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  • 1. Chapter ThreeIntroduction to Conflict of Laws Why an introduction to conflict of laws?[3.1] This chapter provides a preliminary introduction to the rules, tests, approaches,methods, techniques and theories of conflict of laws. Due to a lack of uniformity in theuse of terminology,1 terms and concepts of conflict of laws may sometimes overlap or bebarely distinguishable. Nevertheless, conflict of laws is a vital part of international com-mercial law, because its rules affect the outcomes of international commercial transac-tions. The operation of the conflicts rules may have a significant impact not only on theoutcome of any international commercial litigation,2 but also on the enforcement of con-tractual obligations in any international commercial transactions. Even if a contractualdispute is to be settled by the parties through consultation, mediation or arbitration, theconflicts rules will help them to determine the governing law of the contract, whichforms the basis for ascertaining the parties’ rights and obligations, and for interpretingthe terms of the contract.[3.1][3.2] [3.2][3.2] Conflict of laws is relevant to international commercial law because the parties toan international transaction will usually (by definition) come from different countries, orthe transaction, by virtue of the goods sold or matters concerned, may involve the laws ofdifferent countries. In an international sale of goods or services, for example, the sellercould be in Australia, but the buyer could be in Germany or Japan. Should the law of theseller’s country or the law of the buyer’s country apply, if any dispute arises from the con-tract of sale? In addition, the ship carrying the goods could have a Panamanian registra-tion, but be owned by an American citizen who is also a resident of the Solomon Islands;1. For example, ‘theories’ in Nygh, Conflict of Laws in Australia, 5th ed, Butterworths, Sydney, 1991, pp 18–31, include discussion of ‘the theory of vested rights’, ‘the local law theory’, ‘non-conflicts’, ‘how to resolve a true conflict’ and ‘choice of law technique in Australia’. But in North and Fawcett, the same expression refers to ‘the theory of acquired rights’, ‘local law theory’ and ‘the American revolution’ (Cheshire and North’s Private International Law, 12th ed, Butterworths, London, 1992, pp 27–31).2. ‘International commercial litigation’ is a term of convenience. It was adopted in Cromie, International Commercial Litigation (Butterworths, London, 1990). It refers to litigation for commercial disputes which have international connections. International connections can be identified either through parties to the dispute, or the subject-matter of the dispute. Litigation arising from the dispute may involve service out of jurisdiction, foreign judicial assistance or enforcement of a foreign judgment. 54
  • 2. Introduction to Conflict of Laws [3.5]and the transaction is financed by a Japanese bank operating in Hong Kong. Further-more, if the goods are insured by Lloyd’s, which is based in London, what is the govern-ing law for the insurance contract then? The rights and obligations of each party undereach possible regime of law may be substantially different, because the countries, whichmight have jurisdiction over the matter on the bases of residence, nationality, registrationand business operation, etc, might have substantially different legal systems, and stronginterests in enforcing their own laws. The rules of conflict of laws deal with these issues.[3.2][3.3] [3.3][3.3] International commercial law, public international law and conflict of laws (privateinternational law) are related. For example, in Grace v MacArthur 170 F Supp 442 (1959)(US DCED, Arkansas) the principles of public international law came into play in supportof the rules of conflict of laws. An action involving a contract was initiated in a US Fed-eral Court in Arkansas. Service of a writ to the defendants was required. One of thedefendants was served on board an aeroplane when the plane was flying over Arkansas ina non-stop journey from Memphis, Tennessee to Dallas, Texas. The court held that thedefendant was served within the territory of Arkansas. This is important, because other-wise a process of service out of jurisdiction would be necessary and some jurisdiction setsout difficult rules for service out of jurisdiction. It must be noted that the jurisdiction orterritory of a state extending to the airspace of the state is a concept of public interna-tional law (although it was applied within the dominion of a federal state in this case).[3.3][3.4] [3.4][3.4] Two relatively recent Australian cases, Oceanic Sun Line Special Shipping Co Inc v Fay(1988) 165 CLR 197; 79 ALR 9 and Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR539; 97 ALR 124, illustrate the importance of conflicts rules. Both cases were determinedby the High Court of Australia. In the former, the Australian plaintiff was allowed to pro-ceed with his personal injury claim, sustained while on board a Greek registered shipwithin Greek territorial waters, against the Greek shipowner in the Supreme Court ofNew South Wales. In the latter, the New South Wales companies were not permitted topursue their damages claims in New South Wales against a US resident for allegedly negli-gent advice given by him as an accountant in Missouri. The summaries of the cases are asfollows:[3.4][3.5] [3.5] ♦ [3.5] Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197; 79 ALR 9 The oppressive or vexatious test versus the doctrine of forum non conveniens Facts: Dr Fay (plaintiff), a resident in Queensland, and his wife booked a cruise around the Greek islands in the Eastern Mediterranean through the sale agent of the defendant (Oceanic Sun Line Shipping — the owner of the vessel on which Dr Fay was injured) in Sydney. The money for the tour was paid to the agent in Sydney. Dr Fay received an exchange order from the Sydney agent and received the actual ticket later in Athens. The ticket contained a clause which stated that any dispute arising from the ticket must be heard before the courts of Athens. 55
  • 3. [3.5] International Commercial Law Dr Fay was seriously injured while taking part in trap shooting on board the vessel, which was then sailing in Greek waters. Dr Fay later sued the defendant in the Supreme Court of New South Wales in Sydney, where the ticket was booked, money paid and exchanged order issued. The defendant’s application for a stay of proceed- ings in New South Wales failed. So did its appeal to the Full Court of the Supreme Court. The defendant (appellant) then appealed to the High Court of Australia. Issues: Whether the Supreme Court of New South Wales should hear the claim for personal injury, given the existence of the following circumstances: • the cruise was booked and paid in Sydney; • the ticket which contained a choice of forum clause (a clause which chooses a particular forum, either a court or an arbitral tribunal, to deal with any dispute arising from the contract concerned) was issued in Athens; • the injury took place on board a Greek vessel which was within Greek territorial waters; • the defendant had its principal place of business in Greece; • the plaintiff was resident in Queensland; and • the plaintiff’s language difficulties with litigating in Greek courts. Decision: The High Court by a 3–2 majority dismissed the appeal and held that the terms of the ticket did not exclude the jurisdiction of the Australian courts. How- ever, the majority judges dismissed the appeal on divergent grounds, which did not provide any unambiguous and certain guidance to the lower courts in Australia for dealing with similar matters. This unsatisfactory situation led to a duty-driven effort of compromise (in particular between the joint judgment and Brennan J’s judgment) by the majority of the High Court in Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538; 97 ALR 124.[3.5][3.6] [3.6] ♦ [3.6]Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538; 96 ALR 124 The High Court set out the test of a clearly inappropriate forum Facts: The plaintiffs and respondents, Manildra Flour Mills (MFM, the first plaintiff and first respondent) and Honan Investments Pty Ltd (the second plaintiff and second respondent, which was the holding company of MFM), were incorporated under New South Wales law. MFM sold starches and starch products between 1976–1983 to Manildra Milling Corporation (MMC), which was a subsidiary of Honan Invest- ments and incorporated under the law of the state of Kansas, the United States. Voth, the defendant and appellant, was a practising accountant in Missouri, the United States. He had allegedly provided negligent advice on tax matters to MMC, affecting MFM. Under the laws of the United States, MFM was liable to pay withhold- ing tax on the interest received from MMC, which became indebted to MFM as the result of the transactions between them. MMC was liable to deduct the withholding tax from the payments of interest to MFM. MMC did not deduct the tax during the period between 1976–1983. Nor did MFM pay tax to the US Government during 56
  • 4. Introduction to Conflict of Laws [3.6] that period. All were allegedly the results of Voth’s negligence. In 1984 MFM and MMC realised that the back-dated tax payments and a penalty for MMC’s failure to comply with the US law were payable to the Inland Revenue Services of the United States. MFM and Honan Investments sued Voth in New South Wales for professional negligence. Voth’s application for a stay of proceedings in New South Wales was denied by the Supreme Court of New South Wales, and an appeal to the Court of Appeal of the Supreme Court of New South Wales failed. Voth thus appealed to the Australian High Court on the ground that the NSW court was not the appropriate forum for this dispute. Issues: Whether the proceedings in New South Wales should be stayed, given the existence of the following circumstances: • the alleged negligence (omission or misrepresentation) was committed in Missouri; • the damages flowing from the alleged negligence occurred in New South Wales (MFM) and US (MMC); • Voth was resident in Missouri; and • MFM and Honan Investments were resident in New South Wales. Decision: The majority of the High Court was determined to clarify the uncertainty arising from the divergent tests adopted by the majority judges in Oceanic Sun for determining the appropriateness of an Australian court’s jurisdiction in such cases. Five judges (Mason CJ, Brennan, Deane, Dawson, and Gaudron JJ) agreed that the ‘clearly inappropriate forum’ test should be adopted in Australia. One judge (Toohey J) insisted that the ‘forum non conveniens’ doctrine should be the test in Australia. While the five judges were united (although maybe conditionally, as Brennan J, as his Honour then was, accepted the majority’s test for the sake of unity) in reinforcing the test of ‘clearly inappropriate forum’, they differed in the interpretation and appli- cation of the test. Four judges (Mason CJ, Deane, Dawson and Gaudron JJ) found that New South Wales was clearly an inappropriate forum under the test, but Bren- nan J found New South Wales was not a clearly inappropriate forum under the same test. Toohey J found Missouri was a more appropriate forum under the ‘forum non conveniens’ doctrine. At the end, five judges (Mason CJ, Deane, Dawson, Toohey and Gaudron JJ) held that: • the alleged tort was committed in Missouri and the liability should be deter- mined by the law of Missouri; and • the action should be stayed either because New South Wales is clearly an inap- propriate forum (by the joint judgment) or because Missouri is a more appropri- ate forum (by Toohey J). The dissenting judge (Brennan J) found that the alleged negligence was initiated in Missouri but completed in New South Wales, the principal damage occurred in New South Wales, and New South Wales was not clearly an inappropriate forum. ♦[3.6] 57
  • 5. [3.7] International Commercial Law[3.7] [3.7][3.7] In a situation similar to the two abovementioned cases, an Australian party willhave the advantage of a familiar legal system and the benefit of saving costs if the case isheard by an Australian court, and will face higher risks, and more disadvantages, if he orshe has to litigate in a foreign court. This is why we have to study the rules of conflict oflaws and the tests favoured by a court of law, which will determine the selection of aforum in a given case. A lawyer needs to contemplate in any international commercialcontract the implications of the conflicts rules to deal with possible disputes.[3.7][3.8] [3.8][3.8] This chapter provides an introduction to certain basic rules, techniques orapproaches of conflict of laws, and their application to the determination of a court’sjurisdiction. A study of the determination of governing law of a contract or dispute isfound in Chapter 15. The brief introduction to conflict of laws in this chapter will help usto understand certain preliminary issues, such as the governing law of a contract of sale ora bill of lading, or the jurisdiction of the court (see Bulk Chartering & Consultants AustraliaPty Ltd v T & T Metal Trading Pty Ltd (The Krasnogrosk) (1993) 31 NSWLR 18), in a numberof court decisions which we will deal with in subsequent chapters.[3.8][3.9] [3.9] What is a conflict of laws?[3.9] The expression ‘conflict of laws’ simply means that the laws of different countriesare in conflict with each other. This happens when a particular matter, object, transactionor legal relationship (for example, the validity of a marriage or effect of an oral promise) isgoverned, or alternatively, can be dealt with by the laws of two (sometimes even more)countries. This situation can be illustrated by the following example:[3.9][3.10] [3.10] ♦ [3.10] Example of conflict of laws within Australia Conflict of laws within Australia is not a major concern of our study. However, con- flict does arise between the laws of Australian states from time to time.3 A conflict between the sale of goods legislation of certain Australian states is an appropriate example to demonstrate a conflict of laws in commercial transactions. Hypothetical facts: Suppose a buyer from New South Wales telephoned a seller in Tasmania and ordered a quantity of Tasmanian cheese to the value of $5,000. The order was not reduced to any written form thereafter. No other action was taken in relation to the matter (no part performance). The market prices of the Tasmanian cheese increased and the seller refused to perform the oral agreement to sell. Can the New South Wales buyer enforce this oral agreement?3. For example, in Potter v The Broken Hill Pty Company Ltd (1906) 3 CLR 479, the plaintiff (Potter) sued the defendant (the Broken Hill Pty Company Ltd) in the Supreme Court of Victoria for an alleged infringement of a patent granted in New South Wales under the law of New South Wales. The High Court held that the validity of the patent could only be dealt with in New South Wales. See also Cambridge Credit Corporation Ltd v Lissenden (1987) 8 NSWLR 411; Breavington v Godleman (1987–1988) 169 CLR 41; Perrett v Robinson (1987–1988) 169 CLR 172; Stevens v Head (1992) 112 ALR 7; and Rothwells v Connell (1993) 119 ALR 538. 58
