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Part II The Private Law of Monetary Obligations, 4 Monetary Obligations and the Conflict of Laws

Charles Proctor, Dr Caroline Kleiner, Florian Mohs

From: Mann on the Legal Aspect of Money (7th Edition)

Charles Proctor

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 07 June 2023

Performance of monetary obligations — Exchange control — Legal proceedings and monetary obligations — Dollar

(p. 111) Monetary Obligations and the Conflict of Laws

  1. A. Introduction 4.01

  2. B. The Applicable Law 4.06

  3. C. The Law of the Place of Performance 4.18

  4. D. The Law of the Countries in which the Parties are Established 4.21

  5. E. The Law of the Forum State 4.24

  6. F. The Law of Connected Third Countries 4.27

A. Introduction

4.01  Before moving to a detailed consideration of the interpretation and performance of monetary obligations, it is appropriate to reflect upon the system of law which will govern the solution to the various problems and difficulties which may arise in this area.

4.02  It should be said at the outset that this text is not intended to provide a detailed review of questions of private international law; apart from other considerations, there are many other texts which already fulfil that function.1 Nevertheless, countless cross-border financial transactions occur on a daily basis, and a brief discussion of the essential private international law framework is thus felt to be necessary.

4.03  It should be appreciated that a system of private international law exists in order to resolve the difficulties which may arise where different systems of law may have a bearing upon the same issue.2 Consequently, the points noted in the present chapter would have no application in the context of monetary obligations of a purely (p. 112) domestic character—for example, where a British bank, acting through its London branch, agrees to make a sterling loan available to a company incorporated in England. Such an arrangement involves only one system of law, and no question of a conflict will thus arise; English domestic law will be applied as a matter of course. Inevitably, however, matters become more complex when a transaction involves the laws of two or more jurisdictions.

4.04  Against that brief introductory background, it is proposed to examine the impact which the laws of various jurisdictions may have upon a monetary obligation. In particular, it will be necessary to consider the following:

  1. (a)  the law applicable to the contract;

  2. (b)  the law of the place of performance;

  3. (c)  the law of the countries in which the parties are established;

  4. (d)  the law of the State in which legal proceedings arise with respect to that monetary obligation; and

  5. (e)  the law of third countries with which the monetary obligation may have some connection.

4.05  It may be noted that every State is entitled to establish its own system of private international law for the purpose of resolving conflict questions; public international law does not generally appear to prescribe any particular standards or rules with which such a system must comply. Yet, in spite of this apparent flexibility, there is a considerable degree of uniformity amongst the systems which have emerged. Common law jurisdictions naturally tended to evolve similar rules in this area. The Member States of the European Union adopted a uniform code on the conflict rules applicable in a contractual context, and that code in turn reflects principles which had been developed in England and in civil law countries. For convenience, it is proposed to work by reference to Rome I, but it should not be thought that these general principles are confined to a European context. It should be added that the Rome Convention had effect in the United Kingdom from (p. 113) 1 April 19913 until Rome I came into force. The Rome Convention was accompanied by the Giuliano-Lagarde report on its terms.4 Although this report is not specifically carried forward into Rome I, reference will be made to its commentary where it remains germane to terminology employed within Rome I. Nevertheless, the focus will be on Rome I itself, which will now apply to all contractual conflict cases which fall within its scope.5

B. The Applicable Law

4.06  It has been observed that no contract can exist in a vacuum; it must subsist against the background of a legal system which clothes the arrangement with some meaning and effect.6 It is necessary to ask at the outset how the relevant legal system is to be identified. The problem can only arise in cases involving a cross-border element, but when it does arise, the question can be one of some difficulty. How is it to be resolved?

4.07  In the first instance, Article 3(1) of Rome I reflects the principle of party autonomy and allows the parties the freedom to select the system of law which is to govern their agreement. It provides that:

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

4.08  This provision is clear and it is not proposed to discuss it in depth, although it will be necessary to return to the concept of a ‘split’ governing the law in the context of (p. 114) the lex monetae principle.7 For present purposes, it is sufficient to note that the first sentence of Article 3(1) is expressed in mandatory terms. Consequently, the parties’ choice of law must be respected even if it has no connection with the contractual situation as a whole.8

4.09  Matters become rather complex where the applicable law cannot be identified in accordance with Article 3 of Rome I. In this respect, Article 4 of Rome I operates at three levels.

