Kavouss,

Please allow me to add my answers to Paul’s answers.  I’ve put my answers in red, and Paul’s in blue, to distinguish them. (I’ve also taken the liberty of putting Paul’s answers in “sentence case.”)

I’m not sure why you were not convinced by Paul’s answers, as they seemed quite accurate to me.  In any event, let me see if I can add something helpful.

Before getting to the questions -- the issue of “choice of law” is neither unforeseen nor particularly unpredictable.  “Choice of Law”, also known as “Conflict of Law” (or “Conflicts of Laws”), is a standard and well-developed area of law and jurisprudence, in the US and elsewhere, with roots going back centuries.  It’s taught in every law school I know of.  Of course, the law of Choice of Law is growing and developing and there are different approaches in different jurisdictions and depending on the type of case as well.

It’s also not unforeseen in our work.  “Choice of law” is one of the “layers of jurisdiction” we have been referring to since the beginning of our work.

At the end of this answer, I’ve appended a fairly short summary of US choice of law rules, which has been at the end of the “Influence of jurisdiction”  Google doc for some months now.  To the extent that you find my explanation, as well as Paul’s, insufficient, I think this summary will be quite helpful.  This was taken from the website of the Proskauer law firm, a first rate firm (and not one I’ve been associated with).

Kavouss: My Questions are

a. What do you mean by (the substantive law to apply?)

Paul: I mean the law that will be used to decide the case.  For example, it may be against the law, in say, India, for ICANN to refuse to publish its financial data publicly (I am making this example up of course – i don’t know what Indian law is).  If the court or arbitrator hearing the case decided that Indian law was the applicable substantive law, it would then have to make a decision about whether or not ICANN was violating the substantive law.  In other words, it would have to decide what Indian law requires and whether or not ICANN had complied.  The Indian law here would be the substantive law to apply to the case.

 

Greg:  This is one of the “layers of jurisdiction.”  When we have referred to “choice of law”, this is a reference to the choice of which jurisdiction’s “substantive law” will apply to the case.  Another term for this is the “governing law” of the case.

 

b.  If the parties made a choice of law , say  e.g. Swiss Law, should the case be sent to a Swiss Court or as you said the case still would be treated by the Court to which it was submitted but the Court merely applies Swiss Law.

 

Paul: That very much depends on where the suit is brought and what else the parties have said.  For example, the parties could say “Swiss law applies but the case will be heard in London arbitration” or “Swiss law applies and the case should be in Swiss court”   for the second of these, if someone brought a suit in the us courts anyway, the us courts would generally defer to the language of the contract and dismiss the case with direction to refile it in Switzerland.  I do not know what the law would be if the suit were in India or Iran or the UK or France though. 

 

The harder question is when the parties say that “Swiss law applies” but they don’t say anything about where the court case should be.  Then the courts would have to decide – in the US that decision would be based on questions of convenience (where are the witnesses, for example?) And other similarly equitable questions.  Again, I have no idea how an Indian/Iranian/UK/French court would answer the question.

 

Greg:  As Paul notes, in a case involving a contract, the parties may have specified both the “choice of law” (e.g., Swiss law) and the “venue” (e.g., ICC arbitration in London or a Swiss Court, or “the Federal and State courts in Los Angeles County, California”).  If the parties do not contest these choices later, the courts (in the US and elsewhere)  will generally tend to give deference to the parties’ choices.

 

For the purpose of your question, I would assume that the parties have specified a choice of law, but not a choice of venue.  Thus, the plaintiff could choose to bring the case anywhere the plaintiff would have standing and the court would have “personal jurisdiction” over the defendant (i.e., they could get and keep the defendant in that court).  The defendant could contest the choice of venue, or the court could sua sponte (on its own initiative) look at whether it was an appropriate forum for the case.  As Paul indicates, this could in either case be a question of inconvenience (forum non conveniens) (where are the witnesses, where are the documents, what is the language of the documents?)  and/or “minimum contacts.” (How relevant is this forum to the case?)  The court may also look at its own ability to apply the substantive law of another jurisdiction.

 

If the court determined it was not an appropriate forum, the court would typically dismiss the case.  There is no system I’m aware of to send a case from one country to another country.  The plaintiff would then have to refile in a more appropriate venue.

 

Assuming the parties do not contest the choice of venue, and the court does not determine that it is an inappropriate forum, the case would likely stay in the original court, and the court would apply Swiss law in this example.  It is not at all uncommon (in the US or elsewhere) for a court to apply the substantive law of another jurisdiction.  Indeed, this is one of the reasons that “choice of law” (also known as “conflict of law”) rules exist.