  • 6. Introduction to Conflict of Laws [3.12] Relevant laws: The Tasmanian law differs from the New South Wales law with regard to the validity of this oral order. Section 9 of the Sale of Goods Act 1896 (Tas) states that a contract of sale involving a value of £10 or more must be made or evi- denced in writing, and an oral contract can be enforced only in the following four exceptional circumstances: • buyer accepted part of the goods contracted; • buyer accepted all the goods contracted; • buyer paid an earnest (a rare practice today, referring to a payment made by the buyer to indicate his or her sincerity to buy the goods, which is not refundable if the buyer refuses to perform the contract); or • buyer made part payment for the goods. In contrast, the Sale of Goods Act 1923 (NSW) does not require a contract of sale to be made or evidenced in writing. In fact, a similar provision in the NSW Act was repealed in 1988. Hypothetical conflict: Suppose the four exceptions in s 9 of the Tasmanian Act are not satisfied. Ignoring the issue of standing under the respective laws, the Tasma- nian Act and NSW Act may lead to conflicting results, if they both become applicable on the ground that the oral contract was made in such a circumstance that it is impossible to agree on where the contract was ultimately reached (because, for example, the parties were in different states, were involved in a telephone conversa- tion and disagreed as to when and how the offer and acceptance was effected). This means that under the NSW Act, the buyer can enforce this contract provided that the general law relating to oral contracts, ie the existence of detriment or part per- formance, is satisfied; but under the Tasmania law the seller has no obligation to per- form the oral contract, because s 9 was not complied with. The difference between the Tasmanian Act and NSW Act is what we call ‘conflict of laws’. ♦[3.10][3.11] [3.11][3.11] The above example explains the meaning of conflict of laws. A court becomesconcerned with conflict of laws issues when a plaintiff commences a proceeding pursuantto the rules of the court and the defendant raises the issues of foreign law to challengeeither the appropriateness of the court’s jurisdiction or the claims of the plaintiff. In sucha situation, the court concerned would have to determine first whether it has an appropri-ate jurisdiction over the dispute, and secondly, which law governs the dispute if the courthas an appropriate jurisdiction over the dispute. In carrying out these steps, the courtapplies the so-called ‘rules of conflict of laws’ or ‘conflicts rules’ to make a choice ofeither the jurisdiction, or of the governing law. The former can be called ‘choice of juris-diction’ and the latter ‘choice of law’. In most circumstances, conflict of laws involves theconflict between competing jurisdictions, such as the cases of Oceanic Sun and Voth vMFM: see summaries in [3.5]–[3.6].[3.11][3.12] [3.12][3.12]It follows that in order to resolve the dispute in the hypothetical example, theNew South Wales court will have to determine whether it has appropriate jurisdiction 59
  • 7. [3.12] International Commercial Lawover the dispute if the buyer sues the seller in New South Wales. Similarly, the Tasmaniancourt has to determine whether it has appropriate jurisdiction over the dispute if thebuyer asks it (although it is most unlikely) to enforce the oral contract. The jurisdictionalissue in this hypothetical case may be (but not necessarily) dealt with under the cross-vest-ing legislation, which is uniform throughout Australia and allows a state court to exercisecertain jurisdiction of the court in another state on a reciprocal basis. After the jurisdic-tion of a court is dealt with, the court which is to hear the dispute will have to decidewhich of the two laws (ie the New South Wales Act or Tasmanian Act) should apply. Therules, methods, approaches, or techniques for making such determination form the bodyof conflict of laws.[3.12][3.13] [3.13] Explaining the expression ‘conflict of laws’[3.13] ‘Conflict of laws’, as a particular branch of law, is often referred to as ‘privateinternational law’,4 or sometimes ‘private transnational law’. It represents a body of rules,or established practices, for making a choice of jurisdiction and choice of law in dealingwith foreign elements in local litigation which can involve almost any areas of law, such ascontracts, torts, property law, company law, banking and securities legislation, matrimo-nial law, etc.[3.13][3.14] [3.14][3.14] ‘Foreign element’ is a broad term referring to any facts, connections or consider-ations which may raise the issues of foreign law, foreign jurisdiction or international trea-ties which are not part of domestic law. In the presence of foreign elements, a court of lawwould have to, as we have seen, decide whether it has an appropriate jurisdiction orwhether a local law, a foreign law, an international treaty (which has not been incorporatedinto the domestic law), or sometimes a foreign judgment, should be taken into account indealing with the dispute. Since there are differences, inconsistencies and conflicts betweenrules of different countries, a domestic court has to determine which rule or rules areapplicable in a given case. This is probably why the expression ‘conflict of laws’ was cre-ated. It may also explain why ‘conflict of laws’ is sometimes described as ‘choice of law’.[3.14][3.15] [3.15][3.15] ‘Choice of law’ suggests that in dealing with issues of conflict of laws, the courtis, in fact, making a choice between laws, including sometimes the law governing thechoice of jurisdiction. The rules of conflict of laws may sometimes be broadly called therules of choice of law. Sometimes ‘choice of law’ is used in a more specific sense, referringto the choice of substantive law (see [3.16]) which governs the rights and liabilities of theparties in a given case. This is different from ‘choice of forum’, which deals only with thejurisdiction of a court to hear a dispute.5[3.15][3.16] [3.16]4. The term ‘private international law’ is believed to have been created by Story in 1834 and was adopted by the early English authors, such as Westlake and Foote. North and Fawcett, supra note 1, p 12.5. For example, the Australian Law Reform Commission’s Report No 58 states that choice of law rules ‘need to be distinguished from the rules conferring jurisdiction’: see The Law Reform Commission, Report No 58: Choice of Laws, Commonwealth of Australia, Canberra, 1992, para 1.3. 60
  • 8. Introduction to Conflict of Laws [3.18][3.16] The concepts of ‘substantive law’ and ‘procedural law’ need to be distinguished.‘Substantive law’ refers to a law governing the rights and duties of the parties to an inter-national commercial transaction, and ‘procedural law’ deals with procedural issues of liti-gation. ‘The substantive rights of the parties to an action may be governed by a foreignlaw, but all matters appertaining to procedure are governed exclusively by the law offorum.’6 There are two major reasons for the codification of conflicts rules in the context ofinternational commercial law. First, it is necessary for the purpose of providing the samerights and duties to the same persons who are involved in the same type of internationalcommercial transactions in different jurisdictions. Secondly, codification provides thesame procedural protection to persons who have the same right but take legal action indifferent jurisdictions, and provides the same rules for the choice of law regardless ofwhere the choice is made. Again, private international law (conflict of laws) is closely, butnot exclusively, related to international commercial law.[3.17][3.16] [3.17] Defining ‘conflict of laws’[3.17] While we can come to a reasonable understanding of the kind of issues withwhich we have to deal under the conflict of laws or private international law, there are dif-ficulties in defining the expressions. For example, Nygh observes as follows: [conflict of law, as its title suggests,] is concerned with resolving the conflicts which arise because of the interaction between different legal systems. The title is not altogether satis- factory. While it is true that the resolution of conflicts between laws is the most important and dramatic aspect of the subject, there are other issues, such as jurisdictional questions, which do not necessarily arise out of conflicts between laws and yet indisputably belong to the subject.7 Similarly, in dealing with the different meanings of ‘private international law’, Northand Fawcett observe that: [the main] criticism directed against its use is its tendency to confuse private international law with the law of nations or public international law, as it is usually called … There is, at any rate in theory, one common system of public international law … but, as we have seen, there are as many systems of private international law as there are systems of munic- ipal law.8[3.17][3.18] [3.18][3.18] Perhaps an easier way of defining the concept of ‘conflict of laws’ is to ignore thediversity of the systems of law and to describe the expression at a more abstract level.This appears to be what Castel has done. His definition of ‘conflict of laws’ is as follows: It [conflict of laws] is concerned with the application of law in space. One could describe private international law or conflict of laws as the body of rules dealing with the effect of legally relevant foreign elements on the decision of a civil case. Although rules of conflict6. North and Fawcett, supra note 1, p 75.7. Nygh, supra note 1, p 4.8. North and Fawcett, supra note 1, pp 12–13. 61
  • 9. [3.18] International Commercial Law of laws could, to a certain extent, be considered as a body of substantive rules, in fact they constitute only a technique which enables the courts to reach a solution by applying the domestic law of a particular legal unit to the facts of the case.9 Castel treats ‘conflict of laws’ as a technique in an abstract sense. However, courts in dif-ferent countries may in fact have different techniques of conflict of laws. This is one ofthe reasons for the existence of conflict of laws.[3.19][3.18] [3.19][3.19] The primary meaning of ‘conflict of laws’ implies that a conflict exists in theapplication of the laws of different jurisdictions, such as the hypothetical example in[3.10]. But the laws of different jurisdictions also include laws dealing with the situationwhere a local law conflicts with a foreign law (conflicts rules). Thus we appear to betrapped in a circle in attempting to separate the laws of sovereign states which cause aconflict (laws in conflict) from the conflicts rules of sovereign states which, while pur-porting to resolve the conflict caused by the former, also result in conflicts with the con-flicts rules of other countries (such as renvoi, see [3.83]).[3.20][3.19] [3.20][3.20] Bearing in mind the difficulty of reaching a universal definition of conflict oflaws, we may perhaps adopt a Castel-like approach and define ‘conflict of laws’ broadly asa body of statutory or common law rules (if a common law country is involved) appliedby a court of law for dealing with the conflict between substantive or procedural laws ofdifferent legal systems in any dispute involving foreign elements.[3.21][3.20] [3.21] Three operating areas of conflicts rulesAn overview[3.21] Generally speaking, conflict of laws issues arise when there are foreign elementsin a dispute and these elements lead to a conflict between competing laws of differentlegal systems. For the convenience of our study, we may classify the circumstances whereconflict of laws issues arise into three categories, or operating areas. These are:• determination of jurisdictional issue, often referred as the ‘choice of forum’, or ‘choice of jurisdiction’ issue; for example, Oceanic Sun, see [3.5], and Voth v MFM [3.6];• determination of the substantive law governing the dispute, sometimes referred to as the ‘choice of (substantive) law’ issue (see Chapter 15); and• enforcement of foreign judgments (see Chapter 15). These categories help us to avoid confusion between a choice of forum issue and achoice of substantive law issue and to apply the appropriate rules accordingly.[3.22][3.21] [3.22]Determination of jurisdictional issues[3.22] In common law tradition, a plaintiff ’s access to a regular court (a court the plain-tiff ‘regularly invokes’) is a matter of right.10 This means that a plaintiff may commence9. Castel, Introduction to Conflict of Laws, 2nd ed, Butterworths, Toronto, 1986, pp 3–4. 62
  • 10. Introduction to Conflict of Laws [3.25]proceedings freely pursuant to the procedural rules of a court. Once the plaintiff has initi-ated the proceedings in compliance with the procedural rules, the court has to determinethe appropriateness of its jurisdiction if the defendant challenges this: see, for example,Oceanic Sun (1988) 165 CLR 197; 79 ALR 9, [3.5]]; and Voth v MFM (1990) 171 CLR 539;97 ALR 124, [3.6]. The court has to employ certain rules to reach and justify its decision on the appropri-ateness of its jurisdiction in a given case. These rules are the so-called conflicts rules. Wewill examine the basic rules for determining the issue of jurisdiction in [3.59]–[3.82].[3.22][3.23] [3.23][3.23] In a conflict of laws situation, a court of law is not concerned with whether it hasa jurisdiction over the dispute. Rather, it deals with the appropriateness (or inappropriate-ness) of its jurisdiction. The court has to decide which court of the competing jurisdic-tions is the best, or a clearly more appropriate, or less appropriate, or less inappropriate,or clearly inappropriate (the test endorsed by the majority of the High Court in Voth v MFM,see [3.6]), or most convenient, or less convenient, or most inconvenient, or less incon-venient forum, whatever expressions we may use, to exercise the jurisdiction over the dis-pute. In a sense, the determination of the issue of jurisdiction is a balancing process,involving judging and assessing the competing factors, arguments, advantages and disad-vantages or interests of the parties by a court of law, although conceptual difficulties (ifnot confusion) have led to disagreements among judges as to the functions of the balanc-ing technique (if we may call this a technique) in the operation of conflicts rules.11[3.23] [3.24][3.24][3.24] It must be pointed out that, after the endorsement of the ‘clearly inappropriateforum’ test by the majority of the High Court in Voth v MFM, the balancing approach hasbecome less significant in Australia. This is because the majority judges (Mason CJ,Deane, Dawson and Gaudron JJ) are of the opinion that convenience factors, ‘though rel-evant, have never been regarded as decisive’ in the application of conflicts rules: (1990)171 CLR 538 at 560. However, it must also be pointed out that in Voth v MFM, the major-ity judges and Toohey J did consider (if not balance) the factors relevant to the cause ofaction and advantages or disadvantages to the parties in pursuing the claim in the UnitedStates and Australia respectively: (1990) 171 CLR 538 at 569–571 and 590.[3.24][3.25] [3.25][3.25] Two issues are involved in the determination of a court’s jurisdiction under theconflicts rules:• why does a court want or have to engage in a process of questioning or considering the appropriateness of its own jurisdiction (see, for example, Oceanic Sun (1988) 79 ALR 9 per Deane J at 48–51)?10. Oceanic Sun Line Special Shipping v Fay (1988) 79 ALR 9 per Deane J at 49; Voth v MFM (1990) 171 CLR 538, per Mason CJ, Deane, Dawson and Gaudron JJ at 554.11. For example, Scott LJ in St Pierre v South American Stores (Gath & Chaves) Ltd [1936] 1 KB 382 at 398, stated that a mere balance of convenience is not a sufficient ground for depriving a plaintiff of the advantages of prosecuting his action in an English court if it is otherwise properly brought. 63
