THE POWER OF WILL AND CHOICE OF LAW IN INTERNATIONAL CONTRACTS

Dipartimento di Giurisprudenza Cattedra di Diritto Internazionale

RELATORE

Xxxxx.xx Prof CANDIDATO

Xxxxxxx Xxxxx Xxxxxx Xxxxxx Xxxxx

Matr. 134213

CORRELATORE

Xxxxx.xx Xxxx.

Xxxxxx Xxxxxxxxx

ANNO ACCADEMICO 2018/2019

The Power of Will and Choice of Law in International Contracts

Introduction 1

Chapter I, Party Autonomy and Sovereignty

1) The cornerstone principles, Sovereignty and Party Autonomy 4

2) The principle of Sovereignty, the external view 5

2.1. The principle of Sovereignty, the internal view 8

3) Historical developments on party autonomy, the evolution of choice of law 11

3.1. Anti-autonomists and the U.S. choice of law revolution 12

3.2. Autonomists in the national context, Xxxxxxx’x theory 17

4) Party autonomy, normative grounds 19

5) The concept of “internationality” of the contract 22

5.1. International uniform law 23

5.2. International Choice of law 26

6) Choice of law as a material norm, theories 30

6.1. Choice of law as a conflict law, theories 32

7) Partial conclusions, the Hague Principles 36

Chapter II, The Freedom of choice

1) Freedom in the Hague Principles, art. 2 38

1.1. Freedom in the European and national context, regulation 593/2008

art. 3 42

1.2. Freedom in the U.S. context, section § 187 Restatements, section 1-

301 U.C.C 47

2) Modes of expression: express, tacit choice 52

2.1. Modes of expression: depeçage 60

3) The freedom not to choose, absence of choice 62

3.1. The European context, art. 4 Reg. 593/2008 63

3.2. The United States, § 188 68

4) The connection between the chosen law and the parties, art. 2(4) the Hague Principles 70

4.1. The connection between the chosen law and the parties, the U.S. context and the substantial connection under § 187(2) 75

4.2. The connection between the chosen law and the parties, the U.S. context and the substantial connection under 1-301 U.C.C 81

5) Freedom to choose the terms of the contract. The battle of forms 82

5.1. The material battle of forms, an analysis from the American perspective. 85

5.2. The international Battle of forms, first approaches and the Hague Principles 89

6) Choice of Non-State law 94

6.1. Choice of non-State law in the E.U. and the U.S.A, a uniform approach 97

6.1.1. Choice of non-State law in the Hague Principles, the compromise 102

Chapter III, Limits to the Freedom of Choice

1) Limits to the freedom of choice, an expression of sovereignty 106

2) The concept of mandatory rules 108

2.1. Overriding mandatory Rules, influence on national context and art.

9 of Rome I Regulation 110

2.1.2. Simple mandatory rules, Regulation 593/2008 117

2.2. The U.S. context, fundamental policy compared to mandatory rules.

§187 Restatements, other interpretations, Section 1-301 U.C.C 121

2.3. The Hague Principles, art. 11 overriding mandatory rules 128

3) The Public Order 133

3.1. The Public Order, National and European context 136

3.2. The Public order, American context 138

3.3. The public order, the Hague Principles 143

Chapter IV, Conclusions

1) Same functions, different results 147

2) Regulation 593/2008 as a pattern of party autonomy, American choice of

law approaches as a pattern of sovereignty 148

3) The potential impact of the Hague Principles of Choice of Law on International Commercial Contracts in the European and American context, proposals of implementation, hopes and expectations 159

Sources

1) Bibliography 168

2) Table of Cases 181

3) Other Sources 183

Introduction

This thesis provides an analysis of contractual choices of law in private international law in different legal orders. Specifically, there will be analysed the European and the American system in combination with the new Hague Principles on Choice of Law in International Commercial Contracts. These sources of law find their basis in two principles which can be considered as one opposed to the other, they are the principle of party autonomy and sovereignty of the States. It is generally recognized that the first tends to promote the contractual freedom, whereas the second tends to set limits to the first through several mechanisms and provisions that States are used to dispose in the exercise of their sovereign powers. For the aim of this thesis, it is necessary to premise that what is relevant is not the examination of these abstract principles, but rather the impact that they have on contractual choice of law in international private law. In fact, the principle of party autonomy leads to the freedom of contract in choice of law and it will be examined how this opportunity to choose the law applicable to the contract may variate in these national contexts depending on the legislator. On the other hand, the principle of sovereignty represents the basis in order to impose limits to choice of law which States adopt towards parties in international contracts.

In the first Chapter it will be provided a brief general explanation of these principles. On one hand will be examined the principle of sovereignty both from its external and internal perspective. On the other hand, will be crossed the evolution of party autonomy in the highlighted legal systems in order to see how this principle has developed in time. Furthermore, it will be provided an analysis of various doctrinal opinions that have conflicted and still conflict on the nature of party autonomy in private international law, starting from the distinction between autonomist and anti-autonomists, until the most recent theories on the scope and the nature of choice of law in international contracts.

The second and the third chapter will provide an examination of positive existing law in application of, respectively, the freedom of contract and the limits established to the latter. I opted for a comparative threefold analysis based on topics because I believe that it could better highlight the approaches adopted by the European, American and International systems in order to identify the advantages and disadvantages that these legal orders adopt on the issue of choice of law.

