When trading internationally, parties frequently assume that they can operate in accordance with their own domestic laws and practices. This assumption is erroneous and can lead to grave misunderstandings. When you trade across country borders, you are subject to not only the laws of your own country but to the laws of other countries where you do business. You need not physically enter another country to become subject to its laws-merely selling goods by mail or electronic means may establish a sufficient connection to bring you within the jurisdiction of another country's courts.
To a certain extent, you may control the application of a country's laws to your particular transaction by expressly setting forth the law that will govern the contract. However, parties do not have complete freedom of contract in choosing the governing law. Most countries have laws that mandate domestic jurisdiction over particular types of contractual arrangements, such as those involving land transactions.
Even in the absence of a statute, the determination as to which law will be applied is nearly always left to the discretion of the court, which may or may not respect the choice you have made. In practice, courts tend to uphold the expressed intent of the parties provided it is not contrary to statute. An express provision on governing law therefore has a significant effect on which laws will be employed to interpret contractual rights and obligations in international transactions. |