  • 11. [3.25] International Commercial Law• what are the tests for a court to make a choice between two or more competing juris- dictions (see, for example, Voth v MFM (1990) 171 CLR 538 per Mason CJ, Deane, Dawson and Gaudron JJ at 554–61)? The first issue is pertinent to the theories of conflict of laws and will be addressed in[3.33]–[3.49]. The second issue is concerned with the particular rules (methods or techniques) ofconflict of laws and will be examined in [3.59]–[3.82].[3.25][3.26] [3.26]Determination of governing law[3.26] The purpose of determining the governing law of the matter in dispute is to decidethe rights and liabilities of the parties to the dispute. This is what the plaintiff asks the courtto do and what both plaintiff and defendant expect, once the issue of the court’s jurisdic-tion is settled. The determination of governing law is crucial because the duties and rightsof the parties and the remedies available under competing laws may differ significantly.[3.26][3.27] [3.27] ♦ [3.27] The ‘Anders Maersk’ [1986] 1 Lloyd’s Rep 483 Determination of the governing law of the dispute arising from a bill of lading Facts: The plaintiff shippers contracted with the defendant carrier to carry two large steam boilers from Baltimore, United States to Shanghai, China in 1981. The bill of lading incorporated the provisions of the Carriage of Goods by Sea Act 1936 (US) (COGSA). It also contained a clause which gave the carrier the right to tranship the boilers. The carrier shipped the boilers to Hong Kong and transhipped them on board the vessel Linjiang there for Shanghai. The vessel encountered adverse weather conditions during the voyage. As a result, one boiler fell into the sea and the other was damaged. The shippers took action against the carrier in Hong Kong. They argued that the Carriage of Goods by Sea (Hong Kong) Order 1508 of 1980 gov- erned the dispute because the boilers were transhipped in Hong Kong. The shippers believed that they were entitled to recover more substantial damages under the Hague-Visby Rules, which were incorporated into the law of Hong Kong by the Order 1508 of 1980, than under COGSA. The carrier contended that the bill of lad- ing was subject to COGSA because its provisions were incorporated in the bill. The determination of the governing law of the bill in this case may affect the sum of com- pensation to be received by the shippers. Decision: Mayo J of the High Court of Hong Kong held that the bill was governed by COGSA by the express incorporation of COGSA in the bill of lading. In addition, the transhipment in Hong Kong was not an independent transaction. It was covered by the carrier’s right to tranship under the bill of lading. The law of Hong Kong did not apply to the transhipment in Hong Kong. ♦[3.27][3.28] [3.28][3.28] After the determination of the court’s jurisdiction, the judge will determine thelaw applicable to the dispute. In PS Chellaram & Co Ltd v China Ocean Shipping [1989] 64
  • 12. Introduction to Conflict of Laws [3.29]1 Lloyd’s Rep 413,12 the defendants argued that the law of Hong Kong was applicablebecause the bill of lading was issued in Hong Kong, or, alternatively, the contract of car-riage was concluded in Hong Kong. Both grounds are connecting factors, a connection,considerations or tests for determining the governing law in a case where more than twolaws compete for authority to govern the matter in dispute. However, Carruthers J reliedon the express terms of the bill, which is another rule of conflict of laws, to determine thegoverning law. It can be argued that the process of determining the governing law is aprocess of determining or balancing the rationales, rules, factors or considerations whichmay justify the choice of one law over another in the circumstances concerned. (Themajority of the present High Court may not favour the so-called balance of convenienceapproach to the determination of the appropriate jurisdiction.13)[3.28][3.29] [3.29]Enforcement of foreign judgments[3.29] This is the last area in our functional categories of conflicts rules14 where tech-niques of conflicts rules are needed to guide and justify a decision of the court. Although ‘English and Australian courts have long recognised and enforced foreignjudgments’,15 a person seeking to enforce a foreign judgment in England at common lawdoes not have a right to have the judgment executed by an English court.16 Nor does aperson have a common law right to enforce a foreign judgment in Australia. At commonlaw a person must apply to a local court for the enforcement of a foreign judgmentlocally. The foreign judgment so enforced is executed through the authorisation of thecompetent local court. The reason for this situation can be explained by the concept ofsovereignty which is examined in [2.6]–[2.11]. If every state is sovereign and equal, thereis not any jurisprudential justification for a local court having to obey the judgment of aforeign court. Recognition of a foreign judgment is an exercise of a state’s sovereignty andits courts’ discretion. The expression ‘enforcement of foreign judgment’ refers to a process in which a localcourt recognises and enforces a foreign judgment, or alternatively, refuses to enforce theforeign judgment, pursuant to the local law. In this process, the local court is actuallymaking a decision as to the ‘local validity’ of the foreign judgment. The local court needsthe assistance of certain rules, considerations or justifications in making the decision.Conflicts rules, in particular the vested rights theory (see [3.39]) and local law theory (see[3.40]), thus become relevant. Generally speaking, in the absence of any treaty obligation,12. It must be pointed out that although the decision of the trial judge was set aside by the Court of Appeal of the Supreme Court of New South Wales in this case, see (1990) 28 NSWLR 354, the decision of the Court of Appeal does not affect our discussion in this paragraph.13. For example, Oceanic Sun (1988) 79 ALR 9 per Deane J at 46–8; and Voth v MFM (1990) 171 CLR 538 per Mason CJ, Deane, Dawson and Gaudron JJ at 560. It must be pointed out that the determination of jurisdiction and determination of the substantive law are different matters.14. Conflicts rules can also be discussed according to their functions, in the categories of contracts, torts, family, property and corporations, etc.15. Sykes and Pryles, Australian Private International Law, 3rd ed, Law Book Co, Sydney, 1991, p 107.16. Collins et al, eds, Dicey and Morris on the Conflict of Laws, 12th edn, Sweet & Maxwell, London, 1993, p 457. 65
  • 13. [3.29] International Commercial Lawa local court recognises and enforces a foreign judgment only when such enforcement isconsistent with the local law governing the matter decided in the foreign judgment, andconsistent with the public interest or public policy of the court’s own country. However, alocal court does not adjudicate the merits of a case which has been decided in a foreignjudgment, although it may deny the effect of the judgment by refusing to enforce itlocally. Conflict of laws becomes an issue when local courts adopt different methods,principles or tests for recognising foreign judgments.[3.29] [3.30][3.30][3.30] At present, the enforcement of foreign judgments in Australia is mainly dealtwith by the relevant federal and state legislation, such as the Foreign Judgments Act 1991(Cth) and similar state legislation based on the Foreign Judgments (Reciprocal Enforce-ment) Act 1933 (UK).17 The matter is further discussed in Chapter 15.[3.30][3.31] [3.31] Why consider conflicting foreign laws in the context of trade?[3.31] It is necessary to know the jurisprudential basis of the rules of conflict of laws,even though, as we will see, the experts or scholars of conflicts rules may disagree as tothe real rationale or theory of the conflicts rules. Before going into some detail of the the-ories of conflicts rules, we should look at a hypothetical example of international tradewhere no rule of conflict of laws exists, or no conflict rule has been accepted.[3.31] [3.32][3.32] ♦ [3.32] Example: what would happen if no conflicts rules exist and a court disregards entirely the jurisdiction of another competing court or law? Hypothetical facts: An Australian seller sold 1000 bales of Australian wool under the FOB term (see [4.22]) to a Chinese buyer and the goods were carried by an Australian charterer, who hired the ship from a Chinese shipping company. The Aus- tralian charterer adopted the Chinese company’s bill of lading which contained a clause stating that the Hamburg Rules (see [6.11]) applied to the disputes arising from the bill. The wool was water damaged due to the negligence of the Australian charterer, who was later sued by the Chinese buyer for damages. The relevant laws: Article 6, r 1(a) of the Hamburg Rules states that the carrier’s liability under the rules is limited to an amount equivalent to 835 units of account per package or other shipping unit or 2.5 units of account per kilogram of gross weight of the goods involved. Suppose the Hamburg Rules are part of Chinese law. In contrast, art 4, r 5(a) of the Hague-Visby Rules provides that the carrier’s liability under the rules is limited to an amount less than 666.67 units of account per package or unit or 2 units of account per kilogram of gross weight of the goods involved. The Hague- Visby Rules are part of Australian law.17. For example, Re Dooney [1993] 2 Qd R 362; Re Word Publishing Company Ltd [1992] 2 Qd R 336; and Keele v Findley (1990) 21 NSWLR 444. 66
  • 14. Introduction to Conflict of Laws [3.34] Conflict: The Chinese buyer (shipper) sued the Australian charterer in a Chinese court, which fixed the amount of compensation in accordance with art 6, r 1(a) of the Hamburg Rules. The Australian charterer had asked the Chinese court either to stay the proceedings or to fix an amount under art 4, r 5(a) of the Hague-Visby Rules, because s 11 of the Carriage of Goods by Sea Act 1991 (Cth) states that any bill of lading for the carriage of goods from Australia to overseas must be subject to Australian law and the jurisdiction of Australian courts. The Chinese court refused to consider s 11 of the Carriage of Goods by Sea Act 1991 (Cth), whilst the Australian court refused to enforce the Chinese judgment in Australia by virtue of s 11 of the Carriage of Goods by Sea Act 1991 (Cth). The Chi- nese buyer subsequently seized the assets of the Australian charterer situated in China and the Australian charterer, as a means of reprisal, held the chartered vessel in Australia. What could the Chinese owner of the vessel do? Suppose the Australian courts were offended by the lack of respect shown by the Chinese court to the Carriage of Goods by Sea Act 1991 (Cth). They rejected the complaint of the Chinese shipowner on the ground that both the Chinese shipowner and the Chinese buyer of the wool were state-owned enterprises and were insepar- able, and ordered both the shipowner and buyer to submit to an Australian court to answer the counter-claim of the Australian charterer. What could happen to trading relationships between Australia and China? Hypothetical consequences: More reciprocal retaliation followed and by the end not only was there no trade between the two countries, but also businessmen in each of the two countries did not dare to go to any third country which might confis- cate their property at the request of the other country. Such consequences would seriously damage the countries’ foreign trade and commerce and be intolerable and detrimental to both countries. ♦ This hypothetical example demonstrates that it is unimaginable that conflicts rules notexist in the area of foreign trade and commerce. There are mutual benefits for the courtsof trading countries to coordinate their rules of conflict of laws, or alternatively, todevelop their own rational rules of conflict of laws. This is a practical reason for the exist-ence of conflicts rules in international commercial disputes.[3.32][3.33] [3.33] Major theories of conflicts rulesAn overview[3.33] Theories of conflicts rules enable us to identify the reasons and rationale for theexistence of conflicts rules and how these rules are applied. Thus, we may be able tochoose appropriate conflicts rules from the vast and divergent techniques or rules of con-flict of laws to resolve the relevant issues arising from international commercial disputes.[3.33][3.34] [3.34][3.34] North and Fawcett review the history and theories of conflict of laws in Cheshireand North’s Private International Law (12th ed, Butterworths, London, 1992) pp 14–40. 67
  • 15. [3.34] International Commercial LawRather than repeating what has been said in that book, we will examine only the main the-ories or thoughts which explain why there ought to be conflicts rules and how the rulesshould be applied. These theories and thoughts provide rational bases for a court (or acountry) to develop its conflicts rules to deal with contests between competing laws andjurisdictions.[3.34][3.35] [3.35]Theory of international comity[3.35] In order to explain why a local court has, or is willing, to consider a foreign lawwhich is likely to be in conflict with the local law in a given circumstance, certain legalscholars relied on the theory of comity. This theory (the theory of international comity)was explained by Huber in the following words: Sovereigns act out of comity so that the laws of each nation, brought into existence within its territory, may hold their force everywhere so far as they do not prejudice the power of the law of another sovereign and his subjects. From which it follows that this is derived not merely from the civil law, but from convenience and the tacit consent of nations.18 Huber’s theory of comity was further developed by Story of the United States in thenineteenth century, but ‘was criticised by several European writers on the basis that it wastoo parochial and relegated choice of law to judicial discretion and caprice’.19[3.35][3.36] [3.36][3.36] The theory of comity is not a theory pertaining only to conflict of laws. In fact, ithas been developed as a theory to explain international law in general. It explains why asovereign state will wish to respect the sovereignty of another — this respect extends tothe ‘sovereignty of the law’ and ‘territorial sovereignty’ of another state. If ‘comity’ isunderstood merely as a gesture of courtesy based solely on the discretion of a local gov-ernment or a local court, it only explains the conflicts rules from a moral perspective (ie, amorally binding covenant between countries). However, such a perspective does notexplain why, for example, s 11(1) of the Carriage of Goods by Sea Act 1991 (Cth) imposesexclusive jurisdiction of the Australian law and courts on the sea-carriage from a place inAustralia to a place outside Australia: see [6.137]–[6.138]. Nor does it explain why theAustralian Parliament refuses to consider foreign law in the circumstances described ins 11. Internation comity is better understood as being based on reciprocity and mutualconvenience — in order to avoid or to reduce mutual inconvenience, countries have togive reciprocal comity to each other when considering the authority of foreign law in cer-tain circumstances. This proposition may perhaps be called ‘economic interdependencetheory’.[3.36][3.37] [3.37][3.37] Since the comity theory is based on the courteous conduct of states or courts ofdifferent states, it is vulnerable to attack from the parochial, arbitrary and discourteousconduct of foreign states or foreign courts in certain circumstances. For example, DeaneJ observed in Oceanic Sun (1988) 79 ALR 9 at 50, that the comity theory may not be reliedon to deny a local court’s jurisdiction ‘in circumstances where some leading western18. This passage was quoted in Sykes and Pryles, supra note 15, p 7.19. Id, p 8. 68
