCQ. A. 2628 imposes direct action with respect to marine insurance. It is noteworthy that the Quebec provisions permit direct action regardless of whether or not the insured is bankrupt. The Canadian Marine Insurance Act contains no provision on direct action, seemingly leaving the matter to be governed by the applicable provincial/territorial legislation. See issues of constitutionality at p.373. direct Action applies to marine indemnity and liability insurance: p.374. Direct Action – What law applies? – US: p.375 READ! Direct Action – What law applies? – UK: p.377: Most authors advocate the application of the proper law of the insurance contract to the direct action. Australia Direct Action – What law applies? – France: p.379: The admissibility of a direct action by the victim against the insurer of the party responsible for the loss or damage is governed by the law of the place of the wrongful act. In conclusion, it seems correct to apply the proper law of the insurance contract to the right of a third party to sue the insurer, since that right flows from the contractual relationship between the assured and the insurer, which is the principal contact. Ruby SS: under American law, between the broker and the assured, the US broker was justified in cancelling the policy for non-payment of the premium. Unfortunately, when the owner then sued the underwriter in England the CoA also applied American law, holding that the relationship of the assured with the US broker was a question of authority of the agent, and there subject to the law of the country where the agency relationship was created. The English underwriter could accept cancellation of the policy from the American broker for non-payment of premiums without incurring liability to the assured. The English decision can be criticized on the ground that the assured’s rights against the US broker are separable from its rights against the English underwriter, which latter rights should be determined by the proper law of the insurance contract (English law in this case). Had English law been applied, the assured would have recovered from the underwriter since at English law the premium is deemed to have been paid when the policy is issued and the broker is not permitted to cancel the policy. The UK CoA did not realize that the 2 decisions need not be similar. US law was the proper law of the contract between the broker and the assured, and under US law, the broker was entitled to cancel the policy. English law was the proper law of contract between the insured and the insurer and, under that law, the UK court should have held the underwriter responsible to the assured. See Edinburgh Assurance for good example at p.382. Conclusions: Marine insurance should be treated like any other contract under the conflict of laws. One must recognize that many contracts may be involved: between the insurer and the assured, the assured and the broker, between the assured and the underwriter, and the contract or reinsurance. There is also the right arising under direct action. Each may be subject to a different proper law. Ruby v. Johnson & Higgins (p.127 CSBK) See CSBK Edinburgh Assur v. R.L. Burns (p.133 CSBK) “In deciding an international maritime dispute an admiralty court need not choose only a single law to govern all issues; it may apply domestic law to some aspects of the dispute and foreign law to others, depending on the contacts with each issue.” This is a clear case of Depacage. VII. Topic Seven - A Definition of Canadian Maritime Law Article at p.106 CSBK “navigation and shipping” has been expanded while “Civil rights” have been narrowed. Expanded definition of Canadian maritime law has increased the jurisdiction of the Federal Court and it has resulted in certain provincial laws becoming inoperative. i.e. Marine Insurance Act (a consequence of Triglav) resulted in redundancy of the marine insurance acts in various provinces. Proportionate fault in respect of maritime torts other than in ship collisions involving 2 or more ships, has lost its provincial authority without substituting any federal counterpart. Result: confusion Boundaries of Canadian Maritime Law expanded in Tropwood. The trend was continued in Antares Shipping (general maritime law, rather than provincial law, applied to the sale of a ship, Wire Rope Industries, and Triglav. Buenos Aires Maru: Court held that Canadian maritime law applied, stating that it was a body of federal law encompassing the common law principles of tort, contract, and bailment. It was held to be uniform throughout Canada and that it was the maritime law of England as it has been incorporated into Canadian law and it is not the law of any province in Canada. The SCC also defined the second category of “Canadian maritime law” (s.2 Federal Court Act) as the laws that the Exchequer Court would have administered on its admiralty side if it had had an “unlimited jurisdiction in relation to maritime and admiralty matters.” The long terms consequences are that Canadian Maritime Law, both for jurisdictional and substantive purposes, is very largely, if not exclusively, the CL of England as it was incorporated into and subsequently developed in Canada as of 1934. The exception is where the feds have specifically legislated on “Navigation and Shipping.” It is claimed that the date of reception of English Admiralty law is 1934. The Buenos Aires Maru determined that Canadian maritime law was fundamentally English CL, flavoured with a few ‘specialized rules and principles of admiralty.’ This is decision was inconsistent with a number of older Canadian decisions which had held Canadian maritime law to be rooted in English maritime law. This English maritime law was understood to be a body of law distinct from the CL of England. A number of cases (see p.108 CSBK) have applied English Maritime Law, which leads to the conclusion that Canadian maritime law was English maritime law, and not the ordinary municipal law of England. The Civilian Nature of Maritime Law England: Maritime law is civilian in its origins. Among the major elements of English admiralty law that continue to reflect the general maritime law (lex maritima) of Europe, with its civilian background and sources, are maritime liens, the shipowner’s possessory lien on cargo for freight, pre-judgement interest payable from the date of the casualty as an integral part of damages, general average, marine insurance, and bottomry and respondentia. US: Maritime law in the US is also civilian in nature and origin. Canada: In imposing “the CL principles of tort, contract and bailment”, the Court seems either to have created a whole new maritime law in Canada or to have ignored the true nature of maritime law. One may argue that Canadian maritime law flows not from England’s CL, supplemented by a few specialized rules and principles of admiralty but rather from the European Civil Law. This European CVL underlies a discrete and extensive body of English maritime law to which English CL made far more modest, of nonetheless important, contributions throughout the centuries. Subsequent SCC decisions (p.111 CSBK). Ultimately, what falls under maritime law is whether the claim is integrally connected to maritime matters. See conclusions at p.112 CSBK. VIII. Topic Eight - Tort Torts The traditional conflict of law theory applicable to torts in both CVL and CL is based on the principle of the lex loci delecti or the law of the place where a wrongful act is committed. This stems from the territorial theory. The rationale is that persons who are within the borders of a state must adhere to the standards of conduct prescribed by the state. Proponents of the theory also believe that it is compatible with the expectations of the parties, in that people should be able to gauge the risks of their conduct. Some authors like Savigny believed rather that torts and delicts should follow the lex fori because of their relationship to crime, but that theory is generally discredited today. However, in many cases, the place of the wrong is only marginally connected with the whole cause of action, especially in the case of maritime and air torts, due to the mobility of ships and aircrafts. Moreover, the lex loci delicti is sometimes ambiguous, for example, where a wrongful act done in one jurisdiction produces harm in another jurisdiction, as often happens in defamation, pollution and products liability cases. While the loci delicti is a very important contact, the place of the tort is one contact of many (see Babcock v. Jackson). In modern times, the lex loci theory has been redefined as the law of the place where the injury occurred, rather than the place where the wrongful act was committed. England – Tort Based on Phillips v. Eyre, the present tort conflict rule is that the act complained of must be actionable in English international law. Second, the wrongful act must not have been justifiable by the law of the place where it was committed. Actionable: according to the UK Law Commission, a) no action will lie in England in respect of a class of tort unknown to English law; b) the plaintiff cannot recover in England in respect of a head of damage unknown to English Law; and c) the defendant may make use of a defence which is available under English law eve if it is not confined to events which occurred in England. Not justifiable: Chaplin v. Boys interpreted “not justifiable” to mean that the defendant’s conduct must give rise to civil liability in the place where the act occurred. It is not necessary to classify a defendant’s act as tortious or delictual, so long as it gives rise to civil liability. “It is sufficient if by that law the defendant’s liability to pay damages is contractual, quasi-contractual, quasi-delictual, proprietary or sui generis.” However, if the defendant’s behaviour only gives rise to criminal liability or the right to compensation under a statutory scheme under the law of the place of commission, it will not be possible to found an action in tort in England. This is the “double actionability” rule in that the alleged tort must be actionable in both the lex fori and the lex loci. But see its defects at p.434. An exception to the double actionability rule is the most significant relationship test, which appear in rule 203(2) of Dicey & Morris as a supplement to the Phillips rule. The double actionability is not much more than an all-embracing doctrine of domestic public policy of the forum imposed by English courts on foreign torts. It is to the effect that any foreign tort law is contrary to English public policy unless it complies with English tort law. See Draft UK Bill at p.435 which creates 2 basic rules: I) lex loci delicti for personal injury, death and property damage; and ii) the most significant elements rule for all other cases. Each rule is subject to various particular exceptions and one general exception, the real and substantial connection. (see other rules at p.436) Canada Until Phillips v. Eyre, the general rules for the hearing of foreign tort cases in Canada was based on the lex loci