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Suppose a contractual obligation is formed under EU law (e.g., by consumer protection laws). Now suppose that the parties to that contract (a buyer and a vendor or manufacturer) have agents in a non-EU country (say in Asia). Should they be able to adjudicate the contract under the local judicial system, even though the local system's laws create no such contract?

Update: Answers concerning the rest of the world, besides the US, would be much appreciated.

  • Interesting question and one that seems on the face of it to involve 'Conflict of Laws'. I proof read commercial contracts (US$1 million +) here in a Southeast Asian country which have been drafted in English by resident American and British lawyers who stymie the process of the local jurisdiction by inserting a "take it or leave it" clause that shifts jurisdiction to the neighboring High Court in Singapore (applying Singaporean law) in the event of any contractual breach/dispute arising thereof. – Peter Point Jan 20 '17 at 5:11
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Generally, yes (at least in the United States). The question of which court a lawsuit should be filed in is often one of convenience when the lawsuit is filed; it is not that unusual for this to be a different jurisdiction than the natural jurisdiction when the contract was made. For instance, here is a case in which two US soldiers got into a car crash while stationed in Germany, and one sued the other in Oklahoma court when they returned home. The plaintiff also sued the defendant's insurance, which was allowed under German laws but not Oklahoma laws. However, the Oklahoma Supreme Court determined that the contract was intended to be governed by German law (since it was sold in Germany), and so it made sense to apply the provisions of German law to the contract.

There are exceptions. Courts can decline to enforce terms that are contrary to local public policy; for instance, no US court will enforce a contract that amounts to indentured servitude. For a more common example, employment contracts can have non-compete clauses. In California, those contracts are considered to be against public policy, and are unenforceable regardless of what law the contract was made under. But those are the exceptions; in general, US courts are perfectly willing to hear a case and apply foreign law if it makes sense to apply the foreign law and to hear the case in the US.

This actually comes up a fair bit in the US: each of the 50 states and the federal government have their own laws, and it's not unusual for multiple jurisdictions to be reasonable places for a lawsuit. If a contract is signed between two parties in Maryland, but one party is a resident of Pennsylvania, a lawsuit over it could potentially be filed in federal court. In that case, federal procedures are followed, but the actual law applied would pretty much be Maryland law.

  • Thanks! Any idea on how it is for the rest of the world? For example, US state law in a EU court, or EU law in an Asian court? – Yogesch Aug 25 '15 at 17:54
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Courts outside the U.S. routinely adjudicate contracts entered into in another jurisdiction, even when those contracts state that they are governed by the laws of another jurisdiction. Often such a forum is the only available forum to do so, because no other court has jurisdiction over the defendant (and because the forum state jurisdiction won't honor foreign judgments - there are a number of treaties that govern when a court will or will not honor a foreign judgment in different kinds of law from contract law to custody to tort law). But, a court doing so won't necessarily faithfully apply the law of the other jurisdiction or the law of the place where the contract was entered into.

There is a widely adopted presumption in both common law and civil law jurisdictions that the law of a foreign state is the same as the law of the forum state unless demonstrated otherwise.

Public policy considerations may also preclude the application of foreign law to a contract enforced in the forum. For example, U.S. courts will not enforce discriminatory covenants, and Islamic courts would not enforce contacts for payment of interest, or a contract of marriage to a fifth wife at the same time as someone had four other wives.

Procedural matters are also almost universally governed by the forum state's law although the distinction between what is procedural and what is substantive may vary considerably.

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