I received the following note from longtime reader Scott Chalmers, a foreign legal consultant at King & Spalding’s Houston office who’s qualified in England and Australia:
Ken, one drafting/legal issue that repeatedly comes up in negotiations between US and non-US lawyers is the use of the phrase ‘without regard to its conflict of laws provisions’ in the governing law clause.
Americans have typically insisted upon keeping that phrase, even if the governing law is non-US (e.g. English law, Australian law). Of course, we non-US lawyers respond by saying it’s completely unnecessary (i.e. those courts don’t apply the doctrine of renvoi, don’t have to overcome any related legislation, raises questions as to what the parties intentions are, etc.).
Given your upcoming talks in Australia, this ‘old chestnut’ might be a good one to tackle, as (IMHO) you’d get some interest on the issue.
For those wondering about the phrase Scott highlights, here’s what Negotiating and Drafting Contract Boilerplate
§ 6.02[3] (Tina L. Stark ed. 2003) has to say (footnotes omitted):
The purpose of [the language in question] is to avoid renvoi, that is, to ensure that a particular state’s law governs only substantive matters, and that the court does not also apply the designated law to choice-of-law questions. The following would be an example of renvoi: a party brings suit in a court in California, with respect to a contract with a New York choice of law provision. To determine what law should govern, the California court looks to new York law. The California court then decides that under the New York choice of law rules, the substantive law of New York is not the appropriate law—rather, Texas law is.
In order not to subvert the parties’ intent, the provision specifically excludes from its embrace the state’s conflict of law principles. …
Although renvoi is indeed a theoretical problem, as a practical matter, most courts, as a matter of course, apply their own choice of law rules in determining whether to enforce the governing law provision. Accordingly, some practitioners now consider it unnecessary to specify that the chosen law does not incorporate that jurisdiction’s choice of law rules.
It follows that if a jurisdiction doesn’t recognize the notion of renvoi—and I gather from Scott that courts in England and Australia, at a minimum, do not—the “without regard to its conflict of laws provisions” caveat is unnecessary.
But this opens a bigger can of worms. What other U.S. boilerplate is irrelevant if the governing law is that of a non-U.S. jurisdiction? That’s something that I’m starting to think about, and not only because I’m heading to the other side of the world—it will also be an issue when I start work on the international version of Koncision’s confidentiality-agreement template.
So I invite you to chime in!
Oooooooh! What a great subject!
From an English law perspective, off the top of my head, and looking at Tina’s book for inspiration:
Waiver of jury trial (the only civil cases where we still have juries in England are in defamation)
References to US trade secrets laws
References to merger of parties (true merger doesn’t happen between English companies)
Clauses saying the agreement is a joint drafting effort (the contra proferentem rule works differently under English law)
There are lots of detailed wording differences, but which aren’t boilerplate clauses as such, eg references to closing rather than completion.. Some references to parties acting (or negotiating) in good faith may need to be looked at critically, given the different approaches taken in the English courts and in civil code countries.
Insurance clauses generally need revising, due to differences in insurance practice, egs insurers tend not name other people on policies but note their interests instead.
I expect there would be plenty more if I spent time thinking about it. There are the makings of a good article in this subject – any volunteers?
You’re in grave danger of being designated, by proclamation, author of that article …
Why not just say “This Agreement is governed by [jurisdiction] substantive law” and leave it at that?
I think the best variation on this theme is “This Agreement shall be governed by the internal [or “domestic”] laws of [jurisdiction] and no other laws.”
The advantage of this formulation is that it excludes both renvoi and the application of the UN Convention on the International Sale of Goods.
Indemnities (which many people classify as boilerplate) are another interesting area as I have found that in US agreements indemnities are generally sought for any breach of contract whereas in England (where I practice), we tend to only seek/provide indemnities in relation to specific losses. I have heard it suggested that the reason for this relates to the English/US difference between the ability to recover costs in legal proceedings, which tends to be automatic in England (to the winning party) but not, I believe, in the US. But I would be interested to hear of any other explanations for the difference.
PURCHASE MONEY SECURITY INTEREST… not as strong under English law. Coming from California, all I have to say is God bless the UCC.
Thanks!