delicti theory. See McLean v. Pettigrew at p.437, which is a restatement of the English rule in Phillips v. Eyre. In contrast to the English law, the meaning of ‘not justifiable’ is taken from Mochado v. Fontes and is one of wrongfulness, not simply a case of civil responsibility. Thus, the requirement is less restrictive than the English version and can be fulfilled in Canada by an Act which imposes civil, criminal or penal liability in the place where the wrong occurred. However, there is no exception in the form of the most significant relationship as there is in the UK. See Draft Foreign Torts Act at p.438. Not enacted by any province. Quebec a.3126: x-contractual responsibility is generally subject to the place of the act, but may be subject to the law of the country where the injury appeared if the person who committed the act should have foreseen that the damage would occur there. Furthermore, where the victim and the person who committed the act have common domiciles or residences, then the law of the domicile or residence will apply. See exceptions for manufacturer’s liability and liability for raw materials originating in QC at a.3128 and 3129. Australia Adopted the English double actionability rule with the civil cause of action rule (à la Boys) But Breavington v. Godleman seemingly rejected double actionability, in favour of the lex loci delicti, leaving uncertainty as to whether rules in Phillips v. Eyre still applied. See reform which would create 1) the lex loci delicti and 2) the most significant elements. See p.441. Far better would have been the closest and most real connection rule, with limited rebuttable presumptions and the whole found in a uniform methodology. US Until the 1950s, the rule was the traditional territorial rule, the lex loci delicti. Since then, the most significant relationship (by examining points of contact between the tort and the competing legal systems of law to find out which system has the closest connection with the claim) has gained ground. See history of most significant relationship test at p.442 The Lauritzen-Romero-Rhoditis trilogy: Lauritzen: resolving conflicts in maritime law involves ascertaining and valuing points of contact between the transaction and the states or governments whose competing laws are involved. The criteria, in general, appear to be arrived at from weighing of the significance of one or more connecting factors between the shipping transaction regulated and the national interest served by the assertion of authority. 7 contacts: 1) place of the wrongful act (lex loci delicti); 2) the law of the flag (must prevail unless some heavy counterweight appears; 3) the allegiance or domicile of the injured person; 4) the allegiance of the defendant shipowner; 5) the place of contract (not a substantial influence when the suit is on tort); 6) inaccessibility of the foreign forum; 7) law of the forum. Romero: Extended the Lauritzen approach to all claims in maritime law, not just claims under the Jones Act. Rhoditis: Added the shipowner’s base of operations to the 7 contacts. It also made 2 qualifications: 1) the list of factors was not intended to be exhaustive; 2) the test was not meant to be applied mechanically. See Base of operation at p.444: The 8 criteria must be weighed against each other, and the base of operations criterion does not outweigh the others (see Villar v. Crowley, p.444). But see Fisher v. Agios, p.444 where this was taken too far. See interest analysis: the most significant relationship, merged with the lex loci delicti is the prevailing American Torts rule, as seen in the Restatement second at a.145. (see. p.445). The most significant relationship test goes one step further and is used to discover the appropriate state or national interest under the interest analysis theory. Continuing Influence of lex loci delicti: some courts have taken a long time to move away (p.446) Continuing influence of the law of the flag: still occasionally invoked (p.446) The influence of American interest analysis: Better than lex loci, but closest and most real connection test is better. See also other authorities at p.447ff. (i.e. True Conflicts Rule) Louisiana Comparative impairment is the general rule: the law of the state whose policies would be most seriously impaired if its law were not applied to that issue. p.449 France lex loci delicti. p.449 – See Lautour v. Veuve-Girard and Banque Veuve Morin-Pons (p.449) This is subject to a public order exception, meaning that if the lex loci delicti violates French notions of public order, it will not govern. Lex Loci delicti has been criticised, but Cour de Cassation has shown little interest in applying the most significant relationship approach instead of the lex loci delicti. This has been ascribed to a reluctance to accept diminished predictability in the manner of resolving conflicts problems. ECC Draft Tort Provisions 1972: p.451. Tort and Depacage: In a collision at sea, there is not only one properly applicable law, but many, and each properly applicable law must be determined by the methodology. The possible applicable laws in a collision of 2 ships at sea are: a) the law of responsibility between the ships; b) the law of damages, including pure economic loss and the law of division of damages; c) the law governing presumptions of fault or of causation... see p.451 for all. However, depacage in tort is, unfortunately, less accepted than in contract. Tort and contract: see p.452ff. CL: Problems arise when different laws involved characterize the claims differently. Some product liability claims, for example, are regarded as tortious in England but as contractual in France. See UK Law commission Working Paper 1984 (p.453) which would make it so that the proper law of the contract would govern the validity of the contractual defence, and double actionability would determine the effectiveness of that defence in the UK. CVL: partially resolved the problem by prohibiting cumul, the combination of contractual and x-contractual recourses (see 1458 CCQ). Quebec also has a conflicts rule to ensure that the law of the contract controls any claims for reparation arising from breach of contract (a.3127). In consequence, claims arising out of contractual violations are deemed contractual for conflict purposes, thereby overcoming the whole problem of characterization, encountered in the CL, wherever cumul (claims in both contract and tort) is permitted. Solution: The problem of contractual defences to delictual claims still remains, however, in some CVL and CL jurisdictions. The closest and most real connection, applied in a consistent methodology to both questions of contract and tort, appears to be the sensible solution, because it avoids the danger of imposing an artificial depecage on the claim and the defence. Conclusions The territorial theory (lex loci delicti), the law of the flag, double actionability and interest analysis all have defects which result in uncertainty and lack of uniformity in the choice of law. The proper law of the tort, being the most significant relationship, is a much better single rule. It is clearer and more certain than the proposed hybrid (lex loci delicti/most significant elements) rules of the UK and Australia, with their exceptions and escape hatch (most real and substantial connection) Whatever rule is employed, it must be applied in conjunction with such principles as evasion/fraude à la loi, international public p/o of the forum and mandatory rules in national law and in international conventions. a single rule or even group of rules is not satisfactory unless there is a consistent application of these rules. see p.15 CSBK Tetley Article at p.18 CSBK In 2 cases, Tolofson v. Jensen and Lucas v. Gagnon, the court rejected the “actionable and not justifiable” tort rule of English CL of Phillips v. Eyre, and embraced the territorial theory – the lex loci delicti. Thus 50 years after the SCC’s own version of “Actionable not justifiable” in McLean v. Pettigrew has been discarded. Reasons given (see p.19): certainty and uniformity in a federal state; order and fairness; and comity domestically and internationally. SCC affirmed that there are exceptions to the lex loci delicti rule: real and substantial connection test, forum non conveniens. Depecage may be an answer: the place of the accident could govern the law of responsibility, but the measure of damages, including interest, could be subject to the law of the place where the damages were suffered. See more at p.21. See UK (p.24), US (p.25), Australia (p.25), France, (p.26), Switzerland (p.26), EU (p.26), Louisiana (p.27), PQ (p.27): a.3126 applies the lex loci delicti. Of the injury appears in another country, the law of that country governs (lex loci damni), provided that the tortfeasor should have foreseen that the damage would occur there. Tolofson only applies to CL provinces, and to areas under federal law. Orden v. Grail (p.137 CSBK) The determination of whether a provincial statute is constitutionally applicable in the context of a maritime negligence law action occurs according to a 4-part test. First, a court must determine whether the subject matter affected by the statute falls within the exclusive federal competence over navigation and shipping. If it does, the second step is to determine whether a counterpart to the statutory provision upon which the party seeks to rely is present within existing Maritime law. If no such counterpart exists, the third step involves the court in determining whether or not it is appropriate for Canadian non-statutory maritime law to be altered in accordance with the principles for judicial reform of the law developed by the court. Fourth, if judicial reform of the law is inappropriate, the court must determine whether the particular provincial statutory provision is constitutionally applicable. A provincial statute of general application will be inapplicable in a maritime negligence law context where this application would have the effect of regulating indirectly federal maritime negligence law. See also policy reasons at p.138. Tolofson v. Gagnon (p.148) the rule of private international law that should generally be applied in torts is the law of the place where the activity occurred – lex loci delicti. See benefits at p.149. Collisions: p.466-7 Topic Nine – Presumptions and Proof Presumptions are a means of making proof and have traditionally been divided into rebuttable and irrebuttable presumptions. Particularly in the CL, rebuttable presumptions are procedural and therefore of the forum and irebuttable presumptions as substantive and therefore of the proper law. CVL: Under the CVL, there only 5 ways of making proof: 1) by presumption; 2) by writings; 3) by oral testimony; 4) by confession; and 5) by oath. Presumptions are either of law or of fact (a.2846 CCQ) Legal presumptions are of two types: 1) the first comprises rules of law which, under certain circumstances, preclude contrary proof and are known as presumptions juris et de jure (i.e. conclusive, absolute or irrebuttable