4.10  First of all, specific rules are given for particular types of contract. For example, contracts for the sale of goods or the provision of services are governed by the law of the place where the seller or the provider has his habitual residence.9 Franchise contracts will be governed by the law of the place in which the franchisee has his habitual residence,10 whilst distribution contracts are governed by the law of the country in which the distributor is habitually resident.11 It will be noted that certain banking arrangements—such as the provision of a current account—should be classified as a contract for the provision of a service and, bearing in mind the application of the ‘habitual residence’ test,12 such an account and the associated contract would be governed by the law of the country in which the account-holding branch is located.

4.11  Where the contract does not fall within one of the distinct categories it will be governed by the law of the country in which the party responsible for the ‘characteristic performance’ has his habitual residence.13

4.12  The rules are then withdrawn if it is clear from all the circumstances that the contract is manifestly more closely connected with another country, in which case the law applicable to the law of that country applies.14

4.13  If the above rules do not generate an answer, then the contract will be governed by the law of the country with which the contract is most closely connected.15

(p. 115) 4.14  In the light of these provisions, it is necessary to ask—what is the role of money or monetary obligations in helping to identify the law which is to govern a contract? As noted above, a contract involving the provision of a banking service would be governed by the law of the country in which the relevant bank branch is located. But not all banking activities are necessarily to be seen purely as a ‘service’ in this sense. However, in the case of a loan contract, the obligations of the lender would usually be ‘characteristic’ of the contract for the purposes of the test in Article 4(2) of Rome I, since the borrower's obligations are represented merely by the duty to repay the facility. Consequently, in either case, transactions effected with a bank are likely to be governed by the law of the country in which the bank branch is located.16 It seems to follow from this discussion that, in the application of the presumption created by Article 4(2), a mere obligation to pay money (without more) will not usually amount to the ‘characteristic performance’ of a contract. Nearly every contract will involve a monetary obligation of some kind, and an obligation which is common to all contracts can scarcely be said to ‘characterize’ individual contracts, or to provide them with their distinctive quality.17 It follows that it will usually be the party which is to provide the non-cash consideration whose obligations will be ‘characteristic’ of the contract. To this extent, it may be said that monetary obligations will generally play a limited role in the identification of the law applicable to the contract as a whole. The obligations of the creditor may characterize the contract, but those of the debtor will not. For the same reasons, the currency in which a monetary obligation is expressed will not generally lead to the conclusion that the contract as a whole is governed by the law of the country which issues that currency.18 It should, however, be repeated that one will only have to apply the ‘characteristic performance’ test if (i) the contract does not include an express choice of law; and (ii) the contract falls outside the specific categories covered in Article 4(1) of Rome I.19

(p. 116) 4.15  It should be repeated that Article 3(1) of Rome I provides that ‘by their choice the parties can select the law applicable to the whole or to a part only of the contract’. In accordance with the earlier provisions of that Article, such choice ‘must be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case’. Thus, a contract incorporating an express choice of English law may select ‘dollars’ as the medium of payment. English law must therefore determine whether the parties intended to refer to US dollars, Canadian dollars, Australian dollars, or some other unit of that name, for questions of interpretation will be governed by the law applicable to the contract as a whole.20 But if it is found that the parties intended to refer to US dollars, how can the court proceed from there? English law does not itself define the US dollar or any other foreign currency. Instead, the reference must be made to the federal law of the United States for that purpose. This is the foundation of the lex monetae principle, the consequences of which will be discussed in more detail elsewhere.21 In the sixth edition of this work,22 it was suggested that the validity of the implied choice of US law to determine the nature of the currency obligation could be justified by reference to the ‘exception’ language in Article 3(1) of the Rome Convention, which was to similar effect. However, it is now more difficult to adopt this approach because a similar rule that could be applied in the absence of an express choice of law23 has not been carried forward into Article 4 of Rome I. It is thus necessary to find an alternative formulation which justifies the application of the lex monetae principle in all contractual cases, whether or not an express choice of the governing law has been made. The application of that principle can perhaps be said to rest on the principle that English law will give effect to a contract in accordance with the intentions of the parties and, if they have expressly or impliedly referred to a foreign law to explain that nature and scope of those obligations, then the court will give effect to that intention.24 This does not detract from the position that the entire contract is governed by English law. It is submitted that this suggested approach is therefore consistent with the choice of law rules in Rome I. It is appreciated that the point will only rarely arise in a practical context, if only because it will rarely be disputed; but it is important that the application of a core concept of monetary law can be reconciled with the terms of Rome I.