  • 16. Introduction to Conflict of Laws [3.38]countries, particularly in relation to actions by their own residents, decline to observeeven the judicial restraint shown by common law countries under the traditional doctrine’of oppression and vexation. The comity theory does not impose a unilateral obligationupon a local court to treat a competing foreign jurisdiction as equivalent to its ownjurisdiction.[3.37] [3.38][3.38]The economic interdependence theory[3.38] No conflict of laws scholar has adopted this expression. But the notion of thistheory can be seen in the following passage from Huber’s De Conflictu Legum diversarum inDiversis Imperiis: Because as the laws of another nation can have no force directly in another territory, so nothing could be more inconvenient to commerce and international usage than if rights valid by the law of a certain place were at once made void by a different law elsewhere …20 It is implied in Huber’s statement that the absence of conflicts rules will substantiallydeter and harm international commerce and trade. This observation is undoubtedly cor-rect. As we have seen in Chapter 1, in early English history courts of law applied customsand usage of foreign merchants to mercantile transactions involving foreign merchants:see [1.8]–[1.13]. English law also allowed juries for commercial disputes involving for-eign merchants to consist of both local and foreign persons: see [1.12]. These practicesgave effect to the relevant foreign law and foreign customs and usage to which the foreignmerchants had been accustomed. The main purpose of these practices was to attractmore foreign merchants to England and facilitate international trade and commerce inEngland. It can be argued that economic interdependence between countries is the essen-tial reason for having conflicts rules in international commercial disputes. The point is even clearer in the history of international commercial law in China. Thenotion of conflict of laws was unheard of in seventh century China. However, the TangCode allowed disputes between two foreign merchants of the same nationality to be dealtwith under the relevant foreign law: see [1.23]. The likely explanation for the adoption ofthis conflict of laws rule is that the Chinese Government sought to encourage foreigntraders, although it may also be argued it might have considered that to be a morally fairand preferable thing to do. In any event, the hypothetical example of [3.10] suggests therationale and need for having harmonious conflicts rules in the context of internationaltrade and commerce. Therefore, we may argue that as far as international trade and com-merce is concerned, economic interdependence between countries is a compelling reasonfor them to adopt reasonable conflicts rules. Indeed, this proposition is supported by astatement of the US Supreme Court in The Bremen v Zapata Off-Shore Co (1971) 407 US 1 at8 that the ‘expansion of American business and industry will hardly be encouraged if, not-withstanding solemn contracts, we insist on a parochial concept that all disputes must beresolved under our law and in our courts’.[3.38]20. Id, p 7. 69
  • 17. [3.39] International Commercial LawTheory of acquired or vested rights21[3.39] [3.39][3.39] In the history of searching for a higher law (or theory) to guide and explain theexistence, application and nature of particular conflicts rules, legal scholars and juristssought to rationalise the need for and existence of conflicts rules by examining the natureof the rights subject to the rules. Huber and Dicey, for example, developed the vested oracquired rights theory. This theory assumed that a person acquired a right under a foreignlaw or a local law. The right recognised, granted or given under a particular law becamethe vested or acquired right of the person, and could be enforced or recognised or at leastconsidered by a court of another country. In order to ascertain the creation or existenceof acquired or vested rights, this theory emphasised the territoriality of law. The theory was further developed by Beale in the United States, and strict criteria fordetermining the territoriality of law and rights were developed. The rigidity of the criteriafor determining rights and applying conflicts rules forced the theory away from reality,and its validity was further undermined by Cook and Lorenzen.22 The main defect of thevested or acquired right theory is that it assumes that there is only one state which haspower to create the right which later becomes vested or acquired.23 This is obviouslyuntrue even in our preliminary hypothetical of the oral contract between the New SouthWales buyer and Tasmanian seller (see [3.10]), where the governing law (or the lawreating the vested or acquired right) is determined by the relevant laws applicable to theformation of the contract. The theory has also been held to be incorrect in the sense thata right unenforceable or unrecognised under a chosen law may be recognised by the lawwhich becomes applicable under the conflicts rules of the court exercising jurisdictionover the right.24 Today the vested or acquired rights theory is rarely resorted to. However,the theory may arguably still be relevant to the enforcement of a foreign judgment, wherethe right in question has been vested or acquired under a specified foreign law.[3.39][3.40] [3.40]Local law theory25[3.40] The local law theory was developed by Cook, who explained its meaning andfunction as follows:26 The forum, when confronted by a case involving foreign elements, always applies its own law to the case, but in doing so adopts and enforces as its own law a rule of decision iden- tical, or at least highly similar though not identical, in scope with a rule of decision found in the system of law in force in another state or country with which some or all of the for- eign elements are connected, the rule so selected being in many groups of cases, and sub-21. North and Fawcett, supra note 1, pp 27–30; Sykes and Pryles, supra note 15, pp 8–9; Nygh, supra note 1, pp 18–19; and Brilmayer, Conflict of Laws: Foundations and Future Directions, Little Brown and Co, Boston, 1991, pp 11–41.22. Sykes and Pryles, supra note 15, p 9.23. Ibid.24. North and Fawcett, supra note 1, p 29.25. Id, pp 30–1; Sykes and Pryles, supra note 15, pp 9–10; and Nygh, supra note 1, pp 19–20.26. North and Fawcett, supra note 1, p 30; Sykes and Pryles, supra note 15, p 9; and Nygh, supra note 1, pp 19–20. 70
  • 18. Introduction to Conflict of Laws [3.42] ject to the exceptions to be noted later, the rule of decision which the given foreign state or country would apply, not to this very group of facts now before the court of the forum, but to a similar but purely domestic group of facts involving for the foreign court no foreign element. The rule thus ‘incorporated’ into the law of the forum may for con- venience be called the ‘domestic rule’ of the foreign state, as distinguished from its rule applicable to cases involving foreign elements. The forum thus enforces not a foreign right but a right created by its own law.27 This theory intends to justify conflicts rules, which require the consideration of foreignlaw or give effect to foreign rules, by treating the application of conflicts rules as a processof applying a local law identical or similar to the foreign law that is applicable to the samecircumstances. The theory appears to have endeavoured to justify (or to search for ahigher theory or reason to explain) why a sovereign court wants to (or has to) give effectto rights recognised under a foreign law, or even to enforce the relevant foreign law.[3.40] [3.41][3.41][3.41] The real significance of this theory is not expressly seen in the above quote, butin the extended construction of this statement. For example, North and Fawcett arguethat the gist of the local law theory is the proposition that a local court ‘applies its ownrules to the total exclusion of all foreign rules’ and it often ‘for reasons of social expedi-ence and practical convenience, takes into account the laws of the foreign country inquestion’ to apply the local law in a manner as close as possible to the way in which therelevant foreign law would apply.28 Similarly, Nygh observes that the major importance ofthe theory is ‘the realisation that the function of the conflict of laws is not the preserva-tion of international order but the carrying out of local law and policy’.29 Such construc-tions of the local law theory would give a local court wide discretion in applying conflictsrules and in justifying its decisions.[3.41] [3.42][3.42][3.42] The influence of the local law theory can be seen in the judgment of Gaudron Jin Oceanic Sun (1988) 79 ALR 9 at 55, where her Honour stated that ‘in my view, it is the lexfori which provides the answer to the same question when asked in the process of deter-mining the proper law, it follows that it must also provide the answer when it is necessaryto determine whether or not a stay should be granted on the basis of submission to a for-eign jurisdiction’. This suggests that legal theories may have an impact upon judicialpractices, even though judges will inevitably interpret any theories in their own words,according to their own preference and for their own purposes (see, for example, Deane J’scomment on comity theory in Oceanic Sun). Gaudron J’s observation can be identified withlocal law theory in the sense that both believe that local law provides rules for the deter-mination of conflict of laws issues.[3.42]27. Cook, The Logical and Legal Bases of the Conflict of Laws, Harvard University Press, Cambridge, 1942, pp 20–1.28. North and Fawcett, supra note 1, p 30.29. Nygh, supra note 1, p 20. 71
  • 19. [3.43] International Commercial LawPublic (or government) interest theory (or analysis)30[3.43] [3.43][3.43] The public (or government) interest theory (or analysis) was created by BrainerdCurrie of the United States. He examined a number of US cases, such as Alaska PackersAssociation v Industrial Accident Commission 294 US 532 (1935), and rationalised the judicialpractices by formulating them into the theory of government interest analysis. He initiallyset out his views on government interest analysis in 1959 and modified them in 1963.31 The major points of his theory are as follows:• in a conflict of laws situation, there are government policies and interests in the rele- vant laws which compete for jurisdiction over the matter in dispute;• a court should identify the policies and interests underlying the competing laws;• not every case of conflict of laws necessarily involves a conflict of government inter- ests, and in such a case, one of the competing laws, which represents a government interest, applies;• if both competing laws represent competing government interests, the interest of the local government prevails and thus local law applies; and• in the case of disagreement or uncertainty, the court is obliged to apply local law to guarantee the litigant’s access to justice unless a sole government interest of another country is later clearly established. In the light of these major points, we can argue that government interest analysis is notreally a theory in the sense that comity theory, vested rights theory and local law theoryare theories. It is more a method or approach to resolving conflicts in a particular case.However, it may indirectly provide philosophical guidance or justifications for a court totake into account policy implications in determining the appropriateness of a forum or ofa law, such as Deane J did in Oceanic Sun (1988) 79 ALR 9 at 50–1.[3.43] [3.44][3.44][3.44] Currie’s innovative approach to conflict of laws has inspired lasting and continu-ing discussions (or ‘revolution’32) on the theory of conflict of laws in the United States33and has affected the development of conflict of laws rules in that country. Although Aus-tralian courts of law have not shown any significant interest in this theory (a brief com-ment on the US practice was made by Deane J in Oceanic Sun (1988) 79 ALR 9 at 49), some30. Sykes and Pryles, supra note 15, pp 203–6; Brilmayer, supra note 21, pp 104–8; Brilmayer, ‘The Other State’s Interests’ (1991) 24 Cornell International Law Journal pp 233–43; Castel, supra note 9, pp 9–11.31. Currie, ‘Notes on Methods and Objectives in the Conflict of Laws’ [1959] Duke LJ 171; and Selected Essays on the Conflict of Laws, Duke University Press, Durham, 1963.32. For example, see Simson, ‘Plotting the next “Revolution” in Choice of Law: a Proposed Approach’ (1991) 24 Cornell International Law Journal p 279.33. For example, some recent articles on the interest analysis are Kramer, ‘More Notes on Methods and Objectives in the Conflict of Laws’ (1991) 24 Cornell International Law Journal p 245; Singer, ‘Facing Real Conflicts’ (1991) 24 Cornell International Law Journal p 197; Brilmayer, ‘The Other State’s Interests’ (1991) 24 Cornell International Law Journal 233; and Simson, ‘Plotting the next “Revolution” in Choice of Law: a Proposed Approach’, (1991) 24 Cornell International Law Journal p 279. 72
  • 20. Introduction to Conflict of Laws [3.48]knowledge of the theory would be beneficial to a student of conflict of laws. Sykes andPryles discuss public interest analysis in Australian Private International Law, pp 203–6.[3.44][3.45] [3.45][3.45] Interest analysis represents a single approach to the conflict of laws. All it dealswith is whether a state has an interest in applying its law to a particular dispute or whichstate has a better interest in applying its law to the dispute in question. Currie intended toestablish the government interest theory as the sole, fundamental or starting point forresolving any conflict of laws. He insisted that government interest is the basis for resolv-ing a conflict of laws. According to his theory, because government interest is the reasonand justification for the application of the law representing that interest, courts of lawshould interpret the laws of the relevant states to identify whether there is any ‘govern-ment interest’, or which is a better interest, in the application of these laws. Once theinterests are identified, compared and balanced, the governing law will be chosen in theorder of priority as suggested by Currie: see [3.43].[3.45][3.46] [3.46][3.46] Bearing in mind what interest analysis means, we may argue that it represents aneffort to establish or create a uniform ‘determining’ or ‘connecting’ factor between thematter and applicable laws. The determining or connecting factor is so-called governmentinterest, which is largely determined by examining the policy and purposes of a particularpiece of legislation and by ascertaining the government’s reason (benefit, advantage ordisadvantage) for applying the legislation to the matter in question. The result of applyinginterest analysis will vary, depending on the selection of relevant factors, the constructionof legislative purposes and policy, and the interpretation of the relationships between thepolicy (or legislative purpose) and the relevant factors, all of which represent a mixedexercise of objective and subjective criteria. This is why the critique of interest analysisoften argues that it is inadequate for the court of one country to assess or evaluate thepolicies and government interests underlying the law of another country.[3.46][3.47] [3.47][3.47] The fate of interest analysis in Australia appears to be rather uncertain. The LawReform Commission of Australia has made the following comments in relation to interestanalysis: The Commission rejected a rule selecting approach based on interest analysis as a general technique because it leads to too much uncertainty. As a way of solving true conflicts it requires the court to evaluate competing laws without clear rules to guide them. However, aspects of the approach have influenced the proposals — in particular it is acknowledged that it may be helpful to take into account the objects and purposes of legislation as an ancillary aspect in choice of law decisions within Australia. Not only will this help to elim- inate false conflicts, it will be consistent with s 118 of the Constitution.34[3.47][3.48] [3.48][3.48] To sum up, for our purposes we need to know that interest analysis represents anew approach to conflict of laws (in particular a method for selecting one of the compet-ing jurisdictions or laws). However, the basis of the analysis, that is, identifying the trueconflict and determining the most important connection (government interest) between34. The Law Reform Commission, supra note 5, para 2.11. 73