presumptions); 2) rules of law which establish conclusions, which may be contradicted by a level of proof fixed in law or determined wholly by the trial judge. These contradictable presumptions are known as presumptions juris tantum (i.e. disputable, simple or rebuttable presumptions) Examples of legal presumptions: a.1350 CC France (p.595) Presumptions of fact: a.2849 CCQ. Presumptions of fact are rebuttable. CL: UK: Only presumptions of law have been said to have legal effect in the CL: presumptions established either by statute or by case law. US: Former Uniform Evidence Rule 13 defined presumption as: an assumption of fact resulting from a rule of law which requires such fact to be assumed from another fact found or otherwise established in the action. Presumptions in maritime law: Cargo found wet after a voyage and testing positively for sodium chloride is an example of a presumption of fact. Presumptions of fact are wholly decided by the TJ. They are totally discretionary. If, however, a senior court in a CL jurisdiction (i.e. A Supreme Court) should decided that salt on cargo at discharge indicated evidence of responsibility on the part of the carrier, then this judge-made opinions on facts become presumptions of law. The Pennsylvania rule is a legal presumption and is an example of a judicial inference from a fact becoming a presumption of law as a result of a decision of the US supreme Court. Rebuttable Presumptions of law: May be judge-made or by statute, as was pointed out in respect of the Pennsylvania rules. See examples: a) clean bill of lading – apparent good order; b) last carrier responsible; c) clean bill of lading – under deck storage; d) Vallescura Rule; e) Collision with a stationary object; f) sinking in calm water; g) authority of a charterer to bind the ship. Irrebuttable presumptions of law: examples at p.600 Almost irrebutable presumption of causation: example is Pennsylvania rule: p.601. Note that the Pennsylvania Rule is incompatible with proportionate fault. The problem arises because the US has not adopted the Collision Convention 1910 which contains 2 major principles: 1) all legal presumptions of fault are abolished (a.6) and 2) that responsibility is shared proportionally (a.4). By the decision in Reliable Transfer, the US adopted proportional fault but did not rule on legal presumptions. Presumptions and the Conflicts of Law – CL: presumptions of law historically were divided into 2 groups: rebuttable and irrebuttable. At CL, presumptions were usually classified as rules of evidence and therefore were generally considered procedural in respect of the conflict of laws and subject to the law of the forum. Nevertheless, irebuttable presumptions were classified as attached to the right, arising either in the contract or from the tort and therefore substantive. In consequence, they were deemed subject to the proper law of the tort or the contract in question. Rebuttable presumptions, on the other hand, were deemed procedural and therefore of the forum. Presumptions and the Conflicts of Law – CVL: presumptions of law (whether rebuttable or irrebuttable) have usually been regarded as intimately connected with BoP and subject to the proper law. Presumptions of fact, however, have been seen as part of the “administration of evidence” by the TJ and therefore a procedural matter governed by the lex fori. The civilian distinction seems to be more realistic than its common law counterpart. Presumptions are part of BoP and evidence: Very properly, presumptions usually follow the conflict of law rules for proof and evidence. Indeed, the rationale behind presumptions is that each party has a special knowledge and has the burden or proving that evidence. See quote at p.604-5. Rules of Evidence and therefore procedural?: Generally, at CL, presumptions were considered to be rules of evidence and as such procedural. This was the classic and accepted conflicts rule and as such, presumptions (especially rebuttable presumptions) were subject to, and valid only if in compliance with, the law of the forum. In the same way, most rules of evidence were deemed strictly procedural and were therefore also subject to the lex fori. That even rebuttable presumptions are subject to the law of the forum is neither true nor realistic. For example, the Hague Rules presumption at a. 3(4) that a clean BoL attests to the good order and condition of the goods at loading, is rebuttable but is part of the substantive law. Thus, when the applicable foreign law is the Hague Rules, and is recognized as such by the forum court, the forum court should recognize the rebuttable presumption found in the Hague Rules. See p. 606 for more. An excellent example in which the English forum did recognize a foreign presumption as substantive (and therefore accessory to the foreign lex causae which governed the case) is found in Re Cohn (p.606). See also the Har Rai (p.607) The Pennsylvania Rule is an American presumption of causation to the effect that any violation of a collision regulation is presumed to have caused the collision. The rule was declared to be substantive in ISK v. USA (p.607). See also s.134 of the Restatement Second: the abolition of presumptions by art. 6 of the 1910 Collision Convention, which Japan had adopted, affected the ‘decision of the issue’ and this, the existence or absence of the presumption was substantive. Erie doctrine: under the Erie Doctrine, a federal court, in exercising its diversity jurisdiction, sits as another state court. see p.608. CCQ: p.609: a. 2846-9. See also 3130: leaves presumptions in each case to their proper law, subject to the exigencies of the formalities of the forum. The Restatement second: The distinction between rebuttable and irrebuttable presumptions is complicated and leads to the conclusion that in some cases that the two groups of presumption are subject to a different rule. In reality, all presumptions are subject to their proper law which may be of the forum or of a foreign law. p.609-610. Netherlands: “the law applicable to the collision liability shall determine the BoP and the authority of presumptions.” p.610 Rome Convention: Although it excludes evidence and procedure from its consideration at a.1(2)(h), a.14(1) means that presumptions (and questions of BoP) follow the law of the contract. Thus, the formal validity (existence) of the contract (and presumptions in that respect) may be proved by the law of the forum or the proper law of the contract, provided the forum can so administer the latter law of proof. This is very wise. p.610-611. A.10 does not refer directly to presumptions but it disposes of the historic substance/procedure distinction in respect of 1) interpretation; 2) performance; 3) within the limits of the powers conferred on the court by its procedural law, the consequences of breach, including the assessment of damages in so far as it is governed by rules of law; 4) the various ways of extinguishing obligations, and prescription and limitation of actions; and 5) the consequences of nullity of the contract. Conclusions: The classic distinction of rebuttable presumptions being of the forum and irrebuttable presumptions being substantive is no longer tenable, if it ever was, and must be discarded. Presumptions, whether rebuttable or irrebuttable, are usually attached to or follow the proper law of the legal relationship. They should at least be recognized as part of the proper law of the tort or the contract whenever the forum recognizes that proper law. A better solution is to recognize that presumptions have a proper law of their own, which should be determined in each case by a uniform methodology. One must distinguish between 1) BoP, 2) order of proof, 3) formalities of the forum court. BoP only decides who must prove a single question of fact. Presumptions are an example of BoP and should follow the proper law of the legal relationship. Order of proof is the order in which a number of facts must first be proven by claimant, followed by other facts proven by defendant and finally counterproof by claimant. Thus order of proof has its own proper law. Conduct of the trial is the manner in which a trial or legal proceedings are carried out and is a constituent part of the overall formalities of the forum court. What oath is administered, whether the court or opposing attorneys question witnesses are formalities of the court. The order of proof, for example, of a cargo claim under the Hague rules must be distinguished from the conduct of a trial. The order of proof of the Hague Rules is apart of those Rules and must be recognized as part of the substantive proper law. The conduct of the trial is purely a question for the lex fori and is the collection of local rules in respect to where and when and with what formalities trials are conducted. Conduct of trial is part of the formalities if the forum court. Presumptions assist in the fixing the BoP of a specific legal question. Order of Proof is the order in which proof is presented by both parties. Presumptions, BoP and order of proof are subject to the proper law of the legal relationship. Conduct of the trial and formalities of the forum court are subject to the lex fori. It is the forum court, however, which decides the conduct of the trial and the formalities of the forum, and what is the proper law of the presumptions, of the BoP and the order of proof. ISK v. USA (p.140 CSBK) There is no doubt that a collision in foreign territorial waters is governed by the law of the place of the collision. This jurisdiction usually has the most significant relationship to the occurrence and the parties. See Pennsylvania rule at p.141. Neither purpose (enforce obedience of the violated statute and simplifies adjudication of collision cases) is sufficiently compelling to apply Penn Rule. Nor is the Penn rule considered a part of the procedural law of the forum. It is more akin to substantive law than to rules of procedure concerned primarily with judicial administration. However, a.6 precludes legal presumptions without regard to whether they rest on judicial or legislative authority. IX. Topic Ten – Division of Damages Chapter XV – Division of Damages (& Collision) The three methods of Apportioning Damages: Contributory negligence: Originally, in the CL, contributory negligence of the plaintiff in even the smallest degree was a bar to any recovery from the defendant also at fault. Thus, when both parties to a claim for damages arising in tort were at fault, neither party recovered anything. This is now attenuated by such doctrines as the “last opportunity rule”, where the Court would not condone the plaintiff’s fault, but would grant full damages to the plaintiff because the defendant had the last opportunity of avoiding the accident but negligently failed to act. Most jurisdiction have abolished contributory negligence. Divided damages: See history at p.477-8. The historic rationale behind divided damages rule in maritime law reflected the perilous nature of transport on the world’s oceans, as a result of which all parties to