(p. 117) 4.16  For the present, it is necessary to leave aside specific questions touching the identification of the applicable law25 and to proceed on the basis that the governing law has been identified. The law applicable to a contract governs a broad spectrum of contractual issues, including the following:

  1. (a)  the material validity of the contract;26

  2. (b)  the formal validity of the contract;27

  3. (c)  the interpretation of the contract;28

  4. (d)  the performance of the contract, save that the law of the place of performance may be taken into account in the context of the mode of performance and the steps to be taken in the event of defective performance;29

  5. (e)  the consequences of a breach of contract, including the assessment of damages, in so far as this process is governed by rules of law;30

  6. (f)  the various ways of extinguishing obligations and prescription and limitation of actions;31 and

  7. (g)  the consequences of the nullity of the contract.32

(p. 118) 4.17  In broad terms, it is entirely appropriate that the applicable law should govern the matters just described. If the parties have chosen to contract by reference to the law of a particular country, then it is natural that those laws should govern the essential validity and meaning of their bargain, and prescribe the general consequences of non-performance.33 Thus, if a contract governed by English law requires the payment of an amount in US dollars in London, the federal law of the United States will define the currency in which the obligation is expressed and is to be performed, but that will be the limit of such laws in the context of the dispute; all other substantive questions will fall to be governed by English law.34 Consequently, whilst the lex monetae will be a frequently recurring topic of discussion in this book, it is necessary to retain a sense of proportion; the lex monetae defines the monetary unit in which an obligation is expressed or is to be performed, but the applicable law will generally govern the identification of the currency that forms the subject matter of the contract,35 define the amount of the obligation, the date on which it is to be performed, and the consequences of non-performance.36 The scope of the lex monetae is thus limited to that extent.

C. The Law of the Place of Performance

4.18  In the previous section, it was noted that questions touching the substantive performance of monetary obligations will be governed by the law applicable to the contract as a whole. However, Article 12(2) of Rome I provides: ‘In relation to the manner of performance and the steps to be taken in the event of defective performance regard shall be had to the law of the country in which performance takes place.’

4.19  In the context of a monetary obligation, this provision detracts from the all-embracing dominance of the applicable law; inevitably, there will be marginal areas in which the applicable law and the law of the place of performance will compete and conflict with each other. The point may be of some importance, especially where a monetary obligation is required to be performed in a country other than (p. 119) its State of issue. How are such difficulties to be resolved? A series of points may be made in this context:

  1. (a)  The applicable law remains the primary determinant of questions which arise in the field of performance. This point is emphasized by the language of Article 12(1) which stipulates that the law applicable to a contract ‘shall govern … performance’.

  2. (b)  In contrast, Article 12(2) provides a role for the law of the place of performance, but—at least in the context of a monetary obligation—the role appears to be a very limited one. First of all, the law of that place only has a role in the context of the manner of performance—an expression which itself tends to reaffirm the dominance of the applicable law in the context of matters of performance. Even then, Article 12(2) does not require that such law must be applied in relation to the mode of performance—it merely requires that ‘regard shall be had’ to that law. As the Guiliano-Lagarde Report stated in its commentary on the corresponding provision in the predecessor Rome Convention, this means that ‘the court may consider whether such law has any relevance to the manner in which the contract should be performed and has a discretion whether to apply it in whole or in part so as to do justice between the parties’. It is suggested that this analysis is plainly right, and serves as further confirmation of the limited role of the law of the place of performance. That law may be entirely disregarded if its application is unnecessary to achieve justice between the parties.

