The nature of conflicts law

Conflicts law is a part of national legal systems and is not codified in a systematic way at the supranational or international level. Nevertheless, some international treaties have unified particular areas of substantive and conflicts law with respect to the participating states. When a treaty provides uniform rules of substantive law—as does the United Nations Convention on Contracts for the International Sale of Goods (1980)—it may displace national law, rendering the rules of conflicts law obsolete. In contrast, when an international treaty unifies conflicts law, substantive differences between national laws continue to exist, but the uniform rules provide a way to bridge them. However, conventions exist in relatively few areas of substantive law and conflicts law; also, the number of states participating in them is relatively small, and the interpretation and application of international treaties remain matters for the courts of the individual participating states. A notable exception was the Convention on the Law Applicable to Contractual Obligations (1980), commonly known as the Rome Convention, which applied in the member states of the European Union (EU) and whose interpretation lay within the scope of the European Court of Justice upon reference from national courts. The EU possesses lawmaking powers that enable it to establish uniform rules of substantive law, thereby displacing previous national law and eliminating conflicts. In 2008 the EU adopted the Rome I Regulation, which transformed the Rome Convention into binding EU law, and promulgated the Rome II Regulation, which provided rules for determining the applicable law in cases of noncontractual obligations.

Projects for the unification or harmonization of laws on a wider (in some cases worldwide) basis have been pursued since the middle of the 19th century, when the Italian minister of justice Pasquale Stanislao Mancini sought to convene a conference for the harmonization of private international law. Similar efforts by the Dutch jurist Tobias Michael Carel Asser proved successful in 1893 with the founding of the Hague Conference on Private International Law. In 1904 Japan became the first non-European state to participate in the Hague Conference. Over the years, the Hague Conference has produced many conventions, some of which have enjoyed notable success, such as the Convention on the Civil Aspects of International Child Abduction (1980) and the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (1965). The International Institute for the Unification of Private Law (Unidroit), established in Rome in 1926, sponsors projects for the unification of substantive law. Examples include its early efforts with respect to international sales law and the more recent drafting of the Unidroit Principles of International Commercial Contracts (2004). In Latin America, Mercosur (also known as the Common Market of the South)—whose members include Argentina, Brazil, Paraguay, and Uruguay—led the harmonization of important aspects of international business law, particularly in the areas of trademark, investment, and competition (antitrust) law. The Andean Community (Comunidad Andina; CAN) has promoted the harmonization of copyright and patent law between its member countries of Bolivia, Colombia, Ecuador, and Peru. (See also intellectual-property law.)

Another unifying force of growing importance is international business practice and custom (the so-called lex mercatoria [Latin: “law merchant”]), to which courts, arbitration tribunals, and parties increasingly refer in their decisions and commercial dealings.

Common principles

Although few uniform international conflicts rules exist, there are a number of common principles that are recognized to varying extent throughout the world. The ancient international principle of comity—which, like the biblical Golden Rule, posits that even sovereign states should extend courtesies and privileges to each other—explains why one country would give effect to the law of another. A formal requirement of reciprocity could actually limit the extent of these courtesies and privileges to those that the other state is willing to extend. Party autonomy (i.e., the freedom of parties to decide what court shall hear their case and what law shall govern it) is recognized by most countries, those of Latin America being a notable exception.

Legal systems have established different criteria for the selection of one country’s law over that of another for application to a particular case or problem. There are, however, some widely (albeit not uniformly) shared principles. For questions of family law, inheritance, and (in limited types of cases) even liability in tort, legal systems will consider the nationality or, alternatively, domicile or habitual residence of a person. For commercial transactions, a transaction’s “closest connection” to a legal system may be emphasized over traditional connecting factors such as where the transaction was concluded. Factors determining a close connection to a particular state and its law may be the place of business or principal residence of the party that is to effect the performance in question, the language used by the parties in their negotiations and contract formation, the currency and modalities of payment specified, and other factors that are not as incidental as the place of contracting may be (e.g., when a contract is concluded in a hotel or other meeting place because both parties are in transit). For cases involving legal persons (corporations), many countries, particularly those of the common-law tradition, refer to the law of the state where the entity is incorporated, but others, especially those employing civil-law principles, refer to the law of the corporate “seat,” defined as the place of central management and decision making. Among the latter countries, especially in the EU, there is now a trend to change to the place-of-incorporation rule.

Especially with respect to commercial transactions (e.g., contracts), modern conflicts law emphasizes flexibility. This quality is evident in Article 4 of the Rome Convention, which first established the general principle that the applicable law should be that to which the contract has the closest connection. Although the article provided some presumptions regarding what law that might be, it concluded by making it possible for the court to correct the result: if the court found that, exceptionally, another law was more closely connected to the contract or to one of its issues, then it should apply that law. The convention’s successor, the Rome I Regulation, replaces the presumptions with specific rules for a number of contract types and retains the general reference to the most closely connected law for all other contracts (see below Choice of law).