- Legal Articles
- Ask Elhais
May 22, 2019|
This is especially obvious with regards to worldwide business transactions. Contracts are closed between two parties sitting in two different parts of the world and without meeting each other vis-a-vis. In view of that, more accentuation ought to be placed on the private international legal framework of the states, guaranteeing that they don't stale and are up to international guidelines in managing issues that constantly emerge in International businesses.
As cross-border transactions constantly arise, a pertinent issue naming "choice of law" holds significant importance in the private international law applicable to international commercial agreements. Contracts are mere pieces of paper without any legitimate impact unless a specific reference to some private law is given which characterizes the commitments expected by the parties to the agreement and the recommends the way of redress through the appropriate court system in case of failure to perform contractual obligations.
A governing law provision in any commercial contract defines the law which will govern or regulate the contract in the event of a dispute, as opposed, jurisdiction clause specifies the courts or international institution that will have exclusive jurisdiction to try the matter or resolve disputes. These clauses are though equally important as that of the commercial arrangements between the parties; they are yet neglected amid drafting the general terms of the contract and are considered as standard boilerplates at the end of the contract.
It is vital that these conditions gain as much importance as the substantive arrangements of the agreement. Failure of parties to agree on the governing law can lead to expensive and massive suits deciding the relevant law and jurisdiction to be applied to the agreement. Corporate Lawyers of Dubai assist numerous multi-billionaire companies to have tailor-made commercial contracts prior to entering into an agreement which suits the requirements of both the parties.
Choice of Law Provision
The decision of governing law for the contract is one arrangement in the contract where the parties assign the law of a particular jurisdiction to oversee and regulate the disputes merging between the parties. A such, the parties indicate or stipulate that any claim arising out of the contract will be resolved by the law of a concerned jurisdiction. This decision generally becomes binding on the parties when the parties refer the matter to arbitration.
A significant number of parties, according to statistics of the International Chamber of Commerce, involves governing law in their contract. A standard governing law clause states that "this law of this country shall govern the agreement". There are several preconditions which must be considered prior to choosing a particular which are detailed as below:
Worthiness of the Law for resolving dispute:International law has authorized parties to adopt any law which might govern their contract, ergo, parties mustn't focus on choosing their home country law for purpose of avoiding additional expenses, but must evaluate the worthiness of law in different jurisdiction which will be appropriate for their commercial arrangements. There are numerous jurisdictions which have an offer importance to case laws and precedents, whereas several jurisdiction are silent on such matters and they not even recognize certain notions of the contract.
Jurisdiction issuesParties generally consider the law of a particular jurisdiction wherein they wish to resolve the dispute. However, this standard can be amended as numerous courts are willing to apply foreign law for resolving the matter if the parties have specifically agreed. Yet, parties should be careful while drafting the contract, as it will often be burdensome for parties to decide what foreign law should be applicable, should the dispute arise. They must also be careful as certain jurisdiction does not apply the foreign choice of law and must also consider the manner in which the court will apply the foreign law. On the contrary, most international arbitration institution is readily acceptable on the foreign choice of law and have arbitrators who can easily understand the foreign law to ease the procedure.
Affinity to the lawGiven the vast cases, parties choose the law which they are familiar to rather than opting a more neutral law. Also, the latter can bring unaccepted surprises which parties are not aware of considering dissimilar procedural aspects.
Another most common uncertain clause is to determine the jurisdiction where the word "may" and "shall" can bring unwanted confusion. Importantly, if parties which to have a non-exclusive jurisdiction the word "may" can be utilized, on the contrary for an exclusive jurisdiction the word "shall" should be used. An ideal jurisdiction clause states that "the parties shall/may submit their dispute emerging out of or in connection with the concerned agreement to (court /arbitration) of this country."
A bare review of the foregoing standard jurisdiction clause we note that the first step is to determine which institution shall be given authority to resolve the dispute that is either courts or arbitration institute. Both the system have their pros and cons, hence parties should beforehand determine what should be appropriate for the said matter. It most certainly believed that arbitration offers wide variety of options and advantages over courts which are outlined as below:
UAE Law and Choice of Law
In UAE international parties may face needless issues regarding the application of foreign law to govern the contract. As in certain cases, courts inherit the jurisdiction and governs it according to the UAE local laws such as Civil Transactions Law or Civil Procedure Code. In addition, the courts of UAE will not let go jurisdiction to another court over a matter where UAE courts will in all case have the jurisdiction. This is can be witnessed in the following disputes:
In accordance with the above, if the UAE courts will inherit the jurisdiction, the governing law will be the law of UAE itself. Accordingly, the court will strike down the governing law and jurisdiction clause in the agreement.
What do we learn?
What if there is no governing law and jurisdiction clause in a particular contract? Before the parties get an opportunity to determine the dispute on merits, the parties will have to exclusively determine the courts or law that will govern the contract, which is an expensive and cumbersome decision. The non-presence of governing law and jurisdiction clause confuses the parties to determine if there is a dispute or not and leads to unfavourable decisions.
Copyright © of this article is retained by the author and/or other copyright owners. We explicitly grant you permission to download a copy, without any alteration, of this article for personal non-commercial research or study, without prior permission or any charge. This article can be utilized on your website or for marketing, however, we grant you permission to host this article on your website and no other rights. This content should not be altered in any way or sold commercially in any format without prior permission of the copyright holder. During reference of this article, full biographic details entailing the name of the author, his designation, the institute and the publishing date of the article shall be provided.
I owe the success of my case to Dr. Hassan's diligent approach. He remained focused, put me at ease and always went the extra mile. Dr. Hassan tirelessly put my case in the best possible light and I cannot thank him enough. I would highly recommend Dr. Hassan - I am grateful to him from the bottom of my heart.
Dr. Hassan Elhais is among the best legal consultants I have ever worked with. He has an amazing ability to reduce complex issues into a simple concept that non-legal people can understand. He consistently develops innovative litigation strategies that help us to achieve our ultimate legal goals.
...the extraordinary effort that has been exerted by the staff, and we specially thank Dr. Hassan Mohsen Alhais. Wishing your continues success & excellence...
I believe everyone should recognize what a difference Dr. Hassan Elhais work has made to people's lives; and especially to our family's life, because we will remain forever grateful to each and every one of his team.
Dr. Hassan Elhais never fears cases that involve exposure and he always gives me his honest assessment of our chances of success, which is invaluable to me.
He aided us not only in providing legal advice but also in all legal issues that required a long term strategic approach to achieve most favorable and optimum outcomes he provided us with high level of professional service.
Dr. Hassan Elhais is a responsible, reputable counsel who operates to high levels of service.
Dr Hassan Elhais is responsive, thorough and creative with his advice, and is a valued advisor and legal consultant.
Regardless of the complexity of the matter I know Dr. Hassan Elhais will consider not only legal strategy but also business practicalities in providing advice and litigation options.
I recommend Dr. Hassan Elhais to anyone who says 'I'm in legal trouble'. I was extremely satisfied with the high standard of his work. He has always been there when I have needed him and I refer all my clients, family and friends to him/his firm.
Dr. Hassan Elhais was very professional and he listened to my needs. He was very prompt, efficient and always kept me informed. Dr. Hassan Elhais's service was excellent and I would definitely recommend him to friends and colleagues.
Your email address will not be published. Required fields are marked *