Sometimes, this point is easily resolved, as in the following examples:
- If a Japan-based multinational is negotiating with a small English company, the parties may be happy to agree English law. The multinational may have English lawyers on its staff, or be willing to pay for external legal advice, and may have a general level of comfort with English law.
- If a US-based pharmaceutical company is negotiating the terms of a clinical trial agreement with a French hospital, the company may realise that there is very little chance of the hospital agreeing anything other than French law. There may, in any case, be advantages in having contract issues (eg indemnities) dealt with under the same system of law as that under which liabilities arise (in this case, including liability for personal injury to patients on whom the trial product is tested).
More commonly though, in IP Draughts’ experience, each party wants its own country’s law to govern the contract, and negotiation is required to resolve this issue.
Note that this posting is about which law should govern the contract. This question is linked to, but not the same issue as, which courts or arbitration body should have jurisdiction to resolve any contractual dispute. See this earlier post about choices in relation to arbitration.
If disputes are to be referred to a court, then IP Draughts’ strong view is that law and jurisdiction should not be split. In other words, don’t choose (as happened in a case on which IP Draughts’ former firm provided expert testimony) English law in the Utah courts. In IP Draughts’ view, this is a bad compromise, as it requires the judge to decide the case on the basis of a law in which he or she is not an expert.
In relation to arbitration, bear in mind that procedural issues will likely be decided according to the law of the “seat” of the arbitration, including any appeals to the courts of that jurisdiction against the arbitrator’s decision. For legal simplicity, IP Draughts preference would be to have any arbitration conducted at the same “seat” as the location of the hearings, and to have the law of that location govern the contract.
Sometimes, though, parties want to split the law and the location of the arbitration. IP Draughts understands that it may be possible to have the arbitration hearings at a different location from the official “seat”, so if English law is chosen but hearings are to be physically located in, say New York, it might be desirable to state that the seat of the arbitration is in London so as to keep all the substantive and procedural issues under one system of law. This point goes beyond IP Draughts’ experience or legal knowledge, and in any event the legal position may differ according to national law; specialist legal advice should be sought before trying anything fancy along these lines. The safest approach may be to have law, seat and hearings all in one place.
Coming back to choice of law, parties tend to like what they know. IP Draughts is qualified in English law, which is an example of a common law system (and distinguishable from civil code systems). He works in a large, industrialised country that may be described as being North European in its business approach (or Anglo-Saxon, depending on which way you slice it), and his clients tend to be high-tech businesses and universities. Therefore, IP Draughts preferences, other than English law, include:
- In Europe: Sweden, Netherlands
- In North America: New York, Massachusetts
- In the Far East: Australia, Singapore, Hong Kong
IP Draughts asks readers to comment on these preferences and to state their own preferences and reasons.