Applying Foreign Law And Jurisdiction To A Contract: Principles And Issues To Be Considered By A Foreign Party When Entering Into A Commercial Transaction With An Argentine Party

As a matter of legal principle, Argentine law should be

applied to all contracts entered into in Argentina with a local

party. This principle, though, is subject to an exception in

commercial transactions where foreign law and

jurisdiction can be chosen by the parties to resolve any

conflict in any given contractual relation. This exception also

applies when both parties are nationals of Argentina, but as a

matter of practicality rarely occurs.

The chosen law must be established clearly and specifically

in the terms of the contract and in unambiguous wording. For

example, a provision that subject a contract "to the laws

of the United States" could be subject of controversy as

it will not indicate the State law applicable.

The parties can also subject the controversies arising out

of a contract to foreign jurisdiction. Article 1 of the Federal

Civil and Commercial Procedural Code establishes that the

competence assigned to local courts can be exempted in matters

of exclusive patrimonial and international nature by agreement

of the parties to a transaction, even in favor of foreign

courts or arbitration panels, except in cases of exclusive

Argentine jurisdiction (like bankruptcy) or when it is

expressly prohibited by the law.

The possibility of establishing foreign law to a transaction

is subject to limitations that we describe herein but in broad

terms any matter considered of public order could not be

subject to foreign law and any provision in a contract to the

contrary will be considered null and void. For example, labor

laws, prevail over any contractual provision. In this sense,

the appointment of an agent or sales representative that works

exclusively for the foreign company under strict orders and

subject to periodical reports may be considered as an employee

and claim labor indemnities and social security contributions

in case of termination.

Likewise, the courts may also apply Argentine law to a

contract in certain circumstances. For example, Argentina does

not have statutory protection for agency or distribution

contracts like other countries but the courts may apply

indemnities under established court precedents when the

termination has been extemporaneous. Another exception is that

when establishing guaranties for a payment, a foreign company

should be aware that pledges and mortgages must follow local

law and any provision to the contrary will be ineffective: for

example a provision applying foreign law to the assignment of a

...