Litigation

Chapter Three

Introduction 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 the
use of terminology,1 terms and concepts of conflict of laws may sometimes overlap or be
barely 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 the
outcome of any international commercial litigation,2 but also on the enforcement of con-
tractual obligations in any international commercial transactions. Even if a contractual
dispute is to be settled by the parties through consultation, mediation or arbitration, the
conflicts rules will help them to determine the governing law of the contract, which
forms the basis for ascertaining the parties’ rights and obligations, and for interpreting
the terms of the contract.
[3.1]
[3.2] [3.2]

[3.2] Conflict of laws is relevant to international commercial law because the parties to
an international transaction will usually (by definition) come from different countries, or
the transaction, by virtue of the goods sold or matters concerned, may involve the laws of
different countries. In an international sale of goods or services, for example, the seller
could be in Australia, but the buyer could be in Germany or Japan. Should the law of the
seller’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

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 under
each possible regime of law may be substantially different, because the countries, which
might have jurisdiction over the matter on the bases of residence, nationality, registration
and business operation, etc, might have substantially different legal systems, and strong
interests 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 (private
international 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 support
of 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 the
defendants was served on board an aeroplane when the plane was flying over Arkansas in
a non-stop journey from Memphis, Tennessee to Dallas, Texas. The court held that the
defendant 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 sets
out difficult rules for service out of jurisdiction. It must be noted that the jurisdiction or
territory 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 CLR
539; 97 ALR 124, illustrate the importance of conflicts rules. Both cases were determined
by 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 ship
within Greek territorial waters, against the Greek shipowner in the Supreme Court of
New South Wales. In the latter, the New South Wales companies were not permitted to
pursue 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 as
follows:
[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

[3.5] 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


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


[3.7] [3.7]
[3.7] In a situation similar to the two abovementioned cases, an Australian party will
have the advantage of a familiar legal system and the benefit of saving costs if the case is
heard by an Australian court, and will face higher risks, and more disadvantages, if he or
she has to litigate in a foreign court. This is why we have to study the rules of conflict of
laws and the tests favoured by a court of law, which will determine the selection of a
forum in a given case. A lawyer needs to contemplate in any international commercial
contract 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 or
approaches of conflict of laws, and their application to the determination of a court’s
jurisdiction. A study of the determination of governing law of a contract or dispute is
found in Chapter 15. The brief introduction to conflict of laws in this chapter will help us
to understand certain preliminary issues, such as the governing law of a contract of sale or
a bill of lading, or the jurisdiction of the court (see Bulk Chartering & Consultants Australia
Pty Ltd v T & T Metal Trading Pty Ltd (The Krasnogrosk) (1993) 31 NSWLR 18), in a number
of 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 countries
are in conflict with each other. This happens when a particular matter, object, transaction
or legal relationship (for example, the validity of a marriage or effect of an oral promise) is
governed, 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


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 becomes
concerned with conflict of laws issues when a plaintiff commences a proceeding pursuant
to the rules of the court and the defendant raises the issues of foreign law to challenge
either the appropriateness of the court’s jurisdiction or the claims of the plaintiff. In such
a 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 court
has an appropriate jurisdiction over the dispute. In carrying out these steps, the court
applies the so-called ‘rules of conflict of laws’ or ‘conflicts rules’ to make a choice of
either 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 the
conflict between competing jurisdictions, such as the cases of Oceanic Sun and Voth v
MFM: 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, the
New South Wales court will have to determine whether it has appropriate jurisdiction