the common adventure were expected to share its burdens and benefits equally. Proportionate Damages (comparative fault damages): Adopted by the Brussels Collision Convention at a.4, damages are awarded against each party according to his degree of fault. UK: outside of admiralty, contributory negligence was used until the Law reform (contributory negligence) Act which imposed the principle of damages based on proportionate fault. The divided damages rule for ship collisions seems to have existed for many centuries before that. By allowing divided damages rule for ship collisions to be applied in all courts and not merely Admiralty court, maritime law avoided the contributory negligence rule in respect of ship collisions. Proportional damages were adopted following Collision Convention of 1910 (a.4), and implemented through the Maritime Conventions Act (s.1). Canada: The contributory negligence rule in tort remained in the CL provinces until modern statutes were adopted by each province abolishing contributory negligence as a complete defence. QC’s proportionate fault (a.1053) was not firmly established until 1899. In maritime law, divided damages existed (see p.481). In 1914, proportionate rule is adopted by the Canadian Maritime Convention Act and now exists in the Canada Shipping Act (s.565(1) & (2)). US: Contributory negligence has been abolished slowly and piecemeal in the US by varied state and federal legislation. Unfortunately, the US never enacted the Brussels Collision Convention or the proportionate fault rule. In consequence, the divided damages rule exited in the US until 1975, resulting in forum shopping and uncertainty. The divided damages rule was lessened in its severity by the major-minor fault rule, whereby a court could overlook a minor fault in one vessel where the major fault in the other vessel was significant to account for the disaster. This was a discretionary rule and therefore vague and unreliable. The severity of the divided damages rule was also lessened by the last clear chance rule which permitted the court to determine, in certain circumstances, which of the 2 parties at fault could have avoided the collision. This was difficult to apply since it was difficult to draw the line between the final fault before the impact and what went on before. In 1975, the Supreme Court in US v. Reliable Transport imposed the proportionate fault rule with respect to ship collision damage (other than damage to cargo, persons and other innocent third parties). In so doing, it has done away with the last clear chance rule, the last opportunity rule, the major/minor fault rule and similar rules. However, it did not impose proportionate damages on cargo. (see p.485) See reasons for not changing it at p.486. Pennsylvania Rule if a very heavy presumption, not of fault but of causation. The collision convention 1910 adopted comparative fault and abolished all legal presumptions of fault (a.6). The US is not a party to the Convention and so has not abolished presumptions of fault, although it has adopted comparative fault by Reliable transfer. Prof. thinks that Penn Rule is incompatible with comparative fault but most US decisions are not of this view. When 2 ships collide and are both at fault, they are jointly and severally liable for the claims of third parties (i.e. passengers). When such a joint and several tortfeasor settles with such a third party, the settlor may not obtain contribution from the other tortfeasor in proportion to the latter’s degree of fault, because the damages and proportionate faults have never been determined by a court. France: See history at p.488 but essentially proportionate damages. Maritime law adopted divided damages. See also Commercial Code of 1807 at p.489. Law of July 15, 1915 gave rise to proportionate damages for maritime law. Innocent Third Vessel: A difficult problem arises if 2 vessels at fault collide and a third vessel collides with them at the same time or shortly thereafter. If the first 2 vessels are at fault 40% and 60% respectively, may the third vessel recover 100% of its loss from either vessel or only 40% of its damages from the first, and 60% from the second? Collision Convention 1910, by referring to “and even third parties” at a.4 leads one to believe that an innocent third party is treated like cargo on the two colliding vessels: it recovers only proportionally. UK: Pursuant to The Miraflores, where 3 vessels are at fault in a single collision or in a connected collision, each recovers only proportionally, taking total damage as 100%. When one ship is innocent courts have permitted that vessel to recover fully from either vessel or partially from both. This is because the Maritime Convention Act differs from the Collision Convention in that there is no reference to third parties. Canada: no decisions exactly on that point, by Russel v. The Gloria refers to innocent cargo on an innocent third vessel and its right to recover in full. Canadian courts would follow British example. See p.491-2 for reasons why. Thus, an innocent third vessel and its cargo may recover in full from the other 2 vessels jointly and severally. France: p.492 US: the US did not adopt the Collision Convention and although the US courts applied the divided damages rule until Reliable Transfer, they have always given, and continue to give, innocent parties full recovery, including cargo, persons and vessels. Conclusion of Division of Damages: In the 19th C, the CVL had adopted the proportionate fault rule, while the CL did not finally shed contributory fault until after WWII. Maritime Law adopted the divided damages much earlier. In the years following 1910, maritime nations in both CVL and CL jurisdictions (except the US) adopted the proportionate fault rule for collisions at sea by putting into effect the Collision Convention 1910. It is interesting that France, which already had a proper proportionate fault rule, in adopting the exact text of the Collision Convention, may have taken a step backward with respect to innocent third vessels, because they may not be able to recover fully from the vessels at fault. Division of Collision Damages – The Conflict Problem The law applicable to division of damages should not be decided without considering what laws apply to the other legal consequences of a ship collision at sea, which laws are not necessarily identical. Thus, depecage is necessary. Possible problems are at p.494ff. (including marshalling) Division of Collision Damages and Conflicts – US Because the US adopted proportionate fault rule, most conflicts of law in respect of proportionate fault are avoided between the US and those countries that have adopted the Collision Convention. Cargo claimants on one vessel under US law, however, may recover 100% from the colliding vessel even if that vessel is only partially at fault. This gives rise to conflicts. See p.498ff. Division of Damages and Applicable Law: Division of damages usually follows the law of collision liability. Thus: 1) what is the law of the collision liability? 2) should division of damages follow the law of the collision? 3) if not, what law should apply to division of damages? Some conventions (see p.500) apply the law of the forum to a collision on the High Seas between ships of different flags. This favours forum shopping. However, the forum court should study all the connecting factors (contacts) concerning the collision and the ships themselves. Where a flag of convenience is involved, the forum court should lift the corporate veil. It is noteworthy that by a.7(6)(b) of the Netherlands Act, the law applicable to liability for collision must also govern division of damages. Should this always be the case? The law of collision liability should not be automatically applicable to division of damages. It would be better if all the contacts affecting the division of damages were weighed, instead of the application of a single rule of thumb, such as the law of the collision or the lex loci delicti or the lex fori, in order to arrive at the properly applicable law. The contacts to be weighed are the flags of each ship, the place of the collision, the real place of ownership of each ship, the real place of management and operation of each ship. Division of Damages and Jurisdiction p.500-1 Conclusion Single solutions are unsatisfactory to determine the law governing division of damages in a ship collision case. Rather, all the factors must be considered: p.501. Nor is it logical or satisfactory to hope to find a single law for all the legal problems of a ship collision – responsibility for the collision, the personal injury claims, the cargo claims, the contractual claims, the division of collision damages, presumptions, economic loss and shipowners’ limitation. Rather the proper law of each of these problems must be ascertained on its own. X. Topic Eleven – Obligatory Limitations Shipowner’s Limitation of Liability: universal concept amongst shipping nations and recognizes the perilous nature of maritime transport. Limitation permits a shipowner, whether with respect to liability arising from collision, allision, grounding, cargo damage, death or personal injuries, to claim a limit upon his damages and was originally devised to promote shipping. Today, its social necessity and its value have been questioned, but it is quite unlikely to be abolished. Rather, it has been the subject of extensive international scrutiny and improvement not only in the international limitation of liability conventions, but has been extended into the international conventions on pollution and noxious substances. CL – Limitation by statute: limitation of liability is exclusively the product of Statute. See history at p.508. CL systems, with the exception of the US, are characterized by a limit based upon a) the tonnage of the ship; and b) the value of the ship before the liability-producing event occurred. CVL: Limitation by Lex Maritima: Limitation is an ancient concept (see history at p.509). The limitation fund was based on the value of the ship after the incident which brought about liability, like the US system. In the CVL, there are 2 theories of limitation: “abandonnment”, best associated with France, and “execution”, applied in Germany and Scandinavia. By virtue of abandonment, a shipowner, while personally liable, was able to absolve himself of all claims by relinquishing his ship as well as any pending freight. Under the execution approach, the shipowner was not personally liable; instead, in rem claims were launched against the ship and pending freight, and these claimants received priority by virtue of maritime liens. Two classic Conflict Problems: Originally, the law of a ship collision and all surrounding matters such as limitation were subject to the lex loci, including the right to limit and the size of the limitation fund. More recently, 2 major questions have characterised classic conflicts theory as applied to shipowners’ limitation. The first was to determine which law would provide the right to invoke limitation. The second concerned the law which would govern the size of the limitation itself. These were usually seen as mechanical solutions: 1) the right to limit was seen as substantive, to be governed by the same law which determined the responsibility for the collision; 2) the actual size of the fund was characterized as a matter of procedure to be determined by the lex fori. However, there are many more questions than that. See p.510. Each of these problems has its own properly applicable law, which, of course, need not be different. Nor is there necessarily a single law, either of the forum or any other jurisdiction, which applies to a ship collision. After finding the proper laws to each of the above legal issues, should decided if there is not a more convenient forum in which to decide the case. Conflict Directives in International Limitation Conventions 1924 Limitation Convention: p.510. 