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Issues of Conflict Law

INTRODUCTION

Conflict of laws (or private international law) is a set of procedural rules that determines which legal system and which jurisdictions applies to a given dispute. The rules typically apply when a legal dispute has a "foreign" element such as a contract agreed to by parties located in different countries, although the "foreign" element also exists in multi-jurisdictional countries such as the United Kingdom and the United States.

The term conflict of laws itself originates from situations where the ultimate outcome of a legal dispute depended upon which law applied, and the common law courts manner of resolving the conflict between those laws. In civil law lawyers and legal scholars refer to conflict of laws as private international law. Private international law has no real connection with public international law, and is instead a feature of municipal law which varies from country to country.

The  study of conflict  of laws  centers on  disputes and  transactions that have  legal  implications  involving more  than one  sovereign.[1]Conflicts problems, therefore, can involve questions that go to the very heart of relations between governments. The proper adjustment and balance of those relations requires a high degree of sensitivity on the part of decision– makers. 

Because conflicts questions  generally  arise   in  the  context of litigation, because they  pose  a  vast  array of different fact  patterns, and because many of the  problems resist the  application of inflexible rules, the solutions to conflict  of laws  questions in law  generally, although not  always, have been  the  province of the  judiciary.

Conflicts, is generally said to be divided into three parts:  jurisdiction, choice of law, and judgments. In addition to these subjects, this Study examines at the start the problem of domicile and concludes with an analysis of conflicts problems in domestic relations, an area where specialized treatment is necessary.

There are three main aims of this subject. They are:

First, to set out the conditions under which a court is competent to hear an action. This is the question of jurisdiction.

Second, to determine by what law the rights of the parties are to be ascertained. In a contract dispute, for example, it is necessary to determine the law governing the contract (its ‘applicable law'). This is the question of choice of law.

Third, where a dispute has been litigated in another country, to specify the circumstances in which the foreign judgment can be recognized and enforced by action. This is the question of recognition and enforcement of foreign judgments.

THE QUESTION OF JURISDICTION

In its broadest sense, jurisdiction is the power of a decision-maker to resolve a dispute in a binding manner. When the decision-maker is a court or other tribunal, the dispute is resolved through adjudication, and the power to do so is called judicial jurisdiction.[1]

It can be contrasted with legislative, or prescriptive, jurisdiction, which is the power to enunciate norms governing the merits of the dispute. The source of judicial jurisdiction is the law that constitutes the particular court, and thus it is a national or state law rather than international law.

In some countries the exercise of jurisdiction is restricted by international treaties, such as the Brussels-Lugano conventions among several European countries; in some federal systems, such as the United States, the exercise of jurisdiction by the constituent states must conform to certain outer limits imposed by federal law, primarily the due process clause of the federal constitution.

This clause requires that the state that asserts jurisdiction have sufficient contacts with the defendant or the transaction from which the claim arises or with the property that is the subject of the litigation. In addition, the defendant must be given sufficient notice and opportunity to defend.

"Jurisdiction" concerns the power of courts to adjudicate with respect to a person or thing. If a court has jurisdiction over a person, for example, it can exercise power over her, and adjust her legal relations with others. A court, for example, might order that a defendant pay money to a plaintiff for a breach of contract; the court must have personal jurisdiction for that order to be valid.

In a Conflict of Laws situation, a court of law is not concerned with whether it has a jurisdiction over the dispute. It on the other hand deals with the appropriateness of its jurisdiction. The court has to decide which court of the competing jurisdiction is the best or clearly much more appropriate.

The determination of the jurisdiction is a type of a balancing process, which includes judging and assessing the competing factors, arguments and interests of the parties by a court of law.

Subject to these limitations, each state itself delineates the bases on which its courts are authorized to adjudicate cases with nonlocal elements (jurisdiction in the international sense), and then allocates that authority internally among the various geographical subdivisions or judicial districts within that state (local jurisdiction or venue) and among its various general or specialized courts, tribunals, or other adjudicating agencies in each locality (competence or subject-matter jurisdiction).

To render a valid judgment, a court must, in the absence of acquiescence by the defendant, satisfy all three types of jurisdiction.

In the United States, for historical reasons, a state court's interstate or international jurisdiction is divided into personal jurisdiction (in personam) and jurisdiction over things (in rem). Personal jurisdiction, which is the power to determine the rights and duties of the parties and to bind them personally, is further subdivided into general and specific jurisdiction.

General jurisdiction exists when the defendant is domiciled, incorporated, has its principal place of business, or conducts "continuous and systematic" business in the forum state. Historically, service of process on the defendant within the territory of the court was also a basis of general jurisdiction, but the constitutionality of this basis is now questionable, at least when it is not supported by other defendant contacts.