  3. (c)  The scope of Article 12(2) is yet further limited by the commentary in the corresponding provision of the Rome Convention as set out in the Guiliano-Lagarde Report, which suggests that the term ‘manner of performance’ should be construed according to the laws of the country in which the proceedings take place,37 but should in particular be taken to refer to matters such as the rules governing public holidays. This point may be relevant in the context of monetary obligations,38 but again this tends to emphasize the limited relevance of the law of the place of performance in the present context.39

4.20  The diminished relevance of the law of the place of performance in the context of monetary obligations will be something of a recurrent theme—it will receive (p. 120) particular attention in the context of exchange controls.40 It should, however be noted that Article 9(3) of Rome I allows the court to take into account the impact of illegality under the law of the place of payment. This issue is likewise considered at a later stage.41

D. The Law of the Countries in which the Parties are Established

4.21  The preceding sections have explained the essential dominance of the applicable law in the field of monetary obligations. But, in a conflict of laws situation, multiple jurisdictions are necessarily involved, and it is necessary to consider whether the laws of any of those other jurisdictions may have any impact upon monetary obligations.

4.22  In a sense, the dominance of the applicable law almost answers this question by itself. It is thus unsurprising that the law of the place of the parties’ residence or establishment is of limited consequence.

4.23  It is true that the capacity of an individual to enter into a contract may be determined by the law of his country of domicile42 and the corporate capacity of a legal entity will generally be governed by the law of the place of incorporation.43 Questions of this kind may be of importance in determining whether a monetary obligation has been validly incurred in the first instance but will not subsequently have any impact upon the character or scope of such an obligation.44 Thus, for example, a breach of exchange control regulations in a borrower's home jurisdiction will not usually afford a defence to an action in England under a loan contract governed by English law, for exchange control regulations do not affect individual or corporate capacity.45

(p. 121) E. The Law of the Forum State

4.24  It has already been noted that the law applicable to a contract will govern the majority of the key areas of dispute which may arise, for example, as to the proper meaning of the contract, its performance, and the measure of damages in the event of a breach. This approach is designed to give effect to the contractual intentions of the parties and, in principle, it should therefore prevail regardless of the forum in which the relevant proceedings happen to take place. Thus, so far as the English courts are concerned, a contract which is binding under its applicable law should be enforced in this country, even though a corresponding arrangement governed by English law would be unenforceable for some reason.46

4.25  There must, however, plainly be some limit to this approach. Respect for the intentions of the contracting parties must be balanced by a degree of respect for the fundamental laws and principles of the State in which the proceedings are taking place. The balancing of these potentially competing interests finds expression in two core provisions of Rome I. First of all, Article 9(2) provides that: ‘Nothing in this Regulation shall restrict the application of the overriding mandatory provisions of the law of the forum’. For these purposes, overriding mandatory provisions are defined as provisions ‘the respect for which is regarded as essential by a country for safeguarding its public interests, such as its political, social or economic organization to such an extent that they are applicable to any situation falling within their scope irrespective of the law otherwise applicable to the contract’. Thus, for example, rules governing cartels, competition, restrictive practices, and consumer protection must be applied by the English courts even if the contracts and monetary obligations at hand are governed by a foreign system of law.47 Equally, laws designed for the protection of policyholders resident in this country may be of mandatory application even though the policy concerned is subject to the laws of a different country.48 Article 9(2) may apply to a wide variety of domestic rules of the forum.49 In the present context, it is sufficient to note by way of example (p. 122) that Article 9(2) provides the basis upon which the English courts may give effect to Article VIII(2)(b) of the Articles of Agreement of the International Monetary Fund, even in relation to obligations governed by a foreign system of law.50