1957 Limitation Convention: p.511: 1976 Limitation Convention: p.512 National Approaches to Limitation and Conflicts France: Party to 1976 Limitation Convention and for both international and internal waters. Lenten v. Vigouroux: In the case of a collision on the High Seas, the law which determines the responsibility for the collision will also be applicable to the claim for limitation of liability. The court pointed out, however, that the applicable law in this particular case for both responsibility for the collision and limitation of liability was the lex fori. But see debate at p.514 UK: English authorities have believed that the measure of damages (as opposed to heads of damage and remoteness of damages) is procedural. The question of limitation of damages in tort has, however, generally been determined by a combination of the lex loci delicti and the lex fori, in accordance with the double actionability rule. With respect to limitation of shipowners’ liability, however, it appears that both the right to limit and the calculation of the fund have been governed by English Maritime law, regardless of the place of the casualty, giving rise to the limitation proceedings and the nationality of the ships involved. The current legislation is the Merchant Shipping Act 1979, which implements the 1976 Limitation Convention. It is an obligatory forum court statute, applicable to all shipowners’ limitation cases, including cases arising out of collisions in foreign territorial waters, regardless of the flags of the ships or the nationality of the parties or any other factors. See proposed reforms at p.516. Canada: party only to 1957 Convention. Theorists also adhere to the UK distinction between substance and procedure, with the limitation of liability being procedural, as part of the quantification of damages, and the right to limit being substantive. US: law on shipowners’ limitation of liability was adopted in 1851 and is in need of modernization. The limitation is based, not on tonnage, but on the value of the vessel after the collision, plus the value of any earned freight. There is a limit of $420/ton, applicable to death and personal injury claims only. Only owners and demise charterers may invoke the US limitation. Seaman are unaffected and must take suit under the Jones Act. The American statute also requires that all limitation complaints be files within 6 months after the shipowner has received written notice of the claim. First Restatement: s.411 properly stipulated that the law of the limit itself was distinct from the law of the responsibility for the collision, but then invoked the law of the forum for all aspects of limitation. Second Restatement: each issue in a ship collision, including the right to claim against the ship in contract and tort, the right to limitation, the calculation of the fund, marshaling, etc., is subject to its own proper law, based on the most significant relationship. However, American courts have not taken the same position as the Restatement Second. Titanic applied lex fori (US limitation law) to a British ship on the High Seas. The Norwalk Victory held that the nature of a limit was not necessarily procedural, to be decided by the lex fori. Defects of Titanic and Norwalk Victory: a) they failed to realize that many more laws are involved in a ship collision than the law of the responsibility for the collision, the law of the right to limit and the law of the valuation of the fund; b) there are suggestions that the law of the responsibility for the collision attaches to the law of the right to limit. The presumed ratios of these cases were nevertheless accepted in a number of US decisions. See Korean Wonis One at p.522: illustrates the desire to impose Lex fori. Conclusion is based on the erroneous belief that a single law decides all legal questions to a ship collision and is symptomatic of the desire to avoid a proper determination of the proper laws of the right to limit, of the calculation of the fund, etc. Because the US has its own shipowners’ limitation of liability law, having failed to ratify the conventions, conflicts constantly arise. US courts usually refuse to recognize foreign limitation procedures and decrees, with the result that there may be 2 funds, as in Bethlehem Steel. Conclusion: US Conflicts law on limitation of shipowners’ liability is inconsistent, based on divergent theories: The First Restatement called for the lex fori, the Restatement Second called for the proper law of each issue in tort, which would include the proper law of the limitation. The Restatement Second, unfortunately, was not followed. Both the Titanic and the Norwalk Victory are inconsistent giving varying rules, which have been followed and rejected in subsequent decisions. In most cases, American courts have managed to apply US law, the lex fori. China: p.523: applies the lex fori to the limitation of liability for maritime claims. Presumably this means both the right to limit and the quantification of the fund. This will lead to forum shopping. Netherlands: p.523. Three important Conflict Limitation Cases: 1. Bethlehem Steel: The Court properly found that the proper law of the claims for damages and for economic loss was Canadian. Thus no pure economic loss could be awarded in virtue of Canadian law as it was at that time. The proper law of the right to limit was also Canadian. The proper law of the fund was Canadian as well – there being a closer and more real connection to Canada. This case exposes the weakness of the knee-jerk application of the lex fori to the limitation fund. When limitation proceedings are taken in 2 jurisdictions, the lex fori theory is illogical and untenable. Thus, the US court applying forum non conveniens should have stayed the American action and had the claim tried in Canada with a Canadian fund and Canadian distribution under Canadian law. 2. Arctic Explorer: Decision is very satisfying... look at it at p.528. 3. The M/V Swibon: attempt third party reconcile Titanic with Norwalk Victory, arriving at a 2-tier test, which presumably satisfies both decisions, and then also uses additional, more logical reasoning to find the proper law and thus arriving at the same conclusion. XI. Topic Twelve - Damages DAMAGES – ECONOMIC LOSS, CURRENCY AND INTEREST Damages consist of the principal sum (and is some cases, punitive damages), the currency in which a contract or judgement should be paid, and interest at a certain rate, from a certain date. Restituo in integrum is the placing of the victim of a breach of contract or of a tort/delict in the same position he was in before the event. (see a.1149 France, which includes loss of profit in tort and contract) Damages in contract – CVL: damages are those which are direct and foreseeable. See a.1150 CC (France) at p.722. Contract – CL: 2 rules out of Hadley v. Baxendale: 1) damages which arise naturally, i.e. damages which arise naturally from the breach or which, at the time the contract was made, the defendant knew or should reasonably be expected to have known would arise from the breach; 2) damages which arise from special circumstances, i.e. damages which arise from special circumstances communicated to the defendant at the time of making the contract. Tort: CVL: Damages in delict in the CVL are those which are direct and immediate and include “perte de gain” or “loss of profit.” Damages in delict (and fraud) need only be direct and immediate; foreseeability is not necessary (a.1151 CC (France)). Loss of profits (including economic loss) has traditionally been recoverable in France, in delict, where its occurrence is a direct and immediate consequence of the fault of the defendant, on the basis of the restitutio in integrum. See example at p.724. See also Germany on the same page. Tort – UK: rarely awarded economic loss where the claimant has not also recovered direct physical damage from the defendant. Reliance losses caused by negligent advice are an exception, provided the loss was reasonably foreseeable and there existed a special relationship between the parties. Murphy v. Brentwood confirmed opposition to compensation for pure economic loss. Tort – US: It was thought that to allow PEL would allow liability in an indeterminate amount for an indeterminate time to an indeterminate class. Robins Dry Dock followed this principle but exceptions exist. See p.725. Tort – Canada: SCC allowed PEL in Jervis Crown: PEL is prima facie recoverable where, in addition to negligence and foreseeable loss, there is sufficient proximity between the negligent act and the loss. Tort- Australia: see p.727 Damages and Conflict of Laws: Traditional rules: Heads and remoteness of damages have traditionally been held to be substantive in contract, while in tort they have usually followed the law of the tort. Measure of damages has traditionally followed the law of the forum. None of the distinctions is clear, and in reality, damages have a proper law of their own, which is usually the law to which they have the closest and most real connection. This is true with respect to remoteness of damage, heads of dame in contract and tort, and measure of damages. International Conventions: Arrest of ship Convention: p.728 Rome Convention: The convention subjects assessment of damages to the law applicable to the contract only in so far as assessment is governed by “rules of law.” Where the assessment is treated as a question of fact, it will continue to be subject to the law of the forum. UK Law Commission: proposes no change in the present rule whereby the applicable law in tort and delict determines what heads of damage are available and the measure or quantification of damages under those heads is governed by the lex fori. This is regrettable. US Restatement Second: Damages in both contract and tort follow the law of the juridical act and the law of the tort (s.207 for contracts, 171 for torts). Unfortunately, some American courts have taken the view that measure of damages is procedural. Canada: uses traditional distinction between heads of damage and measure of damage rooted in the English CL. In QC, a.3126-7 CCQ suggest that damages, whether contractual or x-contractual, follow the law