When a court has general jurisdiction, it may adjudicate any claims against the defendant, even claims unrelated to the defendant's contacts with, or activity in, that state. In contrast, when a court has only specific jurisdiction, it may only adjudicate claims against the defendant that arise from the defendant's specific contacts with, or activity in, the forum state. These contacts need not be as pervasive as those supporting general jurisdiction, but must satisfy a certain "minimum" and be of the type that makes it foreseeable that the defendant would be subject to litigation in the forum state and reasonable for that state to do so.

Jurisdiction over property or things is based on the presence of a thing within the territory of the forum state, and is subdivided into jurisdiction in rem and quasi in rem. When a lawsuit seeks to determine the parties' rights in, or relating to, that thing, the court is exercising in rem jurisdiction, and may adjudicate those rights even if it does not have personal jurisdiction over the defendant.

In contrast, when the lawsuit seeks to vindicate claims against the defendant that are unrelated to that thing, the court is exercising quasi in rem jurisdiction. Since 1977, this basis of jurisdiction is—in the absence of other defendant contacts—constitutionally insufficient unless the claim has been previously reduced to a judgment rendered by another court that had jurisdiction over the defendant.

The defendant's consent is a sufficient basis of jurisdiction that may be manifested in different ways, including an express agreement to that effect. Through such an agreement (forum-selection clause), the parties agree to submit their present or future disputes (exclusively or nonexclusively) to a designated court that may or may not otherwise have jurisdiction. Such clauses are much more common in recent years, and are generally enforceable in the absence of contractual defects such as duress or serious overreaching.

In many multistate situations, the courts of more than one state may have concurrent jurisdiction to adjudicate the same dispute. In such a case, the plaintiff, who always has the choice of where to file the lawsuit, may shop for the most advantageous forum, a technique known as forum shopping.

 CHOICE OF  LAW

Choice of law is a procedural stage in the litigation of a case involving the conflict of laws when it is necessary to reconcile the differences between the laws of different legal jurisdictions, such as sovereign states, federated states (as in the US), or provinces. The outcome of this process is potentially to require the courts of one jurisdiction to apply the law of a different jurisdiction in lawsuits arising from, say, family law, tort or contract. The law which is applied is sometimes referred to as the "proper law".

Whenever a legal problem involves incidents or issues concerning more than one state, a court must determine which state's legal rules should control. The development of current approaches to choice of law has been revolutionary. The story begins with the vested rights/territorial approach, which dominated thinking until well past mid–century. The study of choice of law explores the development of modern theories, as well as the counter–revolution in vogue  in some  quarters.

When a court exercises its jurisdiction to adjudicate a case with foreign elements, the court applies its own procedural law to the proceedings before it. With regard to the merits of the case, however, the court may or may not apply its own substantive law. This is the choice-of-law question, which may be answered legislatively as in most civil-law systems, or through judicial precedent, as in most common-law systems, including those of the United States. These rules may point to the law of either the forum state or to another state, depending on each state's pertinent contacts with the case.

For example, in tort cases, these rules may point to the state where the tort was committed or the injury occurred (lex loci delicti), in contract cases to the state where the contract was made (lex loci contractus), and in cases involving land, to the state where the property is situated (lex rei sitae).

The above three rules are typical of what is usually referred to as a traditional choice-of-law system. In the United States, this system was enshrined in the First Conflicts Restatement drafted in 1933 by Professor Henry Beale under the auspices of the American Law Institute. For much of the twentieth century, these rules and others like them were more or less uniformly followed in all states. This places a high premium on providing certainty and predictability in the choice of the governing law, leaving little room for judicial discretion.

These rules give no preference to the forum state, and indeed they aspire to produce international or interstate uniformity—that is, make it more likely that each multistate case will be governed by the same law regardless of where the case is litigated. The choice of the governing law is based not on the content of the laws of the involved states, but rather on the territorial or other factual contacts of those states to the case at hand.

Once a state is found to have the predestinated contact, such as the place of the injury, that state's law is applied almost automatically and—save for some limited exceptions—regardless of its content, its underlying policy, or the substantive quality of the result that such application produces. Indeed, the objective of the traditional choice-of-law process is not supposed to be to ensure a substantively "just" result (material justice), but rather to ensure the application of the spatially appropriate law (conflicts justice).

Traditional choice-of-law rules such as those described above continue to be followed in many countries. Although different in many respects, these approaches reject the notion of preselecting the applicable law on the basis of a single territorial contact, and instead leave the selection to the court on a case-by-case basis. The choice is to be based on multiple contacts and factors, such as the content of the conflicting substantive laws and their underlying policies, the presumed "interests" or claims of the involved states to apply their respective laws, and the substantive quality of the result that the chosen law will produce in the individual case.

As a result of conflicts-resolution, the choice-of-law process today is more flexible, less predictable, and more forum-biased than it was only one generation earlier. The possibility that the forum state will apply its own law to most multistate cases adjudicated by its courts is now greater than in much of the twentieth century, especially in the United States. In turn, this increases the possibility that a given case will be governed by a different substantive law depending on where it is litigated, which in turn reinforces the incentive for forum shopping described earlier.