 

Kavouss: In the latter case, to what extent the Court could claim that it is fully familiar to all details of Swiss Law? Take the extreme case that there would agreements for 20, 30 ...  choice of Law for 20, 30 different cases. Do you believe that the Court in question would be familiar with the details of all 20, 30 Laws ? I find it very difficult that ,e.g. a  State Court  in any country would have such vast knowledge of all laws that mentioned above

 

Paul:  If a court kept a case but had to apply Swiss law, the court would have to be educated in the law.  That might be by the parties or the court might ask an expert.  In the US we also have a process (not used that often) where the US court could certify the question to a Swiss court and ask it for the answer.  The difficulty in learning the law is another one of the equitable factors that might make a us court transfer the case to Switzerland if the parties have not specified that in contract to stay in the us.

 

Greg:  The Court would not claim it is already familiar with all the details of another jurisdiction’s law.  That is not the assumption that underlies the concept of a court applying the law of another jurisdiction.  Rather, as Paul notes, the parties would be required to provide information necessary for the court to apply the law.  This may include hiring an expert in the law of the jurisdiction.  This would almost certainly be required for each party when preparing their papers.  The expert may also be called on to testify on the law.  Each party may have their own expert in that law.  The court may also bring in its own expert, instead of or in addition to hearing from the parties’ experts.

 

Situations can arise where the laws of different jurisdictions might apply to different aspects of the case.  In this situation, a court has little choice but to deal with the law of another jurisdiction (or jurisdictions) in addition to its own law.

 

In any event, the court would not need to have or gain a wide knowledge of the law of the other jurisdiction; it would only need to deal with the laws that are implicated in the case.

 

c.  If case  that there is no previously agreed for a choice of Law, why it would not be possible that the parties be asked for the choice of Law before the Court in question starts discussing the case. 

 

An extreme situation of that was the case  of "Y" that the defendant had no information that at a given date a plaintiff  would submit a case  to any Court thus there was possibility to  choose a given Law. Then wouldn't it be logical that both parties be given the opportunity to choose a given Law?

 

Paul: Usually, parties make the choice of law beforehand when they enter a contract.  If they don’t then it is unlikely that they will agree when the law suit starts – after all, they are now fighting in court and I assume that one of the parties will look at it and say “I win under Swiss law” and the other will say to itself “since we may lose under Swiss law, let’s ask for Indian law.”  If the parties were in agreement as to applicable law, a US court would probably honor that agreement – but it is much more likely that they would disagree.

 

Greg:  In any court case, it’s ultimately up to the court what law will apply.  As noted before, if the parties have made a choice in a contract, the court will typically defer to that choice, but the court retains the right to determine that the chosen law is not appropriate.

 

If the parties have not agreed on a choice of law, the court will make that determination.  If it’s obvious (e.g., the parties are resident in the same jurisdiction, all relevant activity took place in that jurisdiction, etc.), it’s likely that little attention will be paid to the issue (because it’s a non-issue).  Where there is a real question as to what law applies, one or both parties are likely to seize on this and try to convince the court which law to apply, based on well-settled choice of law rules.  The court could also ask both parties to brief the issue, even if the parties did not raise it, if there was a genuine issue, and the answer under choice of law rules was not obvious. 

 

Of course, if the parties can agree that a particular law applies, and it is reasonable and consistent with choice of law principles, they are very likely that the judge will agree as well.

Best regards,

Greg

 

Annex I

Summary of US choice of law rules (from http://www.proskauerguide.com/litigation/7/IV)

 

A.     There are several distinct choice of law regimes that have emerged, with states falling into one or more in their choice of law analysis. The principal regimes are discussed below.

B.     The “traditional” test: the First Restatement

1.     Under the traditional test of the First Restatement, followed fully in some jurisdictions today (such as Maryland, Virginia, New Mexico, South Carolina, Georgia, Alabama, Wyoming and Kansas), the law that applies depends on the cause of action and on single points of contact.

a.     Torts and Fraud: Torts are governed in nearly all issues by the law of the place of wrong, “the state where the last event necessary to make an actor liable for an alleged tort takes place.” Restatement (First) of Conflict of Laws § 377. In most cases the last event is the event causing injury and so the place of the wrong is effectively the place of injury. Frauds are similarly governed by the place of the wrong, which is where the loss is sustained, not where the fraudulent misrepresentation is made. Id., illus. 4.

b.     Contracts: In contracts, claims regarding the validity (capacity, formalities, consideration and defenses) are governed by the place where the contract was made, where “the principal event necessary to make a contract occurs.” Id. §§ 311 cmt. d, 332 (1934).

c.     Property: Questions concerning interests in land are governed generally by the law of the situs. In the case of movables, the law of the place where the movable was located at the time of the transaction generally applies.