of the contract or the delict. US & Canada – economic loss – collision: In conflicts of law between Canada and the US over damages in collision cases, the courts in both countries have held that the right to recover for economic loss depends on the law of the place of the collision. Australia: see p.730. Conclusion – damages: Modern conflicts legislation, both national and international, should dispense with the outmoded and inadequate substance/procedure dichotomy as applied to heads, remoteness and measure of damages and should readily acknowledge (1) that damages in conflict cases are subject to their own proper law, and (2) that the proper law of damages is the law with which they are most closely connected, as determined by a consistent methodology, rather than by the mechanical application of artificial and rigid distinctions which no longer correspond to reality. The Currency: UK: Before Miliangos, foreign currency had to be converted into sterling. After, judges could give judgement for an amount expressed in foreign currency. In subsequent cases, courts have rendered judgements in the currency stipulated by the contract or the currency in which the expenditure or loss has been felt, on the basis of restitutio in integrum and the reasonable foreseeability of the damages sustained. See principles at p.732. Date of conversion at p.733. Conclusion: The English rule that awards may be made in foreign currency and that the exchange rate (where enforcement is necessary) is of the date of payment is correct, provided that (i) interest is awarded at the average prime bank rate of the jurisdiction of the foreign currency; and that (ii) the pre- and post-judgement interest is compounded until payment. In this way, complete resitutio in integrum will be provided, because interest represents the inflation rate of a currency as well as the cost of borrowing. To order payment of the debt in one currency and interest in another currency may not take into account the inflation of the currency of the debt, which the interest rate of the place of currency would reflect. Canada has not followed Miliangos. See s.12 of Currency act at p.734. See date of conversion: breach date (date the loss was incurred). US: foreign currency allowed (p.738). Breach date rule (p.740). See also interest at p.741. France: not restricted, but usually made awards in French currency. Date of conversion at p.742. EU: Among member states, debts contracted in the currency of one MS are payable in that same currency in any other MS. Conclusion: The restitutio in integrum principle militates in favour of awarding damages and interest in the currency in which the loss is felt. This is often a foreign currency. National legislation prohibiting such awards is archaic and should be repealed. The Date of Conversion for Purposes of Enforcement: where the debtor, against whom the judgement is rendered, has the foreign currency in his possession and voluntarily pays the judgement debt in that currency, no conversion date is necessary. Where the debtor must purchase the foreign currency in order to pay the judgement debt voluntarily, the conversion date will, of course, be on the date on which the foreign currency is so purchase. However, what happens when debtor refuses to comply? UK: judgements cannot be enforced unless they are expressed in terms of pounds sterling. For that reason, judgements rendered in foreign currency in the UK often order payment to be made in the foreign currency or in its equivalent in sterling. Should the judgement have to be enforced against the debtor, the foreign currency in which the judgement was expressed must first be converted into sterling. This raises the question of the date of conversion. In Miliangos, it was held that conversion for enforcement should be as of the date of payment, meaning the date on which the enforcing court authorizes payment in terms of sterling. Canada: because the rendering of judgements expressed in foreign currency is prohibited by the Currency Act, the question of the date of conversion for purposes of enforcing such judgements does not arise. US: a judgement rendered in foreign currency may be satisfied either in that currency or in the USD equivalent. This ensures that the judgement is enforceable. The conversion date recommended by the Restatement Third is the date of levy. See Uniform Foreign Money Claims Act at p.745. Recognition of Foreign Judgements Rendered in Foreign Currency: see CCQ at 3161. P.746. See also US at p.746. Interest: CVL: Interest is awarded as part of the “perte de gain” (loss of profit), to which claimants in contract and in delict are entitled (see codal provisions at p.747). CL – UK: CL jurisdictions have been more restrictive as to interest. But Lord Tenterden’s Act, at s.28 opened the door slightly. See further evolution at p.748. Thus, the awarding of damages is a discretionary remedy of the courts, and not a right of the judgement creditor. CL- Canada: see p.749. Admiralty: interest has been an integral part of damages in Admiralty. See p.749. Pre-judgement interest: should be awarded, except in exceptional circumstances, because the creditor has been deprived of the use of his money. See US approach at p.750. Rate of interest: see p.752ff. Conclusions: Following the tradition of Admiralty law, rooted in CVL, pre-judgement interest should be awarded as an integral part of damages, in all cases, in the currency of the loss, in both contract and tort, compounded at the average prime rate of the currency in which that loss or damage was sustained, from the date of the loss or damage to the date of judgement. Post-judgement interest should be awarded at the average prime bank rate of the currency of the loss for the period since the date of judgement. Interest in the Conflict of Laws CL: the right to interest has traditionally been regarded as subject to the proper law of the contract, whether the claim is for the recovery of the contractual debt or for damages for the breach of contract. In tort, some cases have held that the interest payable on the damages awarded are determined by the law governing the substantive tort issues, but the double actionability rule would make the tort plaintiff’s recovery of interest dependent upon this being entitled to interest existing under both the lex loci delicti and the lex fori. The rare of interest, as opposed to the right to claim it, has been held to be governed by the proper law of the contract as regards the contract debt itself. As regards damages payable for breach of contract, the lex fori has been applied on the basis that the interest rate is a matter of measure of damages and therefore is a procedural matter. The position in tort cases appears unclear as there is no authority directly on the point. Where the judgement is given in foreign currency in the UK, the rate of interest will ordinarily be determined by the law of that same currency. CVL: damages (including interest) for breach of contract is assessed in accordance with the proper law of the contract. In delict, it appears that the lex loci delicti commissi is determinative of damages and interest, as well as of responsibility generally. Delictual damages paid in France must be paid in French Currency. Rome Convention: stipulates that the law of the contract governs the consequences of breach of contract, including the assessment of damages in so far as it is governed by rule of law (a.10(1)(c)). See more at p.758. US: majority position is that both the right to recover pre-judgement interest and the rate of such interest are substantive matters, subject to the proper law. (see p.758). Conclusion: The awarding of damages is at the discretion of the court, depending on the proof made of the loss suffered by the claimant. The awarding of restitution in integrum should not be refused because of ancient and archaic legislation, unsubstantiated decisions and rules of thumb with respect to economic loss. Nor should courts refuse to grant awards in foreign currency, at realistic rates of compound interest, running from a date which properly compensates the victim. To avoid loss to the victim, as the result of inflation, awards should be in the currency of the loss or of the contract, with pre-judgement interest at the prime rate (compounded) of that currency. The interest will then automatically include inflation. If conversion is necessary (because judgement is not permitted in the foreign currency of the loss) then the judgement should order conversion at the time of the loss, with pre-judgement compound interest at the average prime rate of the currency of the forum. Where awards in foreign currency are permitted, but there is no voluntary enforcement of a judgement rendered in a foreign currency, the order of the seizure after judgement of the assets of the debtor must take into account a date of conversion which provides restitution in integrum to the judgement creditor, including pre- and postjudgement interest compounded. Damages, economic loss, currency and interest each has its properly applicable law to be determined by a consistent methodology. XII. Topic Thirteen – Choice of Jurisdiction Choice of Jurisdiction Jurisdiction of a court to hear a case is a constituent part of all law, and a basic right of any society, because without an established, available court system, the laws of that society will themselves have no authority or effect. Choice of jurisdiction is the second but equal branch of conflict of laws (choice of law and recognition of foreign judgements being the first and third branches respectively. Jurisdiction (CL): to have jurisdiction before the courts means that one has a right in law in the matter. No other statute or code need provide the right. (see examples at p.792) Jurisdiction (CVL): substantive rights are granted by codes or special statutes. Suit, on the other hand, is taken before the normal courts, which have jurisdiction under another statute. Canada and Australia follow the British general maritime law system: there is a single statute granting the court jurisdiction to hear specific maritime claims. Jurisdiction of the court is recognition that those claims exist in the general maritime law. No further statute proclaiming the substantive law is usually necessary, because that law is found in the general maritime law, except in cases where a statute is adopted to redefine particular points of maritime law. In other words, the jurisdiction of the CL courts provides the remedy. In CVL countries, one starts with a right in law in a code or statute. The courts, for their part, have general jurisdiction under another statute. Misunderstandings and conflicts: the CL emphasis on jurisdiction rather than rights, often places an undue emphasis on the law of the forum instead of permitting the choice of the properly applicable law. Thus, the lien for the repair of a ship was deemed in the Halcyon Isle to be merely a local English remedy or procedure of the local court (Singapore). In other words, the foreign right to a lien for necessaries was