59


over the dispute if the buyer sues the seller in New South Wales. Similarly, the Tasmanian
court has to determine whether it has appropriate jurisdiction over the dispute if the
buyer asks it (although it is most unlikely) to enforce the oral contract. The jurisdictional
issue 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 exercise
certain 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 decide
which of the two laws (ie the New South Wales Act or Tasmanian Act) should apply. The
rules, methods, approaches, or techniques for making such determination form the body
of 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 ‘private
international 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 dealing
with foreign elements in local litigation which can involve almost any areas of law, such as
contracts, 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 law
would have to, as we have seen, decide whether it has an appropriate jurisdiction or
whether a local law, a foreign law, an international treaty (which has not been incorporated
into the domestic law), or sometimes a foreign judgment, should be taken into account in
dealing with the dispute. Since there are differences, inconsistencies and conflicts between
rules of different countries, a domestic court has to determine which rule or rules are
applicable 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 court
is, in fact, making a choice between laws, including sometimes the law governing the
choice of jurisdiction. The rules of conflict of laws may sometimes be broadly called the
rules of choice of law. Sometimes ‘choice of law’ is used in a more specific sense, referring
to the choice of substantive law (see [3.16]) which governs the rights and liabilities of the
parties in a given case. This is different from ‘choice of forum’, which deals only with the
jurisdiction 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


[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 foreign
law, but all matters appertaining to procedure are governed exclusively by the law of
forum.’6
There are two major reasons for the codification of conflicts rules in the context of
international commercial law. First, it is necessary for the purpose of providing the same
rights and duties to the same persons who are involved in the same type of international
commercial transactions in different jurisdictions. Secondly, codification provides the
same procedural protection to persons who have the same right but take legal action in
different jurisdictions, and provides the same rules for the choice of law regardless of
where the choice is made. Again, private international law (conflict of laws) is closely, but
not 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 with
which 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’, North
and 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 the
diversity 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 conflict

6. 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


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 of
the 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 the
application 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 situation
where a local law conflicts with a foreign law (conflicts rules). Thus we appear to be
trapped in a circle in attempting to separate the laws of sovereign states which cause a
conflict (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 of
laws, we may perhaps adopt a Castel-like approach and define ‘conflict of laws’ broadly as
a body of statutory or common law rules (if a common law country is involved) applied
by a court of law for dealing with the conflict between substantive or procedural laws of
different legal systems in any dispute involving foreign elements.
[3.21]
[3.20] [3.21]

Three operating areas of conflicts rules
An overview
[3.21] Generally speaking, conflict of laws issues arise when there are foreign elements
in a dispute and these elements lead to a conflict between competing laws of different
legal systems. For the convenience of our study, we may classify the circumstances where
conflict 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 a
choice 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 commence

9. Castel, Introduction to Conflict of Laws, 2nd ed, Butterworths, Toronto, 1986, pp 3–4.

62


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 determine
the 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. We
will 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 has
a 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 (if
not 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 inappropriate
forum’ test by the majority of the High Court in Voth v MFM, the balancing approach has
become 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 of
action and advantages or disadvantages to the parties in pursuing the claim in the United
States 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 the
conflicts 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


• 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) of
conflict 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 decide
the rights and liabilities of the parties to the dispute. This is what the plaintiff asks the court
to 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 rights
of 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 the
law applicable to the dispute. In PS Chellaram & Co Ltd v China Ocean Shipping [1989]

64


1 Lloyd’s Rep 413,12 the defendants argued that the law of Hong Kong was applicable
because 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 two
laws compete for authority to govern the matter in dispute. However, Carruthers J relied
on the express terms of the bill, which is another rule of conflict of laws, to determine the
governing law. It can be argued that the process of determining the governing law is a
process of determining or balancing the rationales, rules, factors or considerations which
may justify the choice of one law over another in the circumstances concerned. (The
majority of the present High Court may not favour the so-called balance of convenience
approach 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 foreign
judgments’,15 a person seeking to enforce a foreign judgment in England at common law
does not have a right to have the judgment executed by an English court.16 Nor does a
person have a common law right to enforce a foreign judgment in Australia. At common
law a person must apply to a local court for the enforcement of a foreign judgment
locally. The foreign judgment so enforced is executed through the authorisation of the
competent local court. The reason for this situation can be explained by the concept of
sovereignty which is examined in [2.6]–[2.11]. If every state is sovereign and equal, there
is not any jurisprudential justification for a local court having to obey the judgment of a
foreign court. Recognition of a foreign judgment is an exercise of a state’s sovereignty and
its courts’ discretion.
The expression ‘enforcement of foreign judgment’ refers to a process in which a local
court recognises and enforces a foreign judgment, or alternatively, refuses to enforce the
foreign judgment, pursuant to the local law. In this process, the local court is actually
making a decision as to the ‘local validity’ of the foreign judgment. The local court needs
the 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


