International commercial transactions have an added a layer of complexity regarding the possibility of legal disputes and dispute resolution or settlement mechanisms. Due to the potential conflict that could result from the differing legal systems of the parties involved in the transaction, many international contracts include choice of law agreements in order to escape the “my law – your law” dilemma (see the recent ICC study on this subject). These agreements rest on the principle of party autonomy, which allows the parties in an international contract to choose the law that governs their transaction, as parties to a contract are considered to be in the best position to determine which law is most suitable for their transaction. However, in practice, adjudicators do not always give full effect to party autonomy and recognize a choice of law clause. As a result, uncertainty remains in this area due to the unequal treatment of such a choice of law agreement by different jurisdictions.
In March 2015, the Hague Conference on Private International Law (HCCH) approved the Principles on Choice of Law in International Commercial Contracts, or the Hague Principles. This non-binding instrument aims to strengthen legal certainty and predictability in international commercial transactions by ensuring that the law chosen by the parties to apply to their international commercial contracts has the widest scope of application, subject to clearly defined limits. The Hague Principles promote a consistent approach to choice of law in international contracts, thereby strengthening legal certainty for international commerce, and can aid in the modernization and harmonization of international commercial law, all of which are conducive to a favourable climate for international business and commerce.
The Hague Principles may serve as a universal model that can be incorporated into domestic law to help guide the reform of private international law rules applicable to contractual choice of law. The Hague Principles are set to operate side-by-side other modern instruments available to parties planning or negotiating international commercial contracts, such as the ICC Incoterms© rules or ICC Model Contracts.
ICC, which contributed to the development of the Hague Principles as an Observer to the Working Group – mandated with the drafting of the instrument – is satisfied with the completion of this new HCCH instrument, the usefulness of which has already been recognized by Paraguay, the first country to have implemented the Hague Principles. In line with UNCITRAL’s endorsement of the Hague Principles (see here for more details), ICC recommends States to incorporate the Hague Principles, whose articles are now available in Arabic ,Chinese , Russian and Spanish , into their domestic choice of law regimes.
The Principles can be downloaded from the Hague Conference website www.hcch.net in English or in French . For more information on the Hague Principles, visit the special section on the website of the Hague Conference on Private International Law.