Author: Laura Dirina
Publication date: 09.04.2024
Private international law is becoming increasingly relevant. Technological development and globalization drastically reduce the obstacles to establishing cross-border private law relations. Therefore, the conclusion of cross-border contracts is becoming more common and it is necessary to expand knowledge for their correct understanding.
What does a cross-border contract mean?
A cross-border contract is an agreement with a foreign element. It happens when the residences of the persons involved in the relationship are in different countries, the merchants are registered or their administrations are located in another countries, or the persons have concluded a contract in one country or via the Internet, the assumed obligations must be fulfilled in another country, etc.
That means that the main difference between a contract and a cross-border contract is it is implemented within the framework of international law. For example, a Spanish company transports goods from a German company to an Italian company.
When reading cross-border contracts important things related to this difference are necessary.
Jurisdiction
Jurisdiction is needed when a dispute arises. Jurisdiction means which country's court or institution should be addressed to resolve it. Jurisdiction of the case is regulated by national laws, international agreements, and European Union regulations. The simplest way is to include a jurisdiction clause in the contract itself. Like, “The place of jurisdiction for all disputes arising from this Agreement is Barcelona Local Court.”
Laws
Contracting across borders needs to know the applicable laws. These laws govern the contract. The parties may agree on the applicable law in the contract. That means the parties are free to choose the applicable law. It can be the acts of the European Union, the laws of third countries, or international conventions. Agreements on the application of non-governmental rules are not accepted.
For example, parties can diside that their agreement is governed by UNDROIT international principles of comercial contracts.
Dispute solving
The parties may agree in the contract on handling disputes in national courts. Often commercial disputes go to arbitration because it is faster, but not always cheaper. The regulation of the European Union takes into account the principle of the weaker party. For example, a consumer may submit a claim to the court of his permanent residence.
Important to know
If the parties in the contract have not agreed on the jurisdiction of the contract and the applicable law, it is determined by the normative acts of private international law.
At the level of the European Union, the law applicable to the interpretation of private law contracts related to several countries, the clarification of their consequences or enforcement rules is defined by the so-called Rome I.
In EU jurisdiction the weaker party is protected.
Conclusion
Basic knowledge of cross-border contractual obligations is important for both individuals and companies. Every lawyer should be able to determine the jurisdiction of the contract, the laws governing it, and the manner and place of dispute resolution. These elements can play a significant role in the overall content of the contract. In the future, cross-border contractual obligations will only increase. This is the reason for the actualization of private international law in society as a whole and among professionals.
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