a local court recognises and enforces a foreign judgment only when such enforcement is
consistent with the local law governing the matter decided in the foreign judgment, and
consistent with the public interest or public policy of the court’s own country. However, a
local court does not adjudicate the merits of a case which has been decided in a foreign
judgment, although it may deny the effect of the judgment by refusing to enforce it
locally. 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 dealt
with 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 to
the 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 trade
where 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


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 not
exist in the area of foreign trade and commerce. There are mutual benefits for the courts
of trading countries to coordinate their rules of conflict of laws, or alternatively, to
develop 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 rules
An overview
[3.33] Theories of conflicts rules enable us to identify the reasons and rationale for the
existence of conflicts rules and how these rules are applied. Thus, we may be able to
choose 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 Cheshire
and North’s Private International Law (12th ed, Butterworths, London, 1992) pp 14–40.

67


Rather 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 rules
should be applied. These theories and thoughts provide rational bases for a court (or a
country) to develop its conflicts rules to deal with contests between competing laws and
jurisdictions.
[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 law
which is likely to be in conflict with the local law in a given circumstance, certain legal
scholars 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 the
nineteenth century, but ‘was criticised by several European writers on the basis that it was
too 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, it
has been developed as a theory to explain international law in general. It explains why a
sovereign state will wish to respect the sovereignty of another — this respect extends to
the ‘sovereignty of the law’ and ‘territorial sovereignty’ of another state. If ‘comity’ is
understood 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, a
morally binding covenant between countries). However, such a perspective does not
explain why, for example, s 11(1) of the Carriage of Goods by Sea Act 1991 (Cth) imposes
exclusive jurisdiction of the Australian law and courts on the sea-carriage from a place in
Australia to a place outside Australia: see [6.137]–[6.138]. Nor does it explain why the
Australian Parliament refuses to consider foreign law in the circumstances described in
s 11. Internation comity is better understood as being based on reciprocity and mutual
convenience — in order to avoid or to reduce mutual inconvenience, countries have to
give reciprocal comity to each other when considering the authority of foreign law in cer-
tain circumstances. This proposition may perhaps be called ‘economic interdependence
theory’.
[3.36]
[3.37] [3.37]

[3.37] Since the comity theory is based on the courteous conduct of states or courts of
different states, it is vulnerable to attack from the parochial, arbitrary and discourteous
conduct of foreign states or foreign courts in certain circumstances. For example, Deane
J observed in Oceanic Sun (1988) 79 ALR 9 at 50, that the comity theory may not be relied
on to deny a local court’s jurisdiction ‘in circumstances where some leading western

18. This passage was quoted in Sykes and Pryles, supra note 15, p 7.
19. Id, p 8.

68


countries, particularly in relation to actions by their own residents, decline to observe
even the judicial restraint shown by common law countries under the traditional doctrine’
of oppression and vexation. The comity theory does not impose a unilateral obligation
upon a local court to treat a competing foreign jurisdiction as equivalent to its own
jurisdiction.
[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 this
theory can be seen in the following passage from Huber’s De Conflictu Legum diversarum in
Diversis 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 substantially
deter 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 customs
and 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 practices
gave effect to the relevant foreign law and foreign customs and usage to which the foreign
merchants had been accustomed. The main purpose of these practices was to attract
more foreign merchants to England and facilitate international trade and commerce in
England. 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. The
notion of conflict of laws was unheard of in seventh century China. However, the Tang
Code allowed disputes between two foreign merchants of the same nationality to be dealt
with under the relevant foreign law: see [1.23]. The likely explanation for the adoption of
this conflict of laws rule is that the Chinese Government sought to encourage foreign
traders, although it may also be argued it might have considered that to be a morally fair
and preferable thing to do. In any event, the hypothetical example of [3.10] suggests the
rationale and need for having harmonious conflicts rules in the context of international
trade and commerce. Therefore, we may argue that as far as international trade and com-
merce is concerned, economic interdependence between countries is a compelling reason
for them to adopt reasonable conflicts rules. Indeed, this proposition is supported by a
statement of the US Supreme Court in The Bremen v Zapata Off-Shore Co (1971) 407 US 1 at
8 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 be
resolved under our law and in our courts’.
[3.38]