4.26  Secondly, Article 21 of Rome I provides that: ‘The application of a provision of the law of any country specified by this Regulation may be refused only if such application is manifestly incompatible with the public policy (ordre public) of the forum.’ This again is a complex subject.51 For present purposes, it must suffice to note that in England, public policy may prohibit the enforcement of foreign law contracts whose performance would be unlawful in England,52 or which created monetary obligations involving the improper use of influence or corruption.53 Likewise, the English courts may refuse to enforce foreign laws which are discriminatory54 or which are inconsistent with the relevant country's treaty obligations to the United Kingdom.55

F. The Law of Connected Third Countries

4.27  It is finally necessary to consider whether the law of some third country may have consequences for a monetary obligation, where there is some link between that obligation and the country concerned.

4.28  Article 7(1) of the Rome Convention gave the court a fairly broad discretion to apply the mandatory rules of a third country with which the contractual situation had a close connection. This rather loose provision was felt to introduce a degree of uncertainty, with the result that the United Kingdom and a number of other Member States exercised an opt-out available under the terms of the Convention. It was the reappearance of this provision—shorn of any right to opt out—in the draft Rome I regulation that originally led the United Kingdom to indicate that it (p. 123) would not participate in Rome I.56 However, the UK accepted the regulation when the relevant provision57 was revised to read:

Effect may be given to the overriding mandatory provisions of the law of the country where the obligations arising out of the contract have to be or have been performed, in so far as those overriding mandatory provisions render the performance of the contract unlawful. In considering whether to give effect to those provisions, regard shall be had to their nature and purpose and to the consequences of their application or non-application.

It is thus no longer possible simply to ‘import’ rules from a jurisdiction with which the contract may happen to have some connection and the provision reproduced here is now limited to the law of the country in which performance is to take place.58

4.29  This brief review of the relevant rules of private international law provides the basis upon which the ensuing chapters will review the rules applicable to the interpretation and performance of monetary obligations.(p. 124)


1  For detailed discussion, see Chitty, ch 30; Dicey, Morris & Collins, ch 32.

2  The point is explicitly made in Art 1(1) of Rome I. Rome I replaced the former Rome Convention on the law applicable to contractual obligations (the ‘Rome Convention’), which had effect in the United Kingdom by virtue of the Contracts (Applicable Law) Act 1990. The Rome Convention—which is considered in Ch 4 of the sixth edition of this work—continues to apply to contracts concluded before 17 December 2009, whilst Rome I applies to contracts concluded on or after that date (see Art 28, Rome I, as revised by a corrigendum). Rome I has a number of points of similarity with the predecessor convention, but certain points of difference were felt to give rise to uncertainty, leading the UK initially to opt out of the proposed Rome I arrangements. However, it agreed to accept the new regulation after certain provisions were renegotiated. For the background, see Ministry of Justice, ‘Rome I—Should the UK Opt In?’, Consultation Paper CP05/08, 2 April 2008. For the Commission's original proposal document in relation to Rome I and a discussion of its provisions, see COM (2002) 654 (final), 14 January 2003. On the general subject, see Max Planck Institute for Foreign and Private International Law: Comments of the European Commission's Green Paper on the Conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation (RabelZ, 2004) 1–118. It may be added that, in a contractual context, a system of private international law is designed to ensure that the original intentions of the parties are respected, subject to the mandatory rules and public policy of the jurisdiction in which the proceedings occur. This point will become apparent as the present discussion is developed.

3  By virtue of the Contracts (Applicable Law) Act 1990 (Commencement No 1) Order 1991, SI 1991/707. In passing, it may be added that the Rome Convention came into effect in the year in which the fifth edition of this book was published, and it is thus unsurprising that Dr Mann did not refer to it in detail. His views on the Convention are tolerably clear from remarks contained in ‘Contract Conflicts: A General Review’ (1983) 32 ICLQ 265, where he describes it as ‘one of the most unnecessary, useless and indeed unfortunate attempts at unification or harmonisation of the law that has ever been undertaken’. He was by no means alone in this view (although few expressed it with such clarity), but the English courts have now been working successfully with the European harmonization measures for an extended period, and the passage of time renders it unnecessary to pursue that particular debate.