C.    The “significant relationship” test: the Second Restatement

1.     The Second Restatement contains certain sections governing specific causes of action as well as an umbrella “significant relationship” test in Section 6(2). The specific sections governing torts, fraud and contract each refer back to the principles and overriding “significant relationship” test. Some version of the Second Restatement is followed by the majority of States (for example, New York, Delaware, Colorado, Connecticut, Alaska, Arizona, California (contracts only), Idaho, Illinois, Iowa, Maine, Mississippi, Missouri, Montana, Nebraska, South Dakota, Ohio, Texas, Utah, Vermont, and Washington). See Symeon C. Symeonides, Choice of Law in the American Courts in 2006: Twentieth Annual Survey, 54 Am. J. Comp. Law 697, 712 (2006).

2.     The Section 6(2) “Significant relationship” test: Section 6(2) provides that, subject to constitutional limitations, courts must follow the statutory directives of their own state on choice of law. In the absence of any, the factors relevant to the analysis of the applicable law include:

a.     the needs of the interstate and international systems,

b.     the relevant policies of the forum,

c.     the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,

d.     the protection of justified expectations,

e.     the basic policies underlying the particular field of law,

f.      certainty, predictability and uniformity of result, and

g.     ease in the determination and application of the law to be applied.

3.     The Second Restatement provides choice of law rules for each cause of action separately, with the analysis reverting to the ”significant relationship” test.

a.     Torts: The rights and liabilities with respect to issues in torts are determined by the local law of the state which, with respect to that issue, has the most significant relationship under the principles stated in Section 6. Second Restatement § 145. Contacts to be taken into account in applying the Section 6 principles are:

                                                      i.        the place where the injury occurred,

                                                     ii.        the place where the conduct causing the injury occurred,

                                                    iii.        the domicile, residence, nationality, place of incorporation and place of business of the parties, and

                                                    iv.        the place where the relationship, if any, between the parties is centered.

b.     Fraud: Where the plaintiff’s actions in reliance on the misrepresentation took place in the same state as that in which the misrepresentations were made, that state’s laws will govern unless another state has a more significant relationship under Section 6. Second Restatement § 148.

c.     Where the plaintiff’s actions in reliance took place in whole or in part in a state other than that where the misrepresentations were made, the following contacts will be considered in determining which state has the most significant relationship:

                                                      i.        the place where the plaintiff acted in reliance upon the representations,

                                                     ii.        the place where the plaintiff received the representations,

                                                    iii.        the place where the defendant made the representations,

                                                    iv.        the domicile, residence, nationality, place of incorporation and place of business of the parties,

                                                     v.        the place where a tangible thing which is the subject of the transaction between the parties was situated at the time, and

                                                    vi.        the place where the plaintiff is to render performance under a contract which he has been induced to enter by the false representations of the defendant.

d.     Contract: In the first instance, the courts must give effect to the law chosen by the parties. In the absence of any such agreement, the courts are directed to the “significant relationship” test of Section 6. Restatement (Second) of Conflict of Laws § 188. The contacts to take into account in determining those principles are:

                                                      i.        the place of contracting,

                                                     ii.        the place of negotiation of the contract,

                                                    iii.        the place of performance,

                                                    iv.        the location of the subject matter of the contract, and

                                                     v.        the domicile, residence, nationality, place of incorporation and place of business of the parties.

e.     If the place of negotiating the contract and the place of performance are in the same state, the law of that state will usually apply, except as provided in the sections regarding specific kinds of contracts (e.g. contracts relating to the transfer of interests in land or chattel, life, fire, surety or casualty insurance, contracts of suretyship, repayment of loans, services, or transportation). In those sections, the Restatement directs application of a specific state’s law subject to the “significant relationship” test of Section 6.

4.     New York courts employ, relatively consistently, a version of the “significant relationship” test, applying the law of the state with the greatest concern for the specific issue. Babcock v. Jackson, 12 N.Y.2d 473 (1963).

D.    The “governmental interest analysis” test:

1.     Many states are moving to, or already incorporate, some version of the government interest analysis test which is in some measure incorporated in the “substantial relationship” test of the Second Restatement. California uses this test in determining the law applicable to tort claims.

2.     The law of the forum is presumed to apply unless a party demonstrates otherwise. Washington Mut. Bank v. Superior Court, 15 P.3d 1071, 1080 (2001). The burden of proof is on the proponent of the non-U.S. law to show that it “materially differs” from the forum and that applying the non-U.S. law will further the interest of the non-U.S. jurisdiction. Id. The non-U.S. law is presumed to be the same as the law of the forum absent a showing to the contrary. United States v. Westinghouse Elec. Corp., 648 F.2d 642, 647 n.1 (9th Cir. 1981) Absent the non-U.S. law proponent carrying its burden, the forum law governs. In re Seagate Tech. Sec. Litig., 115 F.R.D. 264, 269 (N.D. Cal. 1987).