not recognized, although the repairs had been carried out under contract in the US; rather, the lien was held to be procedural, a remedy and thus the lex fori, or Singapore law applied. What civilians would consider a right in law was held to be a procedure of the court (Singapore) where the ship was arrested, although Singapore had no connection with the claim or the parties. The Ioannis Daskalesis, on the other hand, was the proper recognition by the Canadian SCC of the right created in the US in favour of the ship repairer, when a Greek ship was repaired under contract in a US shipyard. Certain countries, however, have followed Halcyon (see p.794) General Principles of Jurisdiction: Jurisdiction only given by law: Jurisdiction is only given to a court by national law (statutory or jurisprudential0 or by an international convention. In personam: Actions in personam are designed to settle the rights of parties as between themselves (e.g. actions for breach of contract or commission of torts or possession of property). In the CL, questions of jurisdictions in such cases were traditionally regarded as procedural and dependent upon either service of the writ on the defendant within the jurisdiction or service out of the jurisdiction pursuant to the court’s rules or on submission of the defendant to the court’s jurisdiction. In Rem: In Rem actions are direction against the ship and/or its cargo and freight in respect of certain maritime claims. Jurisdiction depends on the presence of the res in the court’s territorial waters and is exercised by the service of a warrant of arrest on the vessel by the Admiralty Marshal. The arrest confirms the court’s jurisdiction. Quasi in rem: this jurisdiction allows US courts to take jurisdiction over ‘any admiralty or maritime claim in personam, against a defendant living abroad by attaching his chattels in the jurisdiction of the court (even where the action does not relate to those assets). The Mareva injunction, on the other hand, does not give jurisdiction per se in the UK and Canada. Jurisdiction should be clear whether in an international convention, a national law or a jurisdiction clause. Jurisdiction should benefit and be convenient for all parties to suit, or as many as possible. Reasons for refusing jurisdiction: Many nations have sovereign immunity acts which will prevent their courts from hearing a non-commercial suit against a foreign state. Where there is a suit on the same matter between the same parties in another jurisdiction, the local court, in its discretion, will usually stay the proceedings, but should do so on the condition that the plaintiff actively pursue its suit in the other jurisdiction. (lis alibi pendens) A court is not obliged to accept jurisdiction over trivial matters or matters whose sole purpose is to cause harm rather than to obtain justice. (vexations and frivolous proceedings – de minimis) Valid jurisdiction and arbitration clauses entered into freely by the parties are usually recognized by the courts of the world in their discretion. This is particularly true in respect of jurisdiction under the Brussels Convention 1968 (a.17) and the Lugano Convention 1988 (a.17) where jurisdiction clauses of the Contracting states must be recognized, provided they comply with the requirements of that article. After a dispute has arisen, the parties may even agree on a foreign jurisdiction to settle their dispute, providing the agreement to do so has been entered into freely (Genuine submission by the parties to another jurisdiction). Forum non conveniens: the court may, on its own or at the request of one of the parties, send the suit to another jurisdiction to which defendant is amenable and which it believes is more appropriate. In doing so, it may dismiss the claim conditionally or, better still, stay the suit conditionally (thus retaining jurisdiction), while sending the claim elsewhere for adjudication. In CVL countries, where the giving up jurisdiction by a court is usually forbidden by the national constitution, staying suit should be an adequate and proper alternative. However, under the Brussels convention 1968, the courts of Contracting states must accept jurisdiction and may not generally invoke forum non conveniens. Some courts have been known to refuse to take jurisdiction if it is shown that their judgements and orders will not be recognized (ineffectiveness of the court’s order). Forum Non Conveniens (FNC) FNC could also be entitled “choice of foreign jurisdiction by a court.” FNC is the principle whereby a court, which has jurisdiction to hear a claim, refuses to do so, because it believes another court of another state also has jurisdiction to hear the claim and can better render justice in the circumstances. See a.3135 CCQ. A.49 UK Civil Jurisdiction and Judgements Act 1982. FNC is merely the choice of foreign jurisdiction by a court. Conditions to apply FNC: see p.801. In general, the defendant has the burden of proof that the court should exercise its discretion to stay the proceedings. To discharge this burden, the defendant must show not only that he is not in the natural or appropriate forum, but also that there is some other clearly or distinctly more appropriate forum. The court must study the connecting factors to determine the natural forum that with which the actions had the most real and substantial connection. Conditional stay rather than dismissal @ p.802: courts applying FNC should stay the suit rather than dismiss, in case the other court does not accept jurisdiction or other unacceptable events take place, or the foreign judgement must be executed in the local forum. Staying of suit may satisfy those civilian jurisdictions which prohibit a court from refusing jurisdiction which prohibit a court from refusing jurisdiction when it is competent. The court should stay the stay the suit, reserve all rights and wait until the other forum has adjudicated upon the question. Forum Conveniens (FC) principle whereby a court, which does not have jurisdiction over a claim, nevertheless accepts jurisdiction because there is not other appropriate jurisdiction to hear the claim and justice would not otherwise be done. Although a court cannot give itself jurisdiction, judges from time to time have done so. See a.3136 CCQ and Swiss law at p.804 FC can be described as ‘choice of local jurisdiction by the courts’ whereas FNC is ‘choice of foreign jurisdictions by the courts.’ See conditions: The court in question must have a general, albeit statutory grant of authority of FC. See above. AND, it must be clear that no other court is available to render justice to the parties. Forum shopping: the improper choice of jurisdiction by the manipulation of connecting factors, in order to prevent to court of the proper jurisdiction from hearing a claim. It is best counteracted, not by domestic legislation, but by international conventions on jurisdictions, because national laws and practices have a tendency to favour suit before national courts, which, in turn, often favour local law. International Conventions on Jurisdictions Brussels Convention 1968: p.805. Lugano Convention 1988: p.809 International Maritime Jurisdiction Conventions Arrest of Ships Convention 1952: p.810 Civil Jurisdiction in Collision Convention 1952: p.811 Penal Jurisdiction in Collision Convention 1952: p.812 Specific International rules of Jurisdiction Salvage Convention 1910: p.812 Limitations Convention 1924: p.812 Liens and Mortgages Convention: p.813 Immunity of State-owned ships Convention p.813 Limitation Convention p.813 Nuclear ships Convention p.814 Luggage Convention Liens and Mortgages Convention: p.815 Vessels under Construction Convention Visby Protocol and Hague Rules CLC Convention Fund Convention Athens Passenger Convention Limitation Convention Draft CMI Collision Convention Hamburg Rules Mutli Modal Convention Salvage Convention Liens and Mortgages Convention The Arctic Explorer (p.151 CSBK) Canadian substantive law governs rights and liabilities arising out of Canadian flag vessel’s sinking in Canadian territorial waters. Although the vessel was time chartered to an American corporation, she had no substantial contacts with, or base of operation in, the US. After consideration of the relevant public and private interest factors, it was held that the actions brought against the vessel’s time charterer will be conditionally dismissed on grounds of forum non conveniens, even though the plaintiff’s remedy in Canada may be limited to workmen’s compensation. See factors for Forum Non Conveniens at p.157. The Sky Reefer (p.158 CSBK) ? Ordon Estate v. Grail (p.137 CSBK) See above XIII. Topic Fourteen - Recognition of foreign judgements Because of the principle of territorial sovereignty, a foreign judgement alone has no effect in a local forum; something more is required. There must be some authority given by law in the local forum such as a right granted in a national constitution, in a national law or in an international convention or some right granted in the local common or civil laws, in order for the forum to be able to recognize the foreign law. There are no international conventions on general rules of recognition and enforcement as there are conventions on rules of choice of law (i.e. Rome Convention). There are, however, particular conventions on recognition and enforcement. See examples at p.825. See arbitration documents also at p.825. It is only by such international conventions on recognition and enforcement that complete uniformity can be expected, although they entail significant difficulties on negotiation. Statutes in federal States also harmonize recognition/enforcement rules as between various jurisdictions in such nations. The principle of ‘full faith and credit’ found in the US and Australian Constitutions was an early justification for interstate recognition of judgements within the US and within Australia. The doctrine has been reduced in importance by recent statutes, especially in Aus. In Canada, the doctrine has slowly emerged from the case law of the SCC, although it is not expressly provided for in the wording of the Constitution Act. recognition vs. enforcement: Under the CL, a judgement that is recognized may not necessarily be enforced. i.e. a foreign in personam judgement dismissing a claim or counterclaim, a decree of divorce or a judgement declaring the status of a person or the title to a thing, is not ordinarily capable of enforcement, but only of recognition. Similarly, most in rem judgements (i.e. judgements ordering the sale of a ship to pay the plaintiff’s claim) do not require enforcement but only recognition. “International Jurisdiction” of the foreign court Despite the particular rules arising from statutes, the jurisprudence and tradition of each particular State as to the recognition of foreign judgements, one principle is a constant throughout. In every case, the foreign court which rendered the judgement must have had ‘international jurisdiction.’ i.e. jurisdiction in the international sense and not merely in the domestic sense of the foreign court. For judgements in personam, voluntary physical presence of the defendant in the foreign jurisdiction at the time proceedings are instituted, even if temporary, usually provide international jurisdiction, but residence is even better. At times, property in the jurisdiction has been held to provide the presence but this is doubtful today. For corporations, a permanent business address is usually sufficient (not necessarily the head office). Submission: an agreement to accept the jurisdiction of a foreign court or a valid jurisdiction clause in the contract under dispute, to which the defendant subjected himself, is sufficiently valid as well. Suing as plaintiff or counterclaimant or filing a voluntary and unconditional appearance as defendant in the foreign court is usually binding, and especially the filing of a cross-defence, counter-claim or a claim for compensation, set-off or recoupment. This is known as submission to the foreign jurisdiction. Agreeing to confess judgement in a foreign court gives international jurisdiction, while the fact that obligations arising from contract were to be performed in the foreign jurisdiction usually gives international jurisdiction as well. Appearance solely to contest jurisdiction is not submission because it is not voluntary, especially if it is made conditionally. In rem: When a res is situated in a foreign jurisdiction, there are usually no question that the foreign court has international jurisdiction in the in rem action. Quasi in rem jurisdiction in the US being the attachment in the US is an American phenomenon, which can give jurisdiction by itself, although frequently there is another jurisdiction basis available. Conclusion: there must be a real and substantial connection between the jurisdiction and the defendant, in order to provide the foreign court with international jurisdiction. The real and substantial connection has been rejected as a single, general test in the UK, however. Recognition and even enforcement of a foreign judgement can be implemented by direct action or by a defence to a suit or by a cross-defence (counterclaim, set-off, or recoupment & compensation) as well as, of course, by registration under statute. The foreign judgement must be final and conclusive in the foreign jurisdiction (res judicata). See what this specifically means at p.831ff. Foreign default judgements are ‘final and conclusive’ if the defendant is required by the foreign law to ‘show cause’ why they should be set aside; but if they may be set aside as of right, thy are not final and conclusive. Foreign decrees for specific performance or injunction are not enforceable at CL. Mistakes of fact or law in the foreign judgement do not prevent its recognition or enforcement. In deciding whether there is international jurisdiction, it is the forum court which decides, using its own rules of recognition. The finality and conclusiveness of the final judgement, however, are determined by the law of the court which rendered it. Merger: A foreign judgement did not merge with, or extinguish, the original cause of action at CL, so that the plaintiff who has sued successfully abroad, on returning to England could: a) sue on the foreign judgement; b) sue on the original cause of action; or c) plead both. The historic rule was that foreign courts were not considered courts of record by English CL. Their judgements were only prima facie proof of conclusions reached in the local forum. The rule has been largely reversed by statute in England. The rule has nevertheless remained and been reaffirmed in Canada and, for foreign judgements, in the US. In consequence, a plaintiff who obtains a second judgement in a local forum by suing on the original cause of action may then sue on the more advantageous of the two judgements in the forum of a 3rd jurisdiction, so as to collect higher damages. However, there are certain bars to taking a second action on the original course of action: a) if the foreign judgement was on behalf of the defendant; b) if the foreign judgement has been satisfied. Opposition to a foreign judgement: a number of defences can be raised to oppose the recognition and enforcement of a foreign judgement at CL. Fraud by the foreign ct or by the successful parties: if the foreign judgement has been obtained by fraud, its enforcement may be opposed. The fraud may have been committed by the foreign ct itself or by the successful party in that litigation. Fraud may be extrinsic or extrinsic. See example at p.834. In domestic cases, fraud may be invoked to set aside a judgement only if it could not have been pleaded at the original trial and if the fresh evidence is material and weighty enough to have had an impact on the original decision had it been available. With respect to recognition and enforcement of foreign judgements, the English CL clearly permits the local forum to go into the merits of the foreign judgements and deny it recognition and enforcement on the grounds of fraud, even where no new evidence of fraud is produced and even where the fraud was in fact known to exist, or even alleged, at the time of the foreign proceedings. Fraud is primarily a basis for impeaching a foreign judgement in personam, bc such a judgement directly affects the rights of the parties. Its applicability to in rem judgments is less certain. It does apply, however, in such cases to the extent that the judgement affects the rights of the litigants inter seeee. But where the rights of tps are concerned (i.e. their title to a ship), THE FRAUD doctrine may be inapplicable if the tps are relying on the foreign judgement merely as an assignment, rather than as a judgement. In that case, the rule that an assignment of moveables is governed by the lex situs has come into play. Where the in rem judgement is relied upon as a judgement (i.e. where its enforcement, as opposed merely to its recognition, is sought in the local ct), however, it would seem to be impeachable for fraud as much as any in personam judgment. Violation of natural justice: this does not permit contestation on grounds of error of law or exotic rules of evi or procedure, but has been generally associated with a failure by the foreign court to give a party due notice of the proceedings and/or a fair opportunity to be heard. In the UK, natural justice has been extended to any procedural defect constituting a breach of an English ct's views of substantial justice, a doctrine of uncertain scope which might be better dealt with under the public policy exception. Violation of the intl public o/p of the forum: No foreign judgement which was regarded by a CL court as incompatible with the ct's public policy (as understood in its intl sense) could be granted recognition or enforcement. The ground of impeachment of foreign decisions has been extended in England to foreign judgements rendered on ks executed as a result of undue influence, duress and coercion. Lack of intl jurisdiction: In general, no attack on the foreign judgement may be mounted, however, on the basis that the foreign ct which rendered it lacked the necessary jurisdiction under its own law. Foreign Revenue, penal and other public laws are not enforced. Yet, judgements for costs, exemplary damages and the civil damages portions of combined civil/penal condemnations pronounced by foreign cts have been recognized and enforced. Other grounds: include that the foreign judgement awards multiple damages in an anti-trust suit or under other provisions of such foreign legislation. The basic principles of recognition and Enforcement - CVL French judges mistrusted foreign judgements, based as they were upon laws and procedures often unfamiliar to them, which they regarded as suspect and replete with dangers of injustice. See history at p.838 - Parties seeking enforcement of a foreign judgement in France were virtually obliged to recommence proceedings on the merits. The Munzer case opened this up, founded upon five criteria (p.839) Today, foreign judgements are given effect to by French judges, provided they meet these 5 conditions of recognition, and provided there is a substantial connection bn the States in which they were rendered and the parties and legal relps which they address. Five criteria in detail: a) Intl jurisdiction of the foreign ct; b) intrinsic regularity of the foreign judgement; c) Intl public order of the forum; d) availability of the law applied; e) evasion. Today, foreign judgements are given effect to by French judges provided they meet these 5 conditions of recognition and provided that there is a substantial connection (a lien caractérisé) between the States in which they were rendered and the parties and legal relationships which they address. see p.840ff for description of each factor. Recognition and enforcement procedures - France Exequatur required in most cases: Historically in France, as in England, foreign judgements had no automatic effect or 'authority' in themselves. The exequatur procedure is the ordinary legal mechanism used in France to secure the recognition and enforcement of such judgements. Exequatur not always reqd: p.845 Effects of Exequator: The exequator of a foreign judgement may be granted or refused with respect to the whole or part of the judgement, if one or more conclusions granted by the foreign court do not comply with the 5 criteria of recognition. The grant of the Ex. is enforceable like any other French judgement. It confers the effect of res judicata in France on the foreign judgement from the date it is pronounced, but the rights of the parties under the foreign judgement may retroact to the date the judgement became executory in the jurisdiction where it was rendered. Refusal of the ex. is by nature a decision not susceptible if execution, which has res judicata authority opposable to tps. The effect of foreign judgements not qualifying for recognition. Even where the foreign judgement fails to qualify for recognition and enforcement in France, it may still have some limited effect. French cts may use facts proven in evi in the foreign ct and mentioned as such in the foreign decision, in rendering judgement on a related action taken in France. See other examples at p.847. International Conventions: France is party to Conventions (p.847) whose rules on recognition and enforcement of foreign judgements are often different from the traditional civil law. International Conventions: Brussels Convention 1968: p.848 Lugano Convention 1988: p.856 Liens and Mortgages Convention 1926 Liens and Mortgages Convention 1967 CLC Convention 1969 Fund Convention Hamburg Rules Multimodal Convention New York Convention UNCITRAL Model Law 1985 Morguard Investments v. de Savoye (p.159 CSBK) Recognition of Foreign Judgements Choice of Law Choice of Jurisdiction Because jurisdiction is territorial, a state’s law has no binding effect outside its jurisdiction. The courts in one province should give ‘full faith and credit’ to the judgements given by a court in another province, so long as that court has properly exercised jurisdiction in the action.