4  The Report is printed in OJ C282, 31.10.1980, p 1.

5  In this context, it should be mentioned that a number of issues are excluded from the scope of Rome I. In relation to monetary obligations, it should be noted that questions arising under bills of exchange and promissory notes are excluded, to the extent to which those questions arise from the negotiable character of such instruments—see Art 1(2)(d) of Rome I. So far as the English courts are concerned, other conflict of laws issues relating to such instruments would continue to be governed by the Bills of Exchange Act 1882, s 72. Certain types of insurance contract are also excluded from the scope of Rome I: see Art 1(2)(j).

6  See Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC 50 (HL).

7  For a consideration of some of the difficulties which may arise when the parties agree to apply different systems of law to different aspects of the contract, see McLachlan, ‘Splitting the Proper Law in Private International Law’ (1990) BYIL 311.

8  See Vita Food Products Inc v Unus Shipping Ltd [1939] AC 277; Dicey, Morris & Collins para 32–062. See also the ICSID Award (para 94) in Aucoveri v Venezuela (Arb 00/5 Award dated 23 September 2003).

9  Art 4(1)(a) and (b), Rome I. The habitual residence of a contracting party is to be determined as at the date of the contract. For an individual carrying on a business activity, his habitual residence is his principal place of business. The habitual residence of a corporation is its place of central administration. However, if a contract is concluded in the course of the operations of a branch or agency or the contract contemplates performance though such an establishment, then the habitual residence will be the location of that establishment: see Art 19, Rome I.

10  Art 4(1)(e), Rome I.

11  Art 4(1)(f), Rome I.

12  See n 9.

13  Art 4(2), Rome I.

14  Art 4(3), Rome I.

15  Art 4(4), Rome I.

16  It should be repeated that this observation applies only where the contract contains no express choice of law. Cross-border banking or financial agreements will usually contain such a choice.

17  This position is confirmed by the Giuliano-Lagarde Report. In its commentary on Art 4(2) of the predecessor Rome Convention, the Report notes that a monetary obligation ‘is not, of course, the characteristic performance of the contract. It is the performance for which the payment is due, i.e. depending on the type of contract, the delivery of goods, the granting of the right to make use of an item of property, the provision of a service, transport, insurance, banking operations, security etc which usually constitutes the centre of gravity and the socio-economic function of the contractual transaction’.

18  Thus, where a German publisher entered into a contract with a foreign author, the contract was found to be governed by German law even though the author's fees were payable in a foreign currency—BGHSt, 22 November 1955, 19 BGHZ 110. In the pre-Rome Convention era, the money of account in which an obligation was expressed might occasionally lead to the conclusion that, in the absence of an express choice of law, the parties intended their contract to be governed by the law of the issuing country—see, eg, The Assunzione [1952] P 150 (CA); Rossano v Manufacturers Life Insurance Co [1963] 2 QB 352. These authorities can no longer stand in the light of the express provisions of Art 4 of Rome I.

19  In ascertaining the applicable law, it should also be noted that special rules apply in the context of contracts of carriage (Art 5), consumer contracts (Art 6), and individual employment contracts (Art 8).

20  On the type of problem identified in the text, see the discussion on ‘initial uncertainty’ in Ch 5.

21  See in particular, Ch 13.

22  Sixth edition, para 4.11. The views there expressed are also called into question by the ECJ's decision in Case C-133/08, Intercontainer Interfrigo SC (ICF) v Balkenende Oosthuizen BV [2010] 3 WLR 24, which suggests that the governing law of a contract should only be ‘severed’ if part of the contract clearly has an independent objective. This test would not be met in the case of the lex monetae, since the financial obligations will invariably be an integral part of the contract.

23  In such a case, Art 4(1) of the Rome Convention provided that ‘a severable part of the contract which has a closer connection with another country may by way of exception be governed by the law of that country’.

24  For a discussion of the ‘incorporation’ of specific rules of a foreign law into a contract governed by English law, see Dicey, Morris & Collins, para 32–088.