The United States Constitution provides certain means for restraining the freedom of states to make choice-of-law decisions through the due process, full faith and credit, privileges and immunities, and equal protection clauses.

While the conflicts laws of most states have been gradually diverging, they have also been converging in at least one important respect. Most of them now recognize the principle of party autonomy—namely, the notion that parties to a contractual relationship should have the power to agree in advance on the law that will govern disputes arising from that relationship.

Although this is a principle whose origin can be traced back to ancient Greece, it was only in the second half of the twentieth century that it acquired the status of an almost universal principle sanctioned in most countries, including the United States. It is now followed not only in ordinary contracts, but also in matrimonial agreements, other family-law agreements, and even in unilateral juridical acts such as testaments.




 FOREIGN JUDGEMENTS

The "recognition" of a foreign judgment occurs when the court of one country or jurisdiction accepts a judicial decision made by the courts of another "foreign" country or jurisdiction, and issues a judgment in substantially identical terms without rehearing the substance of the original lawsuit[3]

The judgments of one State's courts have no force by themselves in another State. This is often unsatisfactory. Parties are interested in transnational legal certainty and in avoiding repeated litigation and conflicting decisions; the general public has an interest in avoiding resources spent on re-litigation and in international decisional harmonies; and States have a common interest in promoting inter-State transactions.

However, States have valid reasons to deny foreign judgments the same force they grant their own judgments since the foreign procedure may be viewed as deficient, or the outcome of the foreign litigation may be viewed as objectionable. The field of recognition and enforcement of foreign judgments mediates between these competing considerations.

Recognition and enforcement of foreign judgments is one of the three parts of conflict of laws, besides jurisdiction and private international law (choice of law). This entry is confined to judgments of foreign States. It excludes the recognition and enforcement of foreign arbitral awards and the recognition of foreign legislative and administrative acts as well as the role of international judgments in national law, although there are some parallels in treatment.

Enforcement is not necessarily confined to money judgments: most countries will also recognize non-monetary orders, and much law exists on the recognition of status decisions. However, enforcement is usually limited to civil and commercial matters. Foreign judgments in public law are rarely enforced, although there is no international law reason against it.

Once a foreign judgment is recognized, the party who was successful in the original case can then seek its "enforcement" in the recognizing country. If the foreign judgment is a money judgment and the debtor has assets in the recognizing jurisdiction, the judgment creditor has access to all the enforcement remedies as if the case had originated in the recognizing country, e.g. garnishment, judicial sale, etc. If some other form of judgment was obtained, e.g. affecting status, granting injunctive relief, etc., the recognizing court will make whatever orders are appropriate to make the original judgment effective.

Foreign judgments may be recognized either unilaterally or based on principles of comity, i.e. mutual deference between courts in different countries

A state may not enforce a foreign-country judgment in the following cases:[4]
  • The judgment was not rendered by an impartial tribunals under procedures compatible with the requirements of due process of law;
  • The foreign court did not have personal jurisdiction over the defendant;
  • The foreign court did not have jurisdiction over the subject matter;
  • The defendant did not receive notice of the proceedings in sufficient time to enable him to defend;
  • The judgment was obtained by fraud;
  • The judgment is repugnant to the public policy of the state where enforcement is sought;
  • The judgment conflicts with another final and conclusive judgment;
  • The proceeding in the foreign court was contrary to an agreement between the parties under which the dispute was to be settled;
  • In the case of jurisdiction based only on personal service, the foreign court was an inconvenient forum for the trial; or
  • The judgment seeks to enforce the revenue and taxation laws of a foreign jurisdiction

CONCLUSION

Thus a country when applying the Principles of Conflict of Laws, the following is the procedure to be followed by any company with regards to the solving of any dipute that has arisen, and includes within it an essence of foreign elements.
  1. The court must first decide whether it has jurisdiction and, if so, whether it is the appropriate venue given the problem of forum shopping.
  2. The next step is the characterization of the cause of action into its component legal categories which may sometimes involve an incidental question (also note the distinction between procedural and substantive laws).
  3. Each legal category has one or more choice of law rules to determine which of the competing laws should be applied to each issue. A key element in this may be the rules on renvoi.
  4. Once the applicable law is decided, that law must be proved before the forum court and applied to reach a judgment.
  5. The successful party must then enforce the judgment which will first involve the task of securing cross-border recognition of the judgment.

[1]  This  definition is circular; it is not  possible, after all,  to know  the  legal implications of a  problem until you  know  the  rules that will  be  applied  to  it.

[2]As Available at http://www.lexisnexis.com/lawschool/study/understanding/pdf/ConflictsCh1.pdf  Visited on 12th September 2011

[3]As Available on http://en.wikipedia.org/wiki/Enforcement_of_foreign_judgments, visited on 12th Sept. 2011.

[4]As Available at http://www.leginfo.ca.gov/cgi-bin/displaycode?section=ccp&group=01001-02000&file=1713-1724, visited on 13th Sept. 2011.
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