  • 21. [3.48] International Commercial Lawthe matter and relevant laws, can be seen in the concept of lex causae (see [3.73]), whichpre-dates the creation of the interest analysis theory. As suggested by the Law ReformCommission Report, the influence or significance of interest analysis in Australia willprobably be seen in a conscious assessment of the policy and purposes of the relevantlaws by the Australian courts in certain circumstances, such as Oceanic Sun (1988) 79 ALR9 per Deane J at 49.[3.48][3.49] [3.49]Summary of the theories[3.49] We have dealt with five major theories in the above paragraphs. These are:• international comity theory: see [3.35]–[3.37];• economic interdependence theory (for commercial cases only): see [3.38];• vested or acquired rights theory: see [3.39];• local law theory: see [3.40]–[3.42]; and• government interest (or public interest) analysis or theory: see [3.43]–[3.48].[3.49][3.50] [3.50] True conflict and false conflict[3.50] A true conflict refers to a situation where the application of the laws of relevantcountries results in different or conflicting results. For example, Chinese law requires cer-tain international commercial contracts to be approved before becoming binding, butAustralian law does not have such a requirement. Suppose a contract for the sale of a ves-sel (which is not governed by the Vienna Sales Convention) is entered into between a Chi-nese buyer and an Australian seller in China, but the vessel is to be delivered in Australia.No governing law of the contract has been expressly chosen in the contract. The contractis not enforceable in a Chinese court of law until it is approved by a competent govern-ment authority (if this contract is subject to approval), but is enforceable in an Australiancourt as soon as the contract has been duly executed. Substantial differences result fromthe application of the Chinese and Australian laws, if the parties disagree as to the termsof the contract which has not been approved by the Chinese authority. This is a true con-flict, because under the Chinese Foreign Economic Contract Law the contract can bevoid, but under Australian law the contract is enforceable. The Chinese party, if it intendsto terminate the contract, may argue that Chinese law is the governing law because thecontract was made in China. In contrast, the Australian party, if it intends to enforce thecontract, may argue that Australian law is the governing law, because the contract wasintended to be performed in Australia and the performance is the real and determiningconnection in this case. Both grounds represent valid rules of conflict of laws which maybe taken into account by a court of law in dealing with (if not balancing) the conflict ofinterests represented by the laws in conflict.[3.50][3.51] [3.51][3.51] A true conflict exists in all cases where courts of law apply conflicts rules toresolve the disputes concerned. See, for example, China Ocean Shipping Co v PS Chellaram& Co Ltd (1990) 28 NSWLR 354; and In re Missouri Steamship Company (1889) 42 CD 321.[3.51] 74
  • 22. Introduction to Conflict of Laws [3.53][3.52] [3.52][3.52] A false conflict refers to a situation where the application of the laws of differentcountries will not result in any real difference to the interests of the parties. For example,an Australian seller and a Chinese buyer entered into a contract for the sale of a certainamount of Australian wheat to China (which is governed by the Vienna Sales Convention,see Chapter 5 and Appendix 1). The contract was entered into in China, but the goodswere to be delivered at the Port of Melbourne. The parties disagreed as to the contractualdescription of the goods. The contract did not specify the governing law. Nor did itexclude the application of the Vienna Sales Convention. The Chinese party would insiston the application of Chinese law, and the Australian party would prefer the matter to bedealt with under Australian law. But a court would find there is no substantial differencebetween the competing laws, because both Australia and China are members of theVienna Sales Convention which governs the contract in dispute. The Vienna Sales Con-vention is the same under both Australian and Chinese law.[3.52][3.53] [3.53] A false conflict may also arise within Australia when the laws of different states providesimilar remedies to the matter in dispute. ♦ [3.53] McKain v R W Miller & Company (South Australia ) Pty Ltd (1991) 174 CLR 1; 104 ALR 257 No real conflict between the competing laws Facts: McKain, the plaintiff, was employed by R W Miller & Company, the defendant, as a marine steward on board the vessel Troubridge, plying between South Australian ports. The plaintiff was allegedly injured in the course of a lifeboat drill when the ves- sel anchored at Port Lincoln in South Australia on or about 22 February 1984. The plaintiff, who was resident in New South Wales, commenced proceedings against the defendant for personal injuries in the Supreme Court of New South Wales on 4 January 1990. The defendant contended that the action was statute barred under s 36(1) of the Limitation of Actions Act 1936 (SA) which set out a three-year limita- tion period. Decision: The High Court by a 4–3 majority held that the proceedings were not statute barred because s 36(1) was procedural in nature and did not afford a defence to the action. In the view of the majority judges (Brennan, Dawson, Toohey and McHugh JJ) there was no conflict between the law of New South Wales where the action was entertained and the law of South Australia where the alleged tort occurred. The minority judges (Mason CJ, Deane and Gaudron JJ) held that s 36(1) was not merely procedural and it afforded a good defence in the proceedings. ♦ A false conflict also arguably arises from circumstances where a close examination ofthe issue in dispute reveals that the apparent conflict between two competing laws doesnot in fact exist.[3.53] 75
  • 23. [3.54] International Commercial Law[3.54] [3.54] ♦ [3.54] Kim Meller Imports Pty Ltd v Eurolevant SpA and Others (1986) 7 NSWLR 269 No real conflict exists between the laws applicable to the parties Facts: A bill of lading for the carriage of goods from Italy to Australia stated that all disputes arising from the bill should be arbitrated in London. Section 9 of the Sea- Carriage of Goods Act 1924 (Cth), which has been replaced by the Carriage of Goods by Sea Act 1991 (Cth), imposed an exclusive jurisdiction of Australian courts over such bills. The shipowners were sued not as a party to the bill of lading, but as the owners of the vessel. They applied to the court for a stay of the proceedings on the ground of the arbitration clause in the bill. Decision: Rogers J of the Supreme Court of New South Wales found that s 9 did not apply to a third party. The shipowners, who were not a party to the bill of lading entered into between the charterer of the vessel and the Australian importer, were allowed to rely on the arbitration clause. No conflict between the arbitration clause and s 9 existed. ♦[3.54][3.55] [3.55][3.55] The distinction between a true and a false conflict helps us to avoid unnecessarydebate on the technicality of the rules of conflict of law. In the case of a false conflict, thecourt of forum, where the proceedings are initiated, may have a wider discretion inupholding its own jurisdiction, because no conflict exists between the laws of the relevantjurisdictions. The court of law may also refer the dispute to another forum merely forconvenience of administration. A false conflict implies that there is no substantial differ-ence in the parties’ interests no matter which law applies, but it does not necessarily sug-gest that the forum court must assume its own jurisdiction on the ground of a falseconflict.35[3.55][3.56] [3.56] Characterisation and conflicts rules[3.56] Characterisation is an important issue in conflict of laws. The expression ‘charac-terisation’ refers to a process of legal reasoning in which a judge (or a person) identifies,analyses, assesses and evaluates a legal issue (or relationship or a cause of action, etc) andultimately characterises the issue by identifying it with an existing (or innovative) categoryor compartment of legal principles for the purpose of matching the appropriate rules oflaw to the issue concerned. A detailed discussion of characterisation in the context ofconflicts rules is seen in Collins and Others, eds, Dicey and Morris on the Conflict of Laws(12th ed, Sweet & Maxwell, London, 1993) pp 34–47.[3.56]35. For a general discussion on the true or false conflict, see Kramer, ‘Rethinking Choice of Law’ (1990) 90 Columbia Law Review p 277. 76
  • 24. Introduction to Conflict of Laws [3.58][3.57] [3.57][3.57] The importance of characterisation in the context of conflict of laws is seen, forexample, in Oceanic Sun (1988) 79 ALR 9. In this case, the majority judges (Brennan,Deane and Gaudron JJ), who decided that the Supreme Court of New South Walesshould hear the dispute, characterised the principal issue in dispute as the determinationof the governing law of the contract. They found expressly or implicitly that the contractof carriage (or the transactions leading to the conclusion of the contract) was made, orcarried out, in New South Wales: (1988) 79 ALR 9, per Brennan J at 40, per Deane J at 51and Gaudron J at 59). In contrast, the dissenting judges (Wilson and Toohey JJ), whodecided that New South Wales was not an appropriate forum to hear the dispute, charac-terised the principal issue in question as ‘an action in tort for a wrong allegedly committedby an appellant which is incorporated in Greece and carries on business there, in respectof an accident which occurred in Greek waters on a Greek vessel in the course of a cruisewhich had its point both of departure and return in a Greek port’ (as opposed to ‘anaction for breach of contract’): see (1988) 79 ALR 9 at 22. Because the judges character-ised the main issue of the dispute differently, they reached different conclusions after hav-ing applied the relevant laws which are deemed to be appropriate to the character of theissue in dispute. Similarly, in Voth v MFM (1990) 171 CLR 538, the judges also characterised the princi-pal issue in dispute in different ways. The joint judgment characterised the cause of actionas a negligent omission. It held that the alleged cause of action involved a failure to giveadequate advice in performing accountancy services which ‘was an act complete in itself,or, if not complete in itself, one that was initiated and completed in the one place. Thatplace was Missouri’: see (1990) 171 CLR 538 at 569. By characterising the cause of actionas an issue of negligence, the majority judges found the law where the alleged negligenceoccurred to be appropriately applicable. By characterising the accountancy services as anact which began and ended at the same place, the majority judges excluded the applicabil-ity of New South Wales law to the alleged negligent act. This contributed to the conclu-sion that New South Wales was clearly an inappropriate forum. In contrast, Brennan Jcharacterised the cause of action as a misrepresentation and held that the misrepresenta-tion was made and completed in the place where it was received or relied upon. Brennan Jfound that New South Wales was the place where the misrepresentation was received andrelied upon and where the damages flowing from the misrepresentation occurred: (1990)171 CLR 538 at 578–9. This is why Brennan J found that the law of New South Walesgoverned the cause of action. This finding contributed to his Honour’s determinationthat New South Wales was not clearly an inappropriate forum. The essentiality of charac-terisation to the application of conflicts rules is evident.[3.57] [3.58][3.58][3.58] It must be pointed out that characterisation is relevant not only to the determina-tion of fundamental issues, but also to the determination of any subsidiary issues of thecase. This is because characterisation, in plain words, means that a court of law identifies,defines or characterises the nature or existence of the relevant legal issues to be dealt within a given case. The differences in the way judges characterise the relevant issues may 77
  • 25. [3.58] International Commercial Lawexplain why in certain circumstances judges agree with each other on the basic issues con-cerned but differ from each other as to the appropriateness of applicable laws or ade-quacy of remedies available in the case.[3.58][3.59] [3.59] Selected rules and tests of conflict of lawsAn overview[3.59] One of the major difficulties with the study of conflicts rules is the confusion, orlack of clarity, in the use of terminology. The expressions, such as ‘rules’, ‘tests’, ‘meth-ods’, ‘techniques’ or ‘doctrines’, etc, have been employed in the study of conflict of lawswithout any clearly defined distinction between them. In this section of the book, we willdeal with a number of common tests, rules or techniques applicable to a conflict of lawssituation. Most of the rules or tests are expressed in Latin.[3.59][3.60] [3.60]Forum non conveniens[3.60] Forum non conveniens is a doctrine upon which a local court may find a foreigncourt to be more appropriate than the local court to deal with the issue in question. TheLatin meaning of this phrase is irrelevant, because the meaning of this doctrine asadopted by the English courts today has no connection to the words’ Latin origin. Thiswas discussed by Deane J in Oceanic Sun (1988) 79 ALR 9 at 46, where his Honour statedas follows: … the Latin phrase forum non conveniens is potentially misleading as a description of the cur- rent United Kingdom and United States doctrines to which it is commonly applied: see Spiliada at 474–5; Loftus v Lee (1958) 308 SW(2d) 645 at 658. Even to one with some acquaintance with Latin, “conveniens” (lit “coming together” ie conformable, consistent, appropriate) is likely to suggest “convenient” (Latin: “commodus”) whereas both United Kingdom and United States doctrines, while taking account of convenience, also stress the importance of consideration of the ends of justice: see eg, Spiliada, at 483, 487; Koster v (American) Lumbermens Mutual Casualty Co (1947) 330 US 518 at 527. As we have seen earlier, courts of law have been endeavouring for centuries to searchfor higher theories or doctrines to guide and justify their practices of conflict of laws. Thedevelopment of the forum non conveniens doctrine suggests such endeavour. The forum nonconveniens doctrine, as a ground or test for determining the appropriateness of the selectedcourt’s jurisdiction, was initiated in Scotland,36 and later accepted by the courts of theUnited States.37 It was applied in a 1908 Australian case — Maritime Insurance Co Ltd v Gee-long Harbour Trust Commissioners (1908) 6 CLR 194. The doctrine became more significant(at least to Australian law) when the English courts began to explore the possibility ofreplacing the traditional test of ‘oppression and vexation’ by some more liberal test, suchas the forum non conveniens doctrine, in 1974. In The Atlantic Star [1974] AC 436, the Houseof Lords indicated a desire to interpret the traditional test of oppression or vexation more36. Collins et al, supra note 16, p 398; and North and Fawcett, supra note 1, p 220.37. Ibid. 78