20. Id, p 7.

69


Theory 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 the
existence, application and nature of particular conflicts rules, legal scholars and jurists
sought to rationalise the need for and existence of conflicts rules by examining the nature
of the rights subject to the rules. Huber and Dicey, for example, developed the vested or
acquired rights theory. This theory assumed that a person acquired a right under a foreign
law or a local law. The right recognised, granted or given under a particular law became
the vested or acquired right of the person, and could be enforced or recognised or at least
considered by a court of another country. In order to ascertain the creation or existence
of 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 for
determining the territoriality of law and rights were developed. The rigidity of the criteria
for 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 the
vested or acquired right theory is that it assumes that there is only one state which has
power to create the right which later becomes vested or acquired.23 This is obviously
untrue even in our preliminary hypothetical of the oral contract between the New South
Wales buyer and Tasmanian seller (see [3.10]), where the governing law (or the law
reating the vested or acquired right) is determined by the relevant laws applicable to the
formation of the contract. The theory has also been held to be incorrect in the sense that
a right unenforceable or unrecognised under a chosen law may be recognised by the law
which becomes applicable under the conflicts rules of the court exercising jurisdiction
over 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, where
the 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 and
function 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.
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


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 foreign
law or give effect to foreign rules, by treating the application of conflicts rules as a process
of applying a local law identical or similar to the foreign law that is applicable to the same
circumstances. The theory appears to have endeavoured to justify (or to search for a
higher theory or reason to explain) why a sovereign court wants to (or has to) give effect
to 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, but
in the extended construction of this statement. For example, North and Fawcett argue
that the gist of the local law theory is the proposition that a local court ‘applies its own
rules 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 in
question’ to apply the local law in a manner as close as possible to the way in which the
relevant foreign law would apply.28 Similarly, Nygh observes that the major importance of
the 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 conflicts
rules 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 J
in Oceanic Sun (1988) 79 ALR 9 at 55, where her Honour stated that ‘in my view, it is the lex
fori 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 necessary
to 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 judicial
practices, 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’s
comment on comity theory in Oceanic Sun). Gaudron J’s observation can be identified with
local 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.
29. Nygh, supra note 1, p 20.

71


Public (or government) interest theory (or analysis)30
[3.43] [3.43]

[3.43] The public (or government) interest theory (or analysis) was created by Brainerd
Currie of the United States. He examined a number of US cases, such as Alaska Packers
Association v Industrial Accident Commission 294 US 532 (1935), and rationalised the judicial
practices by formulating them into the theory of government interest analysis. He initially
set 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 not
really a theory in the sense that comity theory, vested rights theory and local law theory
are 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 to
take into account policy implications in determining the appropriateness of a forum or of
a 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 States33
and 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), some

30. 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


knowledge of the theory would be beneficial to a student of conflict of laws. Sykes and
Pryles 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 deals
with is whether a state has an interest in applying its law to a particular dispute or which
state has a better interest in applying its law to the dispute in question. Currie intended to
establish the government interest theory as the sole, fundamental or starting point for
resolving 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 reason
and justification for the application of the law representing that interest, courts of law
should 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 the
interests are identified, compared and balanced, the governing law will be chosen in the
order 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 an
effort to establish or create a uniform ‘determining’ or ‘connecting’ factor between the
matter and applicable laws. The determining or connecting factor is so-called government
interest, which is largely determined by examining the policy and purposes of a particular
piece of legislation and by ascertaining the government’s reason (benefit, advantage or
disadvantage) for applying the legislation to the matter in question. The result of applying
interest analysis will vary, depending on the selection of relevant factors, the construction
of legislative purposes and policy, and the interpretation of the relationships between the
policy (or legislative purpose) and the relevant factors, all of which represent a mixed
exercise of objective and subjective criteria. This is why the critique of interest analysis
often argues that it is inadequate for the court of one country to assess or evaluate the
policies 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 Law
Reform Commission of Australia has made the following comments in relation to interest
analysis:
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 a
new 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 true
conflict and determining the most important connection (government interest) between

