Choice Of Law And Forum Selection In Commercial Contracts

In aviation, commercial relationships regularly have an international aspect: parties to a contract are often based in different countries, with "performance" of the contract possibly taking place in more than one country (e.g. fuelling and maintenance contracts and other contracts for the supply of goods and services). For this reason, if a dispute occurs, it will be necessary to determine (i) which law applies; and (ii) the courts of which country will have jurisdiction over that dispute (or whether the dispute is to be referred to arbitration). A general overview is provided below.

First, one should note that it is not strictly necessary that the applicable law is the same as that of the country exercising jurisdiction. Indeed, it is not unusual for the English Commercial Court to have jurisdiction over matters governed by a foreign law. However, it is normal for the parties to choose as the applicable law that which is the law of the court having jurisdiction (or the law of the state in which an arbitration is to be heard). This is obviously because the judges and arbitrators of these courts/ arbitrations will be better versed in their "home" law.

Normally, parties to a contract should agree at the outset which law is to govern the contract and which court is to have jurisdiction (or which arbitral tribunal is to be competent); and include in the contract an express clause to this effect. If the parties do not designate the applicable law, then there may be the need for extensive and expensive litigation to resolve this issue alone (the rules for determining which law applies in the absence of an express choice can be unclear or their application uncertain). Most countries will permit the parties to make an express choice of law and jurisdiction/arbitration. For example, throughout the European Union, the Rome Regulation on the Law Applicable to Contractual Obligations (EC 593/2008) ("Rome I") governs the determination of the applicable law. Article 3 of this Regulation – entitled "Freedom of Choice" – provides:

"1. A contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or to part only of the contract."

It should be noted that, while the above is of general applicability to commercial contracts, Rome I does contain a number of provisions...