  • 26. Introduction to Conflict of Laws [3.61]liberally and to consider certain factors of convenience, such as advantages and disadvan-tages of the parties in the competing forums. The trend continued in MacShannon v Rock-ware Glass Ltd [1978] AC 795, where balance of convenience and injustice to the parties asa result of staying the proceedings in the selected forum was discussed. This case was fol-lowed by The Abidin Daver [1984] AC 398, where Lord Diplock (at 411) was of the opinionthat the forum non conveniens should be accepted in English courts. The forum non conveniensdoctrine was finally accepted by the House of Lords in Spiliada Maritime Corp v CansulexLtd [1987] AC 460 and has been the English test for determining an application for a stayof proceedings in favour of a foreign forum since. The forum non conveniens doctrine adopted by English courts consists of the followingmajor considerations or elements:• the court will refuse to stay the proceedings if it is satisfied that there is no other clearly more appropriate forum to deal with the dispute;• the court will grant a stay if it is satisfied that there is some other clearly more appro- priate forum to deal with the dispute;• the other available forum should be prima facie clearly more appropriate than the selected forum; and• the appropriateness of a forum should be assessed by taking into account the inter- ests of the parties and the ends of justice. The considerations for determining the appropriateness of a forum, such as advantagesor disadvantages, interests, justice and ‘ends of justice’, have been criticised by severalAustralian judges as uncertain and discretionary: see Oceanic Sun (1988) 79 ALR 9 perBrennan J at 38–40 and Deane J at 46–7 and 49. The English version of the forum non con-veniens doctrine has been expressly rejected by the majority of the High Court in OceanicSun (1988) 79 ALR 9, [3.5] and Voth v MFM (1990) 171 CLR 538, [3.6]. But in Voth vMFM, the joint judgment (Mason CJ, Deane, Dawson and Gaudron JJ) compared the‘clearly inappropriate forum’ test and the ‘clearly more appropriate forum’ test which isone of the basic elements of the forum non conveniens doctrine, and admitted that the twotests lead to the same result in the majority of cases: (1990) 171 CLR 538 at 558. Couldthis be an indication that the High Court is adopting a modified version of the forum nonconveniens doctrine in Australia? Indeed, Toohey J in Voth v MFM reached the same deci-sion as the joint judgment under the forum non conveniens doctrine merely by referring to (orborrowing from) the joint judgment’s discussion of the determining and connecting fac-tors (cause of action, advantages and disadvantages of both parties) in the case.[3.60][3.61] [3.61]The clearly inappropriate forum test[3.61] The ‘clearly inappropriate forum’ test has been accepted by the majority of theHigh Court (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) to be the test fordetermining the appropriateness of a selected court’s jurisdiction in Australia. The testwas initially proposed by Deane J in Oceanic Sun (1988) 79 ALR 9 at 48, and later not only 79
  • 27. [3.61] International Commercial Lawendorsed, but also enunciated, by the joint judgment of Mason CJ, Deane, Dawson andGaudron JJ in Voth v MFM (1990) 171 CLR 538 at 556–64. The notion of the clearly inappropriate forum test can be seen in the following state-ment by Deane J in Oceanic Sun (1988) 79 ALR 9 at 48: It follows that, on my view of the modern content and practical operation of traditional principle, the question whether the United Kingdom doctrine should be accepted in this country can, for practical purposes, be stated in terms of whether the rule that, in a case where there is an available and appropriate foreign tribunal, proceedings will, in the absence of exceptional circumstances, be stayed or dismissed as vexatious or oppressive if the local court is a clearly inappropriate one, should be extended to embrace any case in which it appears that the available foreign tribunal is the natural or more appropriate forum. So stated, the practical impact of the answer to the question is confined to those probably rare cases in which an available foreign tribunal would be the natural or a more appropriate forum but in which it has not been demonstrated by the defendant that the local tribunal is a clearly inappropriate one. Even when the practical significance of the answer to the question is acknowledged as being so confined, the question itself remains a fundamental one of not inconsiderable importance. In the above statement, the expression a ‘clearly inappropriate’ forum was applied. Butthe statement as a whole did not clearly suggest the meaning or definition of the ‘clearlyinappropriate forum’ test. It appears that his Honour applied the vexatious and oppres-sive test for the purpose of determining whether the selected forum was clearly inappro-priate. Rather than expressly defining a test, Deane J here raised a ‘fundamental’ issue of‘not inconsiderable importance’ which reveals the defective or unsatisfactory effect of theforum non conveniens doctrine as adopted in the United Kingdom. The defect of the forumnon conveniens doctrine, inter alia, is that in certain circumstances the selected forum cannotbe proved to be ‘clearly inappropriate’ even though there is another ‘more appropriate’forum to hear the issue in dispute. The jurisprudential basis of Deane J’s clearly inappro-priate forum test appears to be related to the assumed common law right of a plaintiff tocommence an action in a competent court of law. It follows that in order to protect thisright, a plaintiff ’s action should be denied only when the selected forum is ‘clearly inap-propriate’. By the same token, the plaintiff ’s right to invoke a court of regular jurisdiction(an expression used perhaps to distinguish a sincere action from an act of forum shop-ping) cannot be denied merely because there is available another ‘clearly more appropriateforum’.[3.61][3.62] [3.62][3.62] In Voth v MFM the joint judgment sought to distinguish the clearly inappropriateforum test from the traditional test of oppression and vexation by saying that the tradi-tional test is too rigid and its rigidity leads to injustice in the case of ‘forum shopping’(which means that a plaintiff deliberately and yet legally chooses the forum of actionunder the relevant conflicts rules to maximise his or her advantages), because of the diffi-culties in establishing vexation and oppression: see (1990) 171 CLR 538 at 556–7. Thejoint judgment also drew a distinction between the clearly inappropriate forum test andthe clearly more appropriate forum test employed in the forum non conveniens doctrine. The 80
  • 28. Introduction to Conflict of Laws [3.63]main distinction was based on Deane J’s observation in Oceanic Sun, which was quotedabove at [3.61]. The joint judgment admitted that while the two tests lead to the sameresult in most cases, there are rare cases where the existence of a clearly more appropriateforum does not necessarily mean the selected forum is clearly inappropriate: see (1990)171 CLR 538 at 558–9. Again, we may argue that the distinction between the two testswas determined as a matter of principle, because the majority of the High Court thoughtit unfair, impractical, illogical and unsafe if the plaintiff ’s right to invoke a court’s jurisdic-tion could be restricted or eliminated by merely establishing the existence of a moreappropriate foreign forum.[3.62][3.63] [3.63][3.63] Although the joint judgment did not provide a clear definition of the clearly inap-propriate forum test, the major characteristics of this test can be summarised as follows:• the clearly inappropriate forum test is more liberal than the traditional test of vexa- tion and oppression and may be regarded as a compromise between the traditional test and the forum non conveniens doctrine;• the clearly inappropriate forum test focuses on the inappropriateness of the selected forum, but the clearly more appropriate forum test concentrates on the greater appropriateness of another forum;• the clearly inappropriate forum test and the clearly more appropriate forum test pro- duce the same result in most circumstances, but in rare cases the existence of a more appropriate foreign forum does not necessarily prove the inappropriateness of the selected forum;• the clearly inappropriate forum test and the clearly more appropriate forum test are not interchangeable, because in certain cases the appropriateness of a foreign forum does not necessarily suggest the inappropriateness of the selected forum;• the clearly more appropriate forum test is unreasonable and risky because it involves the balancing of conveniences and assessment of justice in foreign law and policy, which is not what a local court is competent to do; in contrast, the clearly inappropri- ate forum test only involves assessment of the court’s own law and policy; and• the clearly more appropriate forum test makes a decision upon the presumed ability and willingness of a foreign court, which is a practice inconsistent with the public policy of Australia; in contrast, the clearly inappropriate forum test relies on the abil- ity and willingness of Australian courts, which is a practice consistent with Australian public policy. In light of the above summary, we may argue that the clearly inappropriate forum testhas been defined (if it has been defined at all) on the ground of its contrast with otherexisting tests or doctrines. It is in fact an approach to (or technique or principle for) thedetermination of jurisdictional issues. It declares that the means of resolving a conflict ofjurisdictions is to ascertain whether the selected forum is clearly inappropriate, ratherthan to find out whether there is another forum which is clearly more appropriate.[3.63] 81
  • 29. [3.64] International Commercial Law[3.64] [3.64][3.64] While, in theory, the distinction between the clearly inappropriate forum test andthe clearly more appropriate forum test is appreciable, in practice the difference betweenthem, with respect, is not reasonably ascertainable. This is because the words ‘appropri-ate’ or ‘inappropriate’ imply comparativity and relativity. Bearing in mind that conflict oflaws implies a contest between two or more legitimate interests or laws with ‘equal’ sover-eignty to apply to the same dispute, it is unrealistic and impossible to determine the inap-propriateness of any local forum by examining the legality or justice of the local forumalone (even though a local court is always competent to do so). If competing jurisdictionsand laws must be assessed and balanced, what is the practical necessity of the clearly inap-propriate forum test being a distinctive test from the forum non conveniens doctrine? To alarge extent, the justification for the independent existence of the clearly inappropriateforum test — the presumed co-existence of a clearly more appropriate foreign forum andof the clearly appropriate local forum; or alternatively, the presumed non-existence ofeither a more appropriate forum or the clearly inappropriate forum in any conflict of lawssituation — is based on an unstated presumption that ‘appropriate’ or ‘inappropriate’ areundefinable. It can be argued, with respect, that the hypothetical example of a road acci-dent given by the joint judgment in Voth v MFM (1990) 171 CLR 538 at 558–9, which wasprovided for the purpose of illustrating a situation where even though the local law isclearly inappropriate there is no other more appropriate forum to entertain the claim, isfallacious, because it is based on a false conflict. When there is no contest between thejurisdictions and laws, there is no conflict of laws. In addition, it is doubtful that theselected forum can ever be found inappropriate in a circumstance where the plaintiff hasa common law right to invoke the jurisdiction of the selected forum whilst no other juris-diction can competently compete with the jurisdiction of the selected forum. Therefore the clearly inappropriate forum test endorsed by the majority of the presentHigh Court is yet to be further tested, or modified, in practice. This test was applied to dis-miss an application for stay of proceedings at the Australian Federal Court in Kawasaki SteelCorporation v Owners and Others Interested in the Ship ‘Daeyang Honey’ (1993) 120 ALR 109.[3.64][3.65] [3.65]The clearly more appropriate forum test[3.65] There is no need to examine this test in detail. The meaning of this test has beenexplained when dealing with the test of a clearly inappropriate forum in the precedingparagraphs. The judgments of Brennan J and Deane J in Oceanic Sun (1988) 19 ALR 9 at39 and 49, and of Mason CJ, Deane, Dawson and Gaudron JJ in Voth v MFM (1990)171 CLR 538 at 554–9, discuss this test in detail.[3.65][3.66] [3.66]Connecting or determining factors[3.66] A connecting or determining factor is not a test in the same sense as the forum nonconveniens doctrine, and the ‘clearly inappropriate forum’ test. The expression refers to anyfactors, or facts, which may allow a court of law to identify or establish a connectionbetween a law and the issue in dispute and to determine which jurisdiction or law applies.For example, the public (or government) interest analysis suggests that the interest 82
  • 30. Introduction to Conflict of Laws [3.69]involved is the connecting or determining factor upon which the issue of jurisdiction andissue of governing law can be determined. Similarly, in Oceanic Sun (1988) 79 ALR 9, theformation of the contract of carriage and the place where the contract was concludedwere regarded as connecting or determining factors, but the judges reached different con-clusions by applying different techniques of characterisation: see [3.56]–[3.58]. In Voth vMFM (1990) 171 CLR 538, the connecting or determining factor was the cause of action.The issue of jurisdiction was determined by referring to the nature of the cause of actionand the place where the cause of action arose. Five judges (Mason CJ, Deane, Dawson,Toohey and Gaudron JJ) held that the cause of action was a failure to provide adequateadvice (negligent omission) and it took place in Missouri. One judge (Brennan J) held thatthe cause of action was a misrepresentation, which occurred in New South Wales. Conse-quently, the majority held that the law of Missouri applied and the courts of Missouri hadappropriate jurisdiction, but Brennan J held that the law of New South Wales governedthe dispute and the courts of New South Wales had appropriate jurisdiction. The impor-tance of connecting or determining factors is evident.[3.66][3.67] [3.67][3.67] In the following paragraphs [3.68]–[3.82] we will deal with a number of Latinphrases. They represent the rules for determining the appropriate jurisdiction, the gov-erning law, and the connecting or determining factor in a given case.[3.67][3.68] [3.68]Lex domicilii[3.68] This means the law of the place where the person concerned has his, her or its (inthe case of a legal person) domicile, a permanent legal residence. A person may obtaindomicile in the place where he or she was born and a company may be deemed to havedomicile in the place where it was incorporated. Lex domicilii emphasises the connectionbetween a person and the law of the place where the person has his, her or its legal‘home’. The domicile of a person should be determined by applying the relevant law deal-ing with the matter in dispute. For example, the domicile defined under a law of marriagemay differ from domicile defined under a company law. In this sense, lex domicilii is only arule of uncertain content which may justify the application of a particular jurisdiction orlaw to a particular person once the connection (domicile) between the person and thejurisdiction or law is established. The rule of lex domicilii is based on the jurisdiction of a sovereign state over the personswho domicile in that state. It can be argued that because a state has sovereignty to makelaws and sovereignty over the persons who domicile within the territory of the state, therule of lex domicilii allows the forum where a person has domicile to have jurisdiction overthe person. Similarly, the rule of lex domicilii also allows the law of the place where the per-son’s domicile is to determine the rights and obligations of the person in a conflict of lawssituation. The rule of lex domicilii suggests the importance of knowledge of public interna-tional law to the study of international commercial law.[3.68][3.69] [3.69][3.69] The rule of lex domicilii is accepted by the Brussels Convention, which was signedby several European countries in 1968. It was restated in the Lugano Convention of 1988, 83
