A Case with Foreign Elements: Preliminary Issues and Their Significance22 Mar 2016 3406 Views
With the acceleration of globalization over the past few decades and its economic, political and cultural consequences; when the global world has become massively interconnected, the legal landscape and its frameworks, as well as practice and points of focus have been changing.
One of the effects of the phenomenon is the ‘marked increase in the appearance in courts of legal disputes involving the application of foreign laws’, as Chief Justice Spigelman pointed out referring to the courts of Australia. When a case involves foreign elements there is a number of preliminary issues that courts consider, and this in itself creates uncertainty, state of doubt as to ‘whether, and to what extent, a foreign law will be applied’. Parties to the cross-border commercial transactions are faced with the potential risks, costs, and significant impact on their cases solely depending on the court’s choice of laws. So, what are the main preliminary issues a court has to decide and what is the significance in relation to a case?
Preliminary issues decided by the court when a case involves foreign elements
Jurisdiction: the first issue the court is faced with is whether the court has the ‘jurisdiction to determine this case’. Following is the question of selection of law. The landscape has been changed with the introduction of Council Regulation 44/2001 limiting jurisdiction to domestic systems. For avoidance of conflicts of jurisdiction, rules must be transparent and based on the principle that jurisdiction is generally based on the defendant’s domicile. Domicile of a company or other legal person is being defined in Council Regulation 44/2001 (Article 60(1).
Law Selection: as put by Russel J. Weintraub in his article, ‘for “substantive” issues a court applies the forum’s choice-of-law rule to select the applicable law. “Procedural” in conflicts jargon is simply shorthand for saying that the forum’s rule applies’. According to the glossary of European Commission, the lex fori refers ‘to the law of the court in which the action is brought. Where an action is brought in a court and has an international dimension, the court must consider the law applicable’. In other words, lex fori governs the “procedural” side, ‘regardless of the lex causae’. When selecting the law, according to Morris, various ‘legal categories and “localizing” elements or “connecting factors”’ are used such as domicile, residence, place of entering into contract, legal duties etc.
Proof of Foreign Law: one of the important issues is that foreign law is not being applied and selected automatically but rather has to be proved and pleaded. As was evident in Macmillan Inc v Bishopgate Investment Trust Plc (No.4) ‘…the evidence of expert witnesses is necessary for the court to find that foreign law is different from English law. In the absence of such evidence, or if the judge is unpersuaded by it, then he must resolve the issue by reference to English law, even if according to the rules of private international law the issue is governed by the foreign law’.
Significance of court’s decisions
As the business world becomes more interconnected and sophisticated, crossing national borders, as companies’ business models become global, the significance of the court’s decisions related to jurisdiction and selection of law becomes crucial in terms of ensuring certainty and justice, confidence of the parties and, hence offering stability all of which are fundamental pillars of international commerce. As stated by Pippa Rogerson, referring to the case of Republic of Iran v. Barakat although the answer of conflict of laws might appear easy…in relation to determination of ownership, ‘these cases are surprisingly complex. The arguments between the parties depend on difficult matters both of fact and of law’. The decisions pertinent to jurisdiction and law selection can have drastic impact on the case, determine its course, introduce prejudice, and induce financial implications for both parties whether to the benefit or loss, introduce additional expenses. Such decisions can potentially pose risks and introduce instability in the realm of corporate/transactional law. As the Hon Justice P.L.G. Bereton, AM, RFD state: ‘the necessity to call evidence to prove foreign law may itself be ‘a source of prejudice’ to a party who seeks to rely on foreign law. Expert evidence will usually be required, and experts are usually expensive. Furthermore, the need to prove foreign law prolongs trials, takes time, and increases costs’. Another point which has been addressed by the authors as well as brought up in Macmillan Inc v Bishopsgate Investment Trust plc (No 4) is the matter of translation and interpretation. As noted by Spigelman CJ in Murakami v Wiryadi, ‘the important aspects of the foreign law will be lost in translation’. And primarily reference here is made to the fact that ‘foreign law apart from being in a foreign language, may involve principles and concepts which are unfamiliar to an English lawyer’. Therefore the decisions discussed herein are of crucial significance which shall be facilitated in a manner as to avoid translation matters and other complexities which might pose challenges to the cross-border commercial relationships.
 The Hon Justice P.L.G., Brereton A.M ‘Proof of Foreign Law-Problems and Initiatives’ (2011) The Future of Private International Law in Australia, Sydney Law School-University of Sydney 1  Ibid (1) 1  David McClean and Veronica Ruiz Abou-Nigm, Morris: Conflict of Laws (8th edn, Sweet & Maxwell 2012), 5  Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, art 60(1)  Council Regulation Article 60(1)  Russel J. Weintraub, ‘Choice of Law for Quantification of Damages: A Judgment of the House of Lords Makes a Bad Rule Worse’ (2006) Vol. 42:311 Texas International Law Journal, 311,312  European Commission website, retrieved from http://ec.europa.eu/justice/glossary/lex-fori_en.htm on 15 August 2015  Ibid (7)  Ibid (3) 8  Macmillan Inc v Bishopsgate Investment Trust plc (No 4)  CLC 417  Ibid (3) 10  Republic of Iran v Barakat  EWCA Civ 1374  Pippa Rogerson, ‘Public Policy and Cultural Objects’ (2008) 67(2) CLJ 246  Ibid (1) 3  Murakami Takako v Wiryadi Louise Maria and others  3 SLR 198;  SGHC 47  Ibid (10) 5