Governed by and interpreted in accordance with

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Negotiation Anatomy

Rush-hour on Rue Limpertsberg, yesterday

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Another one for the great paranoid wellspring from which emerges the advocate’s nature.

This agreement shall be governed by and interpreted in accordance with the laws of England and Wales and their territorial waters.

It seems fussy enough even nominating the governing law that applies to your contract — but is de rigueur in the torrid international waters in which derivatives folk ply their trade, since counterparties are usually foreigners to each other, and to mother England, so really it doesn’t go without saying what law should govern the contract. So this leads to all kinds of tedious complications.

Say I am from Luxembourg, you from Mongolia, and we have a contract under which you will supply goods, Gobi yak milk presently being á la mode in the fashionable salons of Limpertsberg. Under whose rules should we govern our contractual relations?

Traditionally, one conducts international commerce under English law: no doubt, a regrettable post-colonial hang-over, but we are where we are and look: however you feel about Rhodes scholarships, the common law is pretty neat: it is consistent, predictable, and generally produces agreeable results.

So we agree to transact our Yak milk off-taking arrangement under English law. This resolves that impasse in a pleasantly neutral way for now, but let us say, a few years down the track, Yak-based drinks are no longer the thing along Allée Scheffler, and there is now some difference of opinion between us as to exactly how much of this ghastly stuff I have agreed to take.

Since neither of us wants to pitch up in London the idea is to have a local court sort it out. And so was developed the idea of “non-exclusive jurisdiction”: English may be the governing law, but the courts of Luxembourg, Ulan Bator — or, for that matter, anywhere in between — can apply it.

The legal experts of one sovereign judiciary applying the laws of another one might strike you as rather a wishful state of affairs, and it rather points up the need for the grim confection with which we are currently concerned.

For it is hard enough to expect le Cour Supérieur de Justice to properly apply the law of, for example, trusts, when the very concept is said to be[1] unknown to its jurisprudence, without it at least putting some kind of Flemish spin on it. It cannot help reading our rusty Anglo-Saxon contortions with some silken, romance finery.

Will it help if our contract says it is not allowed to? We fear not. Directing a reader on the hermeneutic framework she must use to construe a document from within the confines of that document rather puts the Yak before the сарлаг тэрэг, to coin a phrase.

But — and this is a far broader question — what does it matter anyway?

What are we supposed to do if the sitting members of le Tribunal d’Arrondissement puts some Frankish spin on things? How will we even know? How can we stop them? To whom do we appeal? What difference will it make?

See also


  1. Said to be. The contrat fiduciaire sounds a lot like a trust to me, readers.