25  There is, inevitably, a growing body of case law on this subject—see Dicey, Morris & Collins, para 32R-0.61.

26  Art 10, Rome I. The term ‘material validity’ includes the very existence of a contract, whether it is void for mistake or illegality, whether it is voidable on the grounds of misrepresentation and similar matters. On these subjects, see Dicey, Morris & Collins, para 32R 154–173.

27  Art 11, Rome I. Requirements as to formal validity may include any rule that particular contracts must be reduced to writing. It must be said that the applicable law is a basis, but not the sole basis, upon which formal validity may be judged. On these points, see Dicey, Morris & Collins, para 32R 175–186.

28  Art 12(1)(a), Rome I. Questions concerning the interpretation of monetary obligations will be discussed in detail in Ch 5.

29  Art 12(1)(b), read together with 12(2), Rome I. Once again, questions touching the performance of monetary obligations will be considered in Ch 7. For present purposes, it may be sufficient to note that the laws of one country cannot generally discharge monetary obligations arising under a different system of law. The House of Lords has previously had occasion to remark that an English court order cannot discharge a debt governed by Hong Kong law—see Société Eram Shipping Co Ltd v Hong Kong and Shanghai Banking Corp Ltd [2003] UKHL 30. For earlier cases and discussion of the subject generally see Dicey, Morris & Collins, paras 32–194–32-200.

30  Art 12(1)(c), Rome I. The qualification at the end of Art 12(1)(c) means that questions touching the recoverable heads of damage and remoteness are governed by the applicable law, whilst the qualifications of those damages is governed by the procedural rules of the forum court—see J D'Almeida Araujo Ltd v Sir F Becker & Co [1953] 2 All ER 288; Coupland v Arabian Gulf Oil Co [1983] 1 WLR 1136. It seems that the Private International Law (Miscellaneous Provisions) Act 1995 adopts a similar rule in the context of the law of tort—see Edmunds v Simmons [2001] 1 WLR 1003, although it should be noted that the 1995 Act no longer applies in the sphere now occupied by the Rome II. For further discussion and cases, see Chitty, paras 30.336–30.339.

31  Art 12(1)(d), Rome I. Whether or not a debt has been discharged by some means other than payment must therefore likewise be determined by the governing law and, generally speaking, no other system of law can have any influence upon the question. The Privy Council recently had occasion to consider this point in the context of a contract governed by the laws of Bangladesh—see Wright v Eckhardt Marine GmbH 14 May 2003 (Appeal 13 of 2002). For earlier cases, and a general discussion on the subject, see Dicey, Morris & Collins, paras 32–204–32-209.

32  Art 12(1)(e), Rome I. This provision deals with claims of a restitutionary or quasi-contractual character.

33  See the remarks of Lord Wilberforce in the Amin Rasheed case, n 6.

34  This is one of the consequences of the decision in Libyan Arab Foreign Bank v Bankers Trust Co [1989] QB 728, which will be considered in more detail in Ch 7.

35  See generally the discussion on initial uncertainty in Ch 5. It appears that the same view is adopted in Germany: see Spellenberg, Munchener Kommentar, Art 12 Rome I-VO, para 181.

36  The dominance of the applicable law in this context was recently reaffirmed by the decision in Global Distressed Alpha Fund I Ltd v PT Bakri Investindo [2011] 1 WLR 2038, applying Anthony Gibbs & Sons v Societe Industrielle et Commerciale des Metaux (1890) 25 QBD 399 (CA) and the well-known decision in Adams v National Bank of Greece and Athens SA [1961] AC 255 (HL).

37  This seems to be at odds with the notion that, as a harmonizing measure, the Convention should be uniformly interpreted throughout all Member States—see Dicey, Morris & Collins, para 32–197.

38  eg, in determining whether a payment due to be made on a bank holiday should instead be made on the day before or the day after such holiday. If, however, the point is dealt with in the contract itself, then the stated intentions of the parties should prevail over the law of the place of performance.

39  For cases considering the corresponding provisions in the Rome Convention, see Import Export Metro Ltd v Compania Sud Americain de Vapores SA [2000] EWHC 11 (Comm); East West Corp v DKBS AF 1912 A/S [2003] EWCA Civ 83.