3.     The government interest analysis is a three step one. First, the court determines whether the non-U.S. law differs from that of the forum. If not, there is no conflict, and the forum law applies.

a.     The non-U.S. law that is invoked must “materially differ” from the forum law. Garamendi v. Mission Ins. Co., 131 Cal. App. 4th 30, 41, 31 (2005) (absent a showing of “conflicting authority” in the non-U.S. jurisdictions, the forum law applies)

b.     Laws are “materially different” if their application would lead to different results. Costco Wholesale Corp. v. Liberty Mut. Ins. Co., 472 F. Supp. 2d 1183, 1200 (S.D. Cal. 2007).

4.     Second, if there is a difference, the court examines each jurisdiction’s interest in the application of its own law to determine whether a “true conflict” exists. If not, and only one jurisdiction actually has a governmental interest in having its laws apply, there is only a “false conflict” and the law of the interested jurisdiction will apply.

a.     But even where the forum’s interest is too weak to sustain its side of a “true conflict,” the non-U.S. state must still be shown to have its own legitimate interest in applying its laws. McGhee v. Arabian Am. Oil Co., 871 F.2d 1412, 1424 (9th Cir. 1989).

b.     Where neither state has an interest in applying its laws, the laws of the forum will apply.

5.     Third, if there is a “true conflict” and each jurisdiction has a legitimate interest in the application of its rule of decision, then the court analyzes the “comparative impairment” of the interested jurisdictions to identify the law of the state whose interest would be the more impaired if its law were not applied.

a.     The analysis does not involve weighing the government interests in the sense of determining which law is worthier or best, but as a process of allocating respective “spheres of lawmaking influence.” Offshore Rental Co. v. Continental Oil Co., 583 P.2d 721, 726 (Sup. Ct. Cal. 1978); McGhee v. Arabian Am. Oil Co., 871 F.2d 1412, 1422 (9th Cir. 1989).

b.     In determining the policies and interests of a non-U.S. state, courts – looking to case law or legislative histories – may make their own determinations independent of what the parties demonstrate. See Offshore Rental, 583 P.2d at 725, n.5.

c.     The courts will consider the various contacts in determining which state has the greater interest and would suffer the greater impairment, such as the situs of the injury, the situs of the wrongful conduct, the domicile and business of the parties, and the place of contracting.

6.     The governmental interest analysis considers what is in the competing states’ public policy interests. Where a non-U.S. law violates the forum state’s public policy, that law will not be applied. Kashani v. Tsann Kuen China Enter. Co., 118 Cal. App. 4th 531, 543 (“the forum state will not apply the law of another state to enforce a contract if to do so would violate the public policy of the forum state.”)

a.     For example, recognizing strict liability of manufacturers and compensating injured parties for pain and suffering are public policies of California that will be recognized over non-U.S. law. Kasel v. Remington Arms Co., 24 Cal. App. 3d 711, 735 & n.28 (2d Dist. 1972).

7.     The governmental interest approach requires a separate analysis with respect to each issue. Beech Aircraft v. Superior Court, 132 Cal. Rptr. 541, 550 (Cal. App. 1976).

8.     The courts will determine the relative commitment of the respective states to the law involved, whether the policy underlying the law was more strongly held in the past than now, and whether the law is attenuated and anachronistic. Offshore Rental, 583 P.2d at 726.

9.     Courts performing the comparative impairment analysis also consider the modern pertinence of the underlying policy of the competing laws, and whether the policy can be satisfied by some other means (e.g. insurance satisfies the purpose of providing compensation to tort victims instead of laws permitting a broader range of tort claims).

E.     Changing residency after the wrongful conduct will have no bearing on the choice of law analysis, as court do not want to encourage forum shopping. Reich v. Purcell, 432 P.2d 727, 730 (Cal. 1967).

F.     When more than two jurisdictions are involved, once a party has invoked the choice of law analysis, the interests of all potentially affected jurisdiction are considered. States with similar laws may be grouped together for purposes of the comparative impairment step of the analysis. Among the states that are grouped as one, it is the state with the real interest in the outcome of the litigation whose impairment will be measured against that of a conflicting state. Costco Wholesale Corp. v. Liberty Mut. Ins. Co., 472 F. Supp. 2d 1183, 1199 (S.D. Cal. 2007).