34. The Law Reform Commission, supra note 5, para 2.11.

73


the matter and relevant laws, can be seen in the concept of lex causae (see [3.73]), which
pre-dates the creation of the interest analysis theory. As suggested by the Law Reform
Commission Report, the influence or significance of interest analysis in Australia will
probably be seen in a conscious assessment of the policy and purposes of the relevant
laws by the Australian courts in certain circumstances, such as Oceanic Sun (1988) 79 ALR
9 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 relevant
countries results in different or conflicting results. For example, Chinese law requires cer-
tain international commercial contracts to be approved before becoming binding, but
Australian 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 contract
is 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 Australian
court as soon as the contract has been duly executed. Substantial differences result from
the application of the Chinese and Australian laws, if the parties disagree as to the terms
of 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 be
void, but under Australian law the contract is enforceable. The Chinese party, if it intends
to terminate the contract, may argue that Chinese law is the governing law because the
contract was made in China. In contrast, the Australian party, if it intends to enforce the
contract, may argue that Australian law is the governing law, because the contract was
intended to be performed in Australia and the performance is the real and determining
connection in this case. Both grounds represent valid rules of conflict of laws which may
be taken into account by a court of law in dealing with (if not balancing) the conflict of
interests 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 to
resolve 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


[3.52] [3.52]
[3.52] A false conflict refers to a situation where the application of the laws of different
countries 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 certain
amount 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 goods
were to be delivered at the Port of Melbourne. The parties disagreed as to the contractual
description of the goods. The contract did not specify the governing law. Nor did it
exclude the application of the Vienna Sales Convention. The Chinese party would insist
on the application of Chinese law, and the Australian party would prefer the matter to be
dealt with under Australian law. But a court would find there is no substantial difference
between the competing laws, because both Australia and China are members of the
Vienna 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 provide
similar 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 of
the issue in dispute reveals that the apparent conflict between two competing laws does
not in fact exist.
[3.53]

75


[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 unnecessary
debate on the technicality of the rules of conflict of law. In the case of a false conflict, the
court of forum, where the proceedings are initiated, may have a wider discretion in
upholding its own jurisdiction, because no conflict exists between the laws of the relevant
jurisdictions. The court of law may also refer the dispute to another forum merely for
convenience 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 false
conflict.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) and
ultimately characterises the issue by identifying it with an existing (or innovative) category
or compartment of legal principles for the purpose of matching the appropriate rules of
law to the issue concerned. A detailed discussion of characterisation in the context of
conflicts 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


[3.57] [3.57]
[3.57] The importance of characterisation in the context of conflict of laws is seen, for
example, 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 Wales
should hear the dispute, characterised the principal issue in dispute as the determination
of the governing law of the contract. They found expressly or implicitly that the contract
of carriage (or the transactions leading to the conclusion of the contract) was made, or
carried out, in New South Wales: (1988) 79 ALR 9, per Brennan J at 40, per Deane J at 51
and Gaudron J at 59). In contrast, the dissenting judges (Wilson and Toohey JJ), who
decided 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 committed
by an appellant which is incorporated in Greece and carries on business there, in respect
of an accident which occurred in Greek waters on a Greek vessel in the course of a cruise
which had its point both of departure and return in a Greek port’ (as opposed to ‘an
action 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 the
issue 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 action
as a negligent omission. It held that the alleged cause of action involved a failure to give
adequate 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. That
place was Missouri’: see (1990) 171 CLR 538 at 569. By characterising the cause of action
as an issue of negligence, the majority judges found the law where the alleged negligence
occurred to be appropriately applicable. By characterising the accountancy services as an
act 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 J
characterised 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 J
found that New South Wales was the place where the misrepresentation was received and
relied 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 Wales
governed the cause of action. This finding contributed to his Honour’s determination
that 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 the
case. 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 with
in a given case. The differences in the way judges characterise the relevant issues may