  • 31. [3.69] International Commercial Lawwhich modified the principles of the Brussels Convention for the purpose of accommo-dating the EFTA countries (see [2.49]), which had some reservations on the provisionsof the Brussels Convention. The Brussels Convention and the Lugano Convention co-exist today. The members of the Brussels Convention are Belgium, France, Germany, theNetherlands, Italy, Luxembourg, Denmark, the United Kingdom, Ireland, Greece, Spainand Portugal and the members of the Lugano Convention are the fifteen members of theEuropean Union (see [2.51]), and three members of EFTA. Each convention operatesonly among its members. Under the rule of lex domicilii adopted in the Brussels andLugano Conventions, a court of the forum where the defendant domiciles has the appro-priate jurisdiction in a case of conflict of laws. The rule of lex domicilii is used as the uni-form test, subject to the exceptions prescribed in the conventions (such as contract, tort,trusts and salvage, etc) for determining the appropriateness of a court’s jurisdiction. Itmust be pointed out, however, that this is different from saying that the law of domicile isthe appropriate law governing the substantive issues in dispute.[3.69][3.70] [3.70][3.70] Lex domicilii may also refer to the law of the place where the person has his, her orits residence. ‘Residence’ is also a legal concept, and what constitutes residence should bedetermined in the context of a particular law. It is often used as a test when the domicileof a party is not determinable, or when the residence of the party represents the true con-nection between the party and a country.[3.70][3.71] [3.71] ♦ [3.71] Polites v The Commonwealth (1945) 70 CLR 60 Example of the application of lex domicilii Facts: This case involved the operation of the National Security Act 1939–43 which gave the Governor-General a power to require persons to place themselves, their services and property at the disposal of the Commonwealth. Regulation 7 of the National Security (Aliens Services) Regulations provided compulsory enrolment of aliens in the armed forces. A number of Greek citizens resident in Australia were required to serve in the armed forces. However, there was a rule of international law which said that aliens could not be compelled to serve in the military force of a for- eign country. The regulations were challenged in the Australian High Court. Decision: The High Court held that the regulations were valid, because the relevant Act allowed the Governor-General to make such regulations in spite of the existence of the international law. ♦ This decision was probably motivated by a policy consideration that war justified awider power of the government to manipulate national resources, that is, the natural,human and financial resources within the territory of Australia. The jurisdictional basisfor the Governor-General to require aliens to serve in the Australian army and for thecourt to affirm the validity of this requirement is lex domicilii. It was implied in this case 84
  • 32. Introduction to Conflict of Laws [3.74]that, because of the rule of lex domicilii, Australian law rather than the relevant inter-national law governed the matter in question.[3.71][3.72] [3.72]Nationality[3.72] A person’s nationality and domicile are not always the same. It is common for anational of country X to have permanent residence in country Y. Nationality may be usedas a test (a determinant or a connecting factor) for determining the relationships betweenthe person and a jurisdiction or a law. The courts of law may investigate the nationality ofthe parties to a dispute to determine whether any ‘determining connection’ can be estab-lished between the nationality of a party and a relevant jurisdiction or law. The nationality test is also based on the state’s jurisdiction over persons, becausenationality, which contains specific rights (or privileges) and obligations of a person undera particular law, represents a legal relationship between the person and the country whichgranted him or her citizenship. Although it is more likely that the courts will prefer lexdomicilii to the nationality test,38 it cannot be assumed that a court of law must necessarilyapply the rules and tests in that order in all circumstances. The real question is which testor determinant reflects the real connection between the person and the jurisdiction or lawin question.[3.72][3.73] [3.73]Lex causae[3.73] Lex causae ‘means any system of law which under a conflict of laws rule of forumis applicable to any given question’.39 It involves a process by which a court of law identi-fies the connecting or determining factor between a matter and a law, and determines thegoverning law of the matter in question. This is probably why lex causae is also describedas ‘a convenient shorthand expression denoting the law (usually but not necessarily for-eign) which governs the question’.40 Lex causae is not a rule in the same sense as, for example, lex domicilii., which suggeststhe basis for applying a particular law to a particular person. The rule of lex causae indi-cates only that the law applying to a person or matter is the law which governs the personor matter. More specific tests or determinants are needed before lex causae (whichever lawit is) can be applied to justify the determination of a court.[3.73][3.74] [3.74]Lex fori[3.74] Lex fori refers to the law of the place where the court of law is situated. It meanslocal law or the domestic law of the forum. A court may prefer lex fori to any foreign law,but it must establish the reason (connection between the matter or person and the locallaw) before applying lex fori. Specific tests or determinants, such as domicile, validity of amarriage, conclusion or performance of a contract, or the location of property, are neces-sary to justify the application of lex fori. Sometimes the application of lex fori can be based38. For a comparison between domicile and nationality, see North and Fawcett, supra note 1, pp 165–71.39. Castel, supra note 9, p 9.40. Collins et al, supra note 16, p 30. 85
  • 33. [3.74] International Commercial Lawon general or broad justification (as opposed to specific tests). For example, Gaudron J inOceanic Sun (1988) 79 ALR 9 at 55, was of the opinion that in an application for a stay ofproceedings in favour of a foreign jurisdiction clause, ‘to allow questions as to the exist-ence, construction or validity of a foreign jurisdiction clause to be determined by applica-tion of any law other than the lex fori’ would ‘invite unnecessary complexity’. Her Honourappears to say that in this case lex fori should govern the questions as to the existence,construction or validity of the foreign jurisdiction clause because lex fori governs the proc-ess of resolving a conflict of laws.[3.74][3.75] [3.75] ♦ [3.75] Green v Australian Industrial Investment (1989) 90 ALR 500 Lex fori and the extra-territorial operation of the Trade Practices Act 1974 (Cth) (TPA) Facts: The dispute involved an English company, BE Ltd, and a Western Australian company, AII. G, a representative of BE Ltd, entered into an agreement with L and B, representatives of AII, in London to sell BE’s shares to AII. The shares were to be paid partly in cash and partly by the issue of preference shares in AII. G later claimed that L and B made fraudulent misrepresentations as to AII’s financial position and sought recession of the agreement to sell in the English court. AII filed a petition and was granted an interim injunctive relief against BE Ltd. G then took action in the Aus- tralian Federal Court, alleging a breach of s 52 of the TPA by AII, seeking either to rescind the agreement or to declare the agreement void ab initio. AII applied for a stay of the proceedings. Decision: French J of the Federal Court applied the oppressive and vexatious test endorsed by the majority of the High Court in Oceanic Sun and dismissed the applica- tion for a stay of the proceedings. His Honour held that the TPA has extra-territorial effect and the alleged breach of the Act in London invoked the statutory jurisdiction of the Act, which cannot be excluded by any choice of law clause in the contract. ♦[3.75][3.76] [3.76]Lex situs[3.76] Lex situs (law of the situs) means the law of the place where a subject matter (orthing), in particular a property, is located. It is sometimes interchangeable with lex loci reisitae or lex rei sitae.41 Under this rule, a selected court may decide that the court of theplace where the real estate is located is a more appropriate forum for hearing the dispute,or alternatively, that the law of the place where the real estate is located is the governinglaw, although the matter can be heard in the selected court. Lex situs can be regarded as a particular test for determining the lex causae or the applica-tion of lex fori, because lex situs may lead to the operation of a lex fori, or a lex causae whichcould be either a local law or a foreign law.[3.76]41. Castel, supra note 9, p 8. 86
  • 34. Introduction to Conflict of Laws [3.82]Lex loci42[3.77] [3.77][3.77] Lex loci appears to be based on the same logic as lex situs, because lex loci refers tothe law of the place where the cause of action arises. Since there are various causes ofaction, lex loci is usually specified, inter alia, as lex loci actus, lex loci contractus, lex loci celebra-tionis, lex loci delicti commissi, lex loci solutionis, etc. These rules suggest that a certain connec-tion between a party and a governing law can be established or identified by the cause ofaction involved. These particular rules are also the bases for determining lex causae or lexfori.[3.78][3.77] [3.78][3.78] Lex loci actus refers to the law of the place where the determining act is carried outor the cause of action arises. The ‘act’ concerned is usually limited to the performance ofa contract or the execution of a legal document, because certain other acts which may giverise to a cause of action, such as torts or matrimonial ceremony, are governed by otherspecified rules of lex loci. The question as to what constitutes the determining act isdecided by the discretion of the court. This can be illustrated by the disagreement as tothe place where the alleged negligence occurred between the joint judgment and BrennanJ in Voth v MFM: see [3.66].[3.79][3.78] [3.79][3.79] Lex loci contractus refers to the law of the place where the contract in question wasentered into. This rule suggests that a connection or the determining factor between theperson and the law can be established or identified by exploring the place of the contract.The rule applies to contract disputes.[3.80][3.79] [3.80][3.80] Lex loci celebrationis is a particular rule which suggests a connection between a per-son and a law, that is, the issue of a marriage certificate. It literally means the law of theplace where a marriage ceremony is held. On this basis other legal relationships, such asthe validity of the marriage or the status of a child, may be determined.[3.81][3.80] [3.81][3.81] Lex loci delicti commissi is a rule usually relating to actions in torts. It refers to thelaw of the place where a wrong (a cause of action), such as a tortious act that caused thedamage in question, is committed (or arises). The same rule can also be applied to crimi-nal acts or other acts which caused the damage or claim in question.[3.82][3.81] [3.82][3.82] Lex loci solutionis is usually related to contract law. It means the law of the placewhere certain acts of performance, such as performance of a contractual duty or paymentof money, are carried out. Breach of a contractual duty or failure to pay a debt fall underlex loci solutionis.[3.82]42. For a general discussion on lex loci doctrine, see McLaughlin, ‘Conflict of Laws: the Choice of Law Lex Loci Doctrine, the Beguiling Appeal of a Dead Tradition, Part One’ (1991) 93 West Virginia Law Review p 957. 87
  • 35. [3.83] International Commercial Law[3.83] [3.83] Renvoi[3.83] Renvoi is a French word. It describes a situation where, due to the inconsisten-cies between the conflicts rules of countries, a selected forum determines under its ownconflicts rules that the law of country X is the governing law; but the law of country X(which includes its conflicts rules) says the law of the selected forum is the governing law,or alternatively, says the law of country Z governs the matter in dispute. However, the law(including the conflicts rules) of the selected forum or the law of country Z may subse-quently refer the matter back to country X, or another country. Renvoi reveals the uncer-tainties arising from the lack of a uniform system of conflicts rules. This situation createsdifficulties for both courts and litigants. Renvoi may be illustrated by the following diagram: First country 1st step: As a result of the applica- tion of the conflicts rules of the first country the matter is transferred to the law of the second country 2nd step: As a result of the applica- tion of the conflicts rules of the sec- ond country the matter is referred Second country back to the law of the first country, or the law of a third country Third country It must be pointed out that the whole process usually takes place in a hypothetical orconstructive process, in which the first country may work out the result by first applyingits own law and then the law of the second country, and so on. Of course, there is alwaysa possibility that the matter may be physically transferred from the court of the first coun-try to the court of the second country and then either referred back to the first country orto a third country. It is also necessary to point out that when we say the law of a country,we refer to the law of that country in relation to both jurisidictional matters and substan-tive matters, including conflicts rules. Jurisdictional matters involve the issue of whether acourt has jurisdiction to hear a case, and substantive matters are concerned with the spe-cific rights and obligations of the parties to a particular dispute. The differences betweenthese matters explain why a court which has decided to exercise jurisdiction over a givendispute may want to apply a foreign law to resolve the dispute. 88
  • 36. Introduction to Conflict of Laws [3.84] As suggested in the above diagram, there is a risk and possibility that the matter willcontinue to be referred from one country to another under the conflicts rules of eachcountry, because their conflicts rules are different, or are in conflict with each other. Thissituation must be ended if any conflict of laws can be satisfactorily resolved.[3.83] [3.84][3.84][3.84] In the absence of a universal system to deal with renvoi, three methods or resolu-tions (though the methods can also be categorised into four groups) have been developedfor resolving the problem of renvoi.43 These methods are summarised as follows:• Ignoring the conflicts rules of the second country which is referred to by the con- flicts rules of the selected forum (the first country): for example, if the conflicts rules of the selected forum (the first country) say that the law of the second country applies, the law of the second country should be used to resolve the dispute regard- less of whether the conflicts rules of the second country may refer the matter some- where else. The matter can be dealt with by the selected forum in accordance with the law of the second country (excluding its conflicts rules).• Single renvoi: this means that renvoi can only occur once. The selected forum will examine the law of the second country as a whole. If the law (including the conflicts rules) of the second country refers the matter back to the selected forum (the first country) or a third country, the selected forum will not consider the implications of the relevant conflicts rules in the subsequent application of the law of the selected forum or of the third country. This methods shows respect to the integrity of the sec- ond country’s law, because, unlike the first method, it chooses to ignore its own con- flicts rules (if the matter is referred back to its law). It appears to be more tolerant to foreign law than the first method in the sense that it ignores the conflicts rules of the third country (if relevant) only when the law of the second country has transmitted the matter to the law of the third country (occurrence of renvoi).• Total renvoi: this refers to a situation where the selected forum makes a decision pre- sumably in the capacity of a court of the second country (use the above diagram again). The law of the second country should be examined as a whole and the posi- tion of the second country to renvoi should also be taken into account. A decision made under this method can fall under either of the above two methods, or some- thing else (such as continuous renvoi), depending on the presumed interpretation and application of the relevant law by the court of the second country. This method is a combination of the above two methods. It shows even more respect for the integrity of the law of the second country than the second method. The difficulty with this method, however, would be whether any selected forum is able to interpret and apply the law of the second country in the same way as a court of the second country. Thus the practicability of this method is questionable.[3.84]43. For discussion, see Nygh, supra note 1, pp 206–7; Sykes and Pryles, supra note 15, pp 218–28; and North and Fawcett, supra note 1, pp 59–66. 89