40  See Ch 16.

41  See the discussion at para 16.36.

42  The point is not entirely clear—see Dicey, Morris & Collins, para 32R-216. Questions of the contractual capacity of individuals are generally, although not entirely, outside the scope of Rome I—see Art 1(2)(a) read together with Art 13, Rome I.

43  See Dicey, Morris & Collins, para 30R-020. Questions concerning corporate capacity and the authority of directors to bind a company are outside the scope of Rome I—see Art 1(2)(f) and (g), Rome I. Questions relating to corporate capacity have occasionally posed significant difficulty: see, eg, National Bank of Greece and Athens SA v Metliss [1958] AC 509 (HL); Haugesund Kommune v Depfa ACS Bank [2012] 2 WLR 199.

44  Adams v National Bank of Greece and Athens SA [1961] AC 255 (HL). Even this limited statement must be treated with some care. If a transaction is beyond the capacity of a corporation or has not been properly authorized under the laws of the home State, it may nevertheless be binding upon it if the relevant officials of the corporations had ostensible authority to enter into the contract under the laws which governed it. Questions of this kind are beyond the scope of the present work, but for discussion, see Dicey, Morris & Collins, paras 30–025 and 30–028. The point was considered by the New York Court of Appeals in Indosuez International Finance v National Reserve Bank (2002) NY Int 55.

45  Kleinwort Sons & Co v Ungarische Baumwolle Industrie AG [1939] 2 KB 678. Exchange control questions pose particular difficulty, and will receive detailed consideration in Part IV.

46  For an example, see Re Bonacina [1912] 2 Ch 394.

47  These are the examples given by the Giuliano-Lagarde Report in its commentary on the equivalent provision contained in Art 7(2) of the Rome Convention, although note that consumer protection laws are now categorized as ‘laws which cannot be derogated from by agreement’, on which see n 49.

48  DR Insurance Co v Central National Insurance Co [1996] 1 Lloyds Rep 74.

49  On the subject generally see Dicey, Morris & Collins, paras 32R-131–32-151. It may be noted in passing that exceptions based on mandatory provisions and public policy are to be restrictively construed. In the specific context of exceptions for consumer protection and employment contracts, Rome I uses the expression ‘provisions which cannot be derogated from by agreement’, which is to be more liberally construed for the protection of the weaker party: see Recital (37) to Rome I. The latter expression is used in (i) Art 3(3), which is designed to allow for the application of such rules where an agreement of an essentially domestic nature are subjected to a foreign system of law; (ii) Art 3(4), which allows for the application of EU law in specific cases; (iii) Art 6 dealing with consumer contracts; and (iv) Art 8, concerning individual employment contracts. It is not necessary to consider these provisions in detail for present purposes.

50  On this general subject, see Ch 16.

51  In relation to public policy and contractual obligations, see Dicey, Morris & Collins, paras 32–232–32-239. For a recent case considering the corresponding provision in the Rome Convention, see Duarte v Black and Decker Corp [2007] EWHC 2720.

52  In the context of a contract which infringed exchange control regulations in the UK, see Boissevain v Weil [1950] AC 327.

53  Hope v Hope (1857) 8 DeG M & G, 731; Lemenda Trading Co Ltd v African Middle East Petroleum Co Ltd [1988] QB 448; Tekron Resources Ltd v Guinea Investment Co Ltd [2003] EWHC 2577.

54  Holzer v Deutsche Reichsbahn Gesellschaft (1938) 277 NY 473; Oppenheimer v Cattermole [1976] AC 249 (HL) and Re Helbert Wagg & Co Ltd's Claim [1956] Ch 323.

55  Royal Hellenic Government v Vergottis (1945) 78 Ll LR 292.

56  See the consultation paper mentioned in n 2.

57  Now contained in Art 9(3) of Rome I. Note that the expression ‘overriding mandatory provisions’ used in Art 9(3) has already been considered in para 4.25.

58  As noted earlier, this issue is considered in more depth at para 16.36.