Jurisdiction In The Case Of a Bank About To Enter Into a Loan Agreement with A Foreign Company - Essay Example

Banking Industry I. Jurisdiction to be Covered by Opinion In our case scenario of a bank about to enter into a loan agreement with a foreign company, there are three jurisdictions, which must be looked into. First, we should look into the jurisdiction of the place where the contract was perfected, second, the place where the parties subject themselves to jurisdiction and the place of implied jurisdiction. To gain some colorable understanding on these types of jurisdiction, let us discuss these briefly. 1.a Place Chosen by Parties v. Place of Perfection of Contract When relying on Article 3 of the EC Convention on the Law Applicable to Contractual obligations, one must be able to “demonstrate with reasonable certainty that the parties have chose a particular law as the governing or applicable law; it must be the real choice which the parties had a clear intention to make.” Under this provision of the law, the agreement as to which country shall have jurisdiction of the contract should be clearly stated therein to avoid ambiguity of the provisions. Under the recent ruling of Marconi Communications International Limited v PT Pan Indonesia Bank Limited TBK (2005) AER (D) 389, the Court of Appeals dealt with the jurisdiction of the letter of credit. Under this contract, it was specifically stated that the governing law would be English law. However, there was a provision in the contract itself, which gave an indication for confirmation of the letters of credit. The conflict now in this case is in the interpretation of the contract as to whether or not Article 4(2) of the Convention would apply since although the forum specifically chosen by the parties is England, the perfection of the contract is more closely connected with the other country which is Indonesia as the confirming bank is located in that country. Another argument presented in this case is the application of Article 4(5) . Now therefore, the court has to resolve whether or not to use Article 4(5) and disregard Article 4(2). In its resolution, the Court ruled that Article 4(5) should apply therefore the law of England should be the governing law as provided for in the contract. Most interesting in this case is the Court’s recommendations that “the same system of law should govern the co-existing contracts between (a) the issuing bank and the beneficiary, (b) the confirming bank and the beneficiary and (c) the issuing bank and the confirming bank. Note that within same law there already exist potential conflicts of interpretation and application in certain situations. This should be give emphasis when setting the jurisdiction of the contract. It could never be overly emphasized that contracts can be subject to different interpretations and that the ambiguity of the law could lead to several connotations. B. Necessity of Separate Opinion Where the contract is ambiguous and is subject to more than one jurisdiction, it is necessary to seek different opinions on the matter at hand. In our case scenario where the property subject to collateral is outside the territories of the parties entering into contracts, property laws of the country where the subject is located should also be taken into considerations. Note that in the case of Ralli Brothers v Campania Naviera (1920) 2 KB 287 the Court ruled that “where a contract is to be performed in a country where its performance is unlawful by the law of that country (lex Loci solutionis), it will not be enforced in English Court.” Another doctrine which should never be ignored in cases involving third parties and necessitating separate opinions is the case of Foster v Driscoll (1929) 1 KB 470, 521 where it was ruled that “An English contract should and will be held invalid on account of illegality if the real object and intention of the parties necessitates them joining in an endeavour to perform in foreign and friendly country some act which is illegal by the law of such country notwithstanding the fact that there may be, in a certain event, alternative modes or places of performing which permit the contract to be performed legally.” In other words, conflict of laws may arise where in the case of Ruritania, foreign corporations are prohibited to foreclose properties of the State and Bank A accepted as collateral a property owned by Ruritania and is located in Country C. Even though the laws of country B may allow such foreclosure, still such act would be contrary to the laws of Ruritania, which owns the property. C. Matters Which Should Be Covered by the Opinion Matters, which should be covered in the opinion, are the governing rules as provided by the EC Convention (Rome 1980) especially in the arbitration and choice of law, presumption as to choice of law (lex loci cebrationis, lex loci solutionis and lex rei situs), and the interpretation by the Court of Justice. D. Structure of the Opinions The structures of the opinions should follow established rules and procedures. A good way of presenting this would be to start with the generally accepted principles and applications through legal provisions and decided cases. After laying down your premises, you law down your arguments as to why and why not these general rules should or should not be applied. Exceptions to the rules should be presented in a convincing manner. For instance, we need to argue on jurisdiction of England in a situation where the terms of the contract would necessitate confirmation of the contract by a third party. Where Company B will still need the confirmation of the government of Ruritania through its Government Bank or Central Bank for instance, we may find the contract will be more closely related to the Government of Ruritania and under Article 4(2), this would give Ruritania jurisdiction as the country most closely connected thereto. Premise of our argument would be on the basic provisions of the contract, which named England as the proper forum. Exceptions will not be qualified using text and cases, which will support the claim of England as the proper forum. E. Qualification Expected to Find in the English Law The English law itself has provided for several qualifications in the interpretation of contracts. Article 3 and Article 4 of the Rome Convention states several points of qualifications subject to the court’s interpretation. To establish points of arguments in conflict of law these provisions should be looked into closely. It would also be noteworthy to review cases like Iran Continental Shelf Oil v IRI International Corporation (2002) EWCA Civ 1024 where “characteristic performance” mentioned in Article 3 is one of the subjects. As interpretations of law may differ in given cases, property, law, insurance law and insolvency law may also be used as legal basis according to the stipulations, which may be present in the contract under review. Laws and Publications 1. EC Convention on the Law Applicable to Contractual Obligations (Rome 1980) 2. Green Paper on the Conversion of the Rome Convention of 1980 (Rome I – law applicable to contractual obligations) into a Community Instrument and its Modernisation online available at http://europa.eu.int/comm/justice_home/news/consulting_public/rome_i/doc/bar_council_england_wales_en.pdf Cases 1. Carl-Zeiss-Stiftung v Rayner & Keeler Ltd (1966) 2 All ER 536 at 556, 568 and 588, [1967] 1 AC 853 at 919, 939 and 972 2. Dicy and Morris (1993) the Conflict of Laws (12th Edition) vol. 2, page 1259 3. EC Convention on the Law Applicable to Contractual Obligations (Rome 1980) 4. Egon Olderdorff v Libera Copr [No.2] C.L.C. 482 5. Foster v Driscoll (1929) 1 KB 470, 521 6. Iran Continental Shelf Oil v IRI International Corporation (2002) EWCA Civ 1024 7. Libyan Arab Foreign Bank v Manufacturers Hanover Trust Co [1988] 2 Lloyd's Rep 494 at 502 8. Marconi Communications International Limited v PT Pan Indonesia Bank Limited TBK (2005) AER (D) 389 9. Ralli Brothers v Campania Naviera (1920) 2 KB 287 10. Sierra Leone Telecommunications Co. ltd. v. Barclays Bank Plc (1998) 2 All E.R. 820 Read More