  • 37. [3.85] International Commercial Law[3.85] [3.85][3.85] To summarise the problem of renvoi, we may say that renvoi is an inevitableproduct of the divergence, if not contradiction, of nation-based conflicts rules. Any dis-cretionary and unilateral approach to the resolution of renvoi will inevitably offend theconflicts rules of some country (because of the conflict of states’ economic, political andlegal interests), unless no conflict exists between the conflicts rules of the countries con-cerned. The search for a higher theory to justify or guide any particular method forresolving renvoi has not yielded any satisfactory result. The reason for this failure lies inthe conflicts rules themselves, which cannot be satisfactorily unified unless a much higherlevel of political, economic and social cooperation can be achieved between countries.The recent development of conflicts rules within the European Union may provide use-ful experience for the future search for a set of universal conflicts rules.44[3.85][3.86] [3.86] Action in personam[3.86] Action in personam refers to a particular type of jurisdiction under which a courtof law may hear a complaint, or to a ground on which the court may determine certainrights of the parties involved in a dispute. For example, Holmes J in Tyler v Judges of theCourt of Registration (1900) 175 Mass 71 described action in personam as follows: If the technical object of the suit is to establish a claim against some particular person ... or to bar some individual claim or objection, so that only certain persons are entitled to be heard in defence, the action is in personam, although it may concern the right to, or the pos- session of, a tangible thing. Action in personam, as a term describing generally a cause of action, is relevant to per-sonal rights, obligations or claims which are based on certain legal relationships. A court’sjurisdiction over a particular claim based on action in personam can be, but is not neces-sarily always, supported by the physical presence of the defendant within the territory ofthe court’s jurisdiction at the time when the alleged cause of action arises. For example,s 9 of the Admiralty Act 1988 (Cth) allows proceedings to be commenced as an action inpersonam on a maritime claim or a claim for damages done to a ship in the circumstancesdescribed in ss 4 and 5 of the Act. Besides maritime claims, action in personam is also acause of action in property or contract disputes.[3.86][3.87] [3.87] Action in rem[3.87] Action in rem also describes a basis for determining the jurisdiction of a court oflaw. ‘In Roman law an action in rem was one brought in order to vindicate a jus in rem, iea right such as ownership available against all persons, but the only action in rem knownto English law is that which lies in an Admiralty court against a particular res, namely aship or some other res, such as cargo, associated with the ship.’45 For our purposes, actionin rem is a particular cause of action which allows a court of law to hear a complaint44. For discussion of Brussels and Lugano Conventions, see North and Fawcett, supra note 1, pp 282–336.45. Id, p 213. 90
  • 38. Introduction to Conflict of Laws [3.89]against a ship, cargo or things associated with the ship on the ground that the rem is phys-ically located within the jurisdiction of the court,46 regardless of whether there is anyother connection between the law of the forum and the matter in dispute. Action in rem is a ground for bringing an admiralty action under the Admiralty Act1988 (Cth).47 The following case illustrates the operation of action in rem:[3.87][3.88] [3.88] ♦ [3.88] Kawasaki Steel Corporation v Owners And Others Interested In The Ship ‘Daeyang Honey’ (1993) 120 ALR 109 Action in rem allows the plaintiff to sue the defendant against any ships owned by the same defendant Facts: Kawasaki Steel was the true indorsee of the iron ore carried by the ship, which sank in a typhoon on 22 October 1992 several hundred miles off the coast of the Philippines. Kawasaki Steel was a Japanese company. The other three plaintiffs were also Japanese companies which acted as agents for Kawasaki Steel in purchasing the iron ore from BHP in Australia. BHP delivered the iron ore to the ship and endorsed the three bills of lading issued by the shipmaster to the agents of Kawasaki Steel. Kawasaki Steel chartered the ship from a time charterer, Navix Line Ltd, which was also a Japanese company. Navix Line Ltd chartered the ship from its owner, Pan Ocean Shipping Co Ltd, which was a Korean company. The lost ship, Daeyang Honey, was a Korean registered ship. It was alleged that the loss of the ship in the typhoon was due to the defective structure of the ship. Kawasaki Steel and other plaintiffs commenced action in rem against a number of ships owned by Pan Ocean Shipping for the loss of the iron ore. The shipowner applied for a stay of the proceedings on the ground of, inter alia, forum non conveniens. Decision: The Federal Court of Australia held that the shipowner had not estab- lished that Australia was a clearly inappropriate forum. The application for a stay of the proceedings failed. ♦[3.88][3.89] [3.89] The concept of ‘justice’ and conflicts rules[3.89] English writers and judges have suggested that ‘justice’ is the philosophical basisof English private international law. It is undeniable that English judges possess a certain46. Action in rem provides merely a cause of action or a basis for the court’s jurisdiction. Thus, in Rosenfeld Hillas & Company Pty Ltd v the Ship Fort Laramie (1923) 32 CLR 25, the High Court of Australia entertained a claim for non-delivery of the goods against the shipowners in an action in rem, without dealing with the issue whether the validity of the bill of lading under which the plaintiff ’s rights to the goods were established should be governed by American or Australian law.47. For example, in Ocean Industries Pty Ltd v The Owners of the ship M V ‘Steven C’ [1994] 1 Qd R 69, the appellant (plaintiff at trial) who had obtained a judgment in an action in personam under the Admiralty Act 1988 (Cth) against the owners of a vessel brought an action in rem against the same owners under the Act because the same debt remained unsatisfied. 91
  • 39. [3.89] International Commercial Lawmeasure of flexibility to develop the law and apply its principles particularly in a subject asfluid and uncodified as private international law. A sense of what is fair and just will ofteninfluence a judge and obviously should do so. Whatever the reasoning employed (which isoften open to criticism on theoretical or formalistic grounds) the decisions in English andAustralian cases often seem ‘right’ or ‘just’.48[3.89][3.90] [3.90][3.90] However, the fundamental question is: what is ‘justice’? Is it the justice of theresult — that is, synonymous with ‘just or fair’? Or is it justice in the sense of judicialadministration — that is, a synonym for the administration of the judicial system? TheSupreme Court of New South Wales appears to have used the expression ‘justice’ in thecontext of the ‘interests of justice’, that is, the interests of the courts in the administrationof justice.49 In addition, we may wonder how to apply notions of fairness and justice orthe ‘interests of justice’ to the conflict of laws.50 Can the proposition that ‘our most fun-damental institution about law’ is its function ‘to regulate human action and its conse-quences’51 provide any assistance? Brennan J in Oceanic Sun (1988) 79 ALR 9 at 40, raisedthe question of how, in dealing with conflict of laws ‘a court in New South Wales [could]identify the “ends of justice” [a term which constitutes part of the tests for applying theforum non conveniens doctrine in English courts]’. Mason CJ, Deane, Dawson and GaudronJJ in Voth v MFM (1990) 171 CLR 538 at 560, observed that ‘the court does not, andindeed cannot, evaluate the justice or relative merits of the substantive laws of the availa-ble forums (including the chosen forum)’. It appears that the concept of justice is notreadily defined or universally accepted.[3.90][3.91] [3.91][3.91] Bearing in mind that the emphasis on the notion of ‘justice’ is its function as thebasis or justification for a court’s discretion in applying conflicts rules, the test of justiceperhaps functions as a philosophical guideline for evaluating, assessing and balancing theconflicting interests in a given dispute. This reflects a different approach to the conflict oflaws, and suggests that whatever rules, procedures and interests are adopted in the proc-ess of resolving a conflict, the result must appear to be fair and just in the eyes of judges,who are entrusted with a duty to protect democracy and justice in any democratic society.This is perhaps why Lord Kinnear said in Sim v Robinow (1892) 19 R 665 at 668 that a con-flict should be resolved in a manner which is suitable ‘for the interests of all the parties48. Sykes and Pryles, supra note 15, p 11.49. Bankinvest AG v Seabrook (1988) 90 ALR 409,per Street CJ at 409, per Kirby P at 411, and Rogers AJA at 425.50. In Oceanic Sun (1988) 79 ALR 9 at 24, Wilson and Toohey JJ made the following comment: The expression “the interests of all the parties and the ends of justice” is a composite one. This is best understood and given effect to by recognising that the initial onus lies on the appellant (in this case) to demonstrate that some forum other than New South Wales is more appropriate because it is the forum with which the action has the most real and substantial connection. This statement was intended to explain the meaning of ‘the interests of the parties and the ends of justice’ in Oceanic Sun. But, by emphasising the onus of proof, it provides little guidance as to the general meaning and application of the expression.51. Kramer, ‘More Notes on Methods and Objectives in the Conflict of Laws’ (1991) 24 Cornell International Law Journal 245 p 255. 92
  • 40. Introduction to Conflict of Laws [3.94]and for the ends of justice’. However, it must also be pointed out that this approach of theEnglish courts has been criticised by Brennan J as unworkable in Oceanic Sun (1988)79 ALR 9 at 38.[3.91][3.92] [3.92] Forum shopping[3.92] ‘Forum shopping’ refers to a situation where a plaintiff deliberately chooses aparticular forum (court or country) from a range of available fora for the purpose of tak-ing full advantage of the law to advance his or her case, or to maximise the disadvantageto the defendant. There are discussions as to whether such activities should be allowed orrestrained.52 Under the common law tradition as adopted in England and Australia, aplaintiff has a right to resort to the court pursuant to the relevant procedural require-ments. The common law in England and Australia does not prohibit or curtail a plaintiff ’saccess to law as far as the plaintiff can establish a cause of action and his or her standingto sue under the relevant law. This means that forum shopping may not be regarded as anissue under Australian law.[3.92][3.93] [3.93] Conflict of laws in Australia[3.93] Anglo-Australian methodology in choice of law has basically remained the samesince Story wrote. The cause of action is put into one of several categories, each possess-ing its own choice of law rule which indicates which state’s laws govern the matter. Someof the choice of law rules consist of fairly rigid territorial criteria of the type advocated byBeale. Thus, property questions concerning immovables are governed by lex situs and for-eign torts are at least prima facie and to a limited extent governed by lex loci delicti. But afew choice of law rules are flexible, such as those applicable to contract and trusts.53[3.93][3.94] [3.94][3.94] Given the legal tradition of Australia, the methodology and system of conflictsrules in Australia are indeed similar to the English ones. However, as we have seen, thepresent High Court of Australia has moved away from the forum non conveniens doctrineadopted in the United Kingdom and, with variations, in the United States.54 The ‘clearlyinappropriate forum’ test is the test for determining most applications for a stay of pro-ceedings in Australian courts. The differences between the ‘clearly inappropriate forum’test and the ‘clearly more appropriate forum’ test (forum non conveniens) were discussed inthe joint judgment of Mason CJ, Deane, Dawson and Gaudron JJ in Voth v MFM (1990)171 CLR 538 at 557–61. The ‘clearly inappropriate forum’ test is perhaps the mostimportant distinction between the Australian conflicts rules and UK conflicts rules.[3.94]52. For example, ‘Forum Shopping Reconsidered’ (1990) 103 Harvard Law Review p 1677; and Walker, ‘Forum Shopping for Stale Claims: Statutes of Limitations and Conflict of Laws’ (1989) 23 Akron Law Review, p 19.53. Sykes and Pryles, supra note 15, p 13.54. Deane J compared the doctrine of forum non conveniens in the United Kingdom and the United States in Oceanic Sun (1988) 79 ALR 9 at 46–8. 93
  • 41. [3.95] International Commercial Law[3.95][3.95] In Australia, rules and practices governing conflict of laws may vary from state [3.95] tostate. This is because each state and territory has the power to deal with many matterswhich are not exclusively subject to the federal legislative power. This results in variationsof the rules of conflict of laws in Australia. Conflict of laws may become an issue wheninterstate matters are involved,55 although this is not our major concern in the study ofinternational commercial law.[3.96][3.95] [3.96][3.96] The Australian Law Reform Commission identified in 1992 the following areasof interest concerning Australian conflicts rules:• whether the Constitution has any role to play in determining the issue;• how to apply the choice of law rules in connection with federal jurisdiction and under the cross-vesting legislation;• the inappropriateness of forum law as a choice of law rule in Australia;• uncertainty in the choice of law rules in cases involving torts, and substance and procedure;• difficulty in applying choice of law rules to statutory schemes;• whether the common law is adequate for modern conditions; and• whether choice of law rules need to be the same within the federation of Australia as in the international situation.56 The major recommendations of the Commission in relation to the abovementionedissues are to retain the existing common law-based jurisdiction selecting approach (whichmeans the disagreement as to the test for determining an application for a stay of pro-ceedings in Australia between the judges of the High Court will likely remain) and toachieve uniformity through legislative amendment to individual legislation where uni-formity is needed, rather than through a uniform choice of law code in Australia.57 TheCommission proposed draft federal legislation in its report,58 which has not yet yieldedany concrete result.55. For example, in McKain v R W Miller & Company (South Australia) Pty Ltd (1991) 174 CLR 1, the High Court of Australia was asked to determine whether an action in the Supreme Court of New South Wales for torts committed in South Australia was barred by the Limitation of Actions Act 1936 (SA). The court had also to determine whether the denial of the action in the Supreme Court of New South Wales by the law of South Australia raised issues of conflict of laws.56. The Law Reform Commission, supra note 5, para 1.9.57. Id, paras 2.12 and 2.13.58. Id, p 143. 94