77


explain 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 laws
An overview
[3.59] One of the major difficulties with the study of conflicts rules is the confusion, or
lack 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 laws
without any clearly defined distinction between them. In this section of the book, we will
deal with a number of common tests, rules or techniques applicable to a conflict of laws
situation. 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 foreign
court to be more appropriate than the local court to deal with the issue in question. The
Latin meaning of this phrase is irrelevant, because the meaning of this doctrine as
adopted by the English courts today has no connection to the words’ Latin origin. This
was discussed by Deane J in Oceanic Sun (1988) 79 ALR 9 at 46, where his Honour stated
as 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 search
for higher theories or doctrines to guide and justify their practices of conflict of laws. The
development of the forum non conveniens doctrine suggests such endeavour. The forum non
conveniens doctrine, as a ground or test for determining the appropriateness of the selected
court’s jurisdiction, was initiated in Scotland,36 and later accepted by the courts of the
United 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 of
replacing the traditional test of ‘oppression and vexation’ by some more liberal test, such
as the forum non conveniens doctrine, in 1974. In The Atlantic Star [1974] AC 436, the House
of Lords indicated a desire to interpret the traditional test of oppression or vexation more

36. Collins et al, supra note 16, p 398; and North and Fawcett, supra note 1, p 220.
37. Ibid.

78


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 as
a 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 opinion
that the forum non conveniens should be accepted in English courts. The forum non conveniens
doctrine was finally accepted by the House of Lords in Spiliada Maritime Corp v Cansulex
Ltd [1987] AC 460 and has been the English test for determining an application for a stay
of proceedings in favour of a foreign forum since.
The forum non conveniens doctrine adopted by English courts consists of the following
major 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 advantages
or disadvantages, interests, justice and ‘ends of justice’, have been criticised by several
Australian judges as uncertain and discretionary: see Oceanic Sun (1988) 79 ALR 9 per
Brennan 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 Oceanic
Sun (1988) 79 ALR 9, [3.5] and Voth v MFM (1990) 171 CLR 538, [3.6]. But in Voth v
MFM, the joint judgment (Mason CJ, Deane, Dawson and Gaudron JJ) compared the
‘clearly inappropriate forum’ test and the ‘clearly more appropriate forum’ test which is
one of the basic elements of the forum non conveniens doctrine, and admitted that the two
tests lead to the same result in the majority of cases: (1990) 171 CLR 538 at 558. Could
this be an indication that the High Court is adopting a modified version of the forum non
conveniens 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 (or
borrowing 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 the
High Court (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) to be the test for
determining the appropriateness of a selected court’s jurisdiction in Australia. The test
was initially proposed by Deane J in Oceanic Sun (1988) 79 ALR 9 at 48, and later not only

79


endorsed, but also enunciated, by the joint judgment of Mason CJ, Deane, Dawson and
Gaudron 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. But
the statement as a whole did not clearly suggest the meaning or definition of the ‘clearly
inappropriate 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 the
forum non conveniens doctrine as adopted in the United Kingdom. The defect of the forum
non conveniens doctrine, inter alia, is that in certain circumstances the selected forum cannot
be 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 to
commence an action in a competent court of law. It follows that in order to protect this
right, 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 appropriate
forum’.
[3.61]
[3.62] [3.62]

[3.62] In Voth v MFM the joint judgment sought to distinguish the clearly inappropriate
forum 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 action
under 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. The
joint judgment also drew a distinction between the clearly inappropriate forum test and
the clearly more appropriate forum test employed in the forum non conveniens doctrine. The

80

Litigation

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (11)

Similar a Litigation

Similar a Litigation (20)

Más de Kiran Prasad Naik

Más de Kiran Prasad Naik (20)

Último

Último (20)

Litigation