Thus, the second chapter is dedicated to the ways in which freedom of contract is exercised in the systems under examination. Specifically, relevance will be attributed to provisions recognizing the freedom of contract and all the ways in which the latter can be expressed into international agreements. The connection with the chosen State, the express and tacit choice; the depeçage; the battle of forms and the choice of non- State laws are the themes examined in this chapter in accordance to a threefold comparison among the European Regulation 593/2008, the American approaches especially Restatement Second and the Hague Principles. By the way it will be noted that not every system dedicates an expressed analysis to these issues, some of them are simply implied whereas others are not foreseen in the legal orders. It will be also observed how the examined legal systems adopt different approaches toward the freedom of contract, specifically the European and the International context are more in line with a party autonomy approach, whereas the American system reflects the sovereignty principle.

In the third chapter it will be analysed the other side of the principle of freedom of contract in choice of law, thus the sphere of the limitations expressive of the principle of sovereignty. In fact, nonetheless the importance attributed to party autonomy, it is generally recognized that there must be imposed limits to the freedom to choose the applicable law to the contract. The main limitations are caused by the mandatory rules and the protection of public order which States provide and that can not be derogated by parties in the exercise of their power of freedom of contract in international agreements. However, through a triple

comparison it will be examined how the specific sources of law assume different concepts of limitations and it will be analysed how the operation of these divergent limits can be framed in different levels of thresholds concerning mandatory rules and public order respectively in the U.S., the European and the International context.

In the last chapter, there will be provided conclusions on the principles of party autonomy and sovereignty and it will be observed how, following to an examination of positive law carried out in the previous chapters, these principles are nestled respectively in Regulation 593/2008 and the American approaches on choice of law in the contractual matter, even if they have a different level of convergence. Finally, it will be taken into consideration the importance and the resonance that the Hague Principles would effect in the examined legal orders if were implemented in the latter, enhancing the effects of the power of will and choice of law in international contracts and promoting the harmonization of Private International Law at global level.

Chapter I, Party autonomy and Sovereignty

1. The cornerstone principles, sovereignty and party autonomy

The principles of party autonomy and sovereignty have always been considered as two opposite pillars. Whereas the first tends to promote the interest of the specific parties in the transaction, the second tends to protect the general interest of the States towards the parties in order to set limits to the freedom of contract warranted by party autonomy. In the contractual matter it is necessary to premise that these principles are relevant both at substantive and at private international law level because they play an important role in both fields. However, for the aims of this thesis will be analyzed the relevance of these principles in choice of law in international contracts and therefore main attention will be given on the effects that the application of these principles cause on international agreements in p.i.l. making a comparison between the European, American and International system.

Starting from the abstract, sovereignty will be first analyzed because it is recognized as the principle which refers to the general interests of the States towards private parties and imposes limitations on the freedom of contract. Second, further and deeper attention will be provided for party autonomy , as it represents the grounds for freedom of contract and it deals with the specific concrete interests that parties want to reach when creating obligations between them, from the perspective of private international law.

2. The principle of Sovereignty, the external view

Opposed to party autonomy there is a principle that can be considered as the ground of the limits to freedom of choice, that is the principle of the State’s sovereignty. States are the main subjects of national and international law and are generally considered as sovereign, implying that “they need not accept any authority from above or from anyone else unless they choose to do so”.1 At this point the exercise of the sovereignty can be considered from two outlooks, thus from the internal or from the external perspective.

Starting from the latter, the external perspective considers the relationship between the national States and other foreign subjects of international law, that is to say other States or entities. Some States have imposed in their fundamental acts that they are bound by supranational sources of law, such as art. 11 or art. 117(1) of the Italian Constitution in order to establish the primacy of supranational law over national law, e.g. European law. However, not every supranational legal order is above the national one. It is necessary to recall as an example the relationship between the European Convention of Human Rights (ECHR) and Italy. The Constitutional jurisprudence2 identified in article 117(1) of the Italian Constitution the norm which contains provisions ruling on the relationship between the internal legal order and the ECHR. Art. 117 is integrated with the ECHR rules, which are called “interposed rules” and from the perspective of the hierarchy of sources of law they are in between internal rules and constitutional rules. Thus, in case of

1 X. XXXXXXXX, International law, Cambridge University Press second edition, page 74; The Reception of International Law in the EU Legal Order 2018, Oxford Principles of European Union Law: Volume I: The European Union Legal Order. Oxford University Press, page 1208- 1233; Autonomy, Constitutionalism and Virtue in International Institutional Law, in International Organisations and the Idea of Autonomy: institutional indepence in the international legal order. New York: Routledge, page 120-140; International Law and World Order: A Critique of Contemporary Approaches July 2018, In : Netherlands International Law Review, 2018, page 253-258.

2 Judgement 348/349 2007.

conflict between internal law and ECHR, the latter prevails. On the other hand, in case of conflict between ECHR and constitutional rules, the latter prevail.

ECHR rules are important because they have two functions: the first shows how these provisions become an interposed parameter in order to examine the constitutional legitimacy of internal rules. In fact, internal rules are considered as hierarchically subordinated because they are supposed to pursue interests which are less important compared to a supranational interest, which has been agreed by the State. On the other side, the other function of ECHR rules is that they are considered as a criterion in order to follow a constitutionally oriented interpretation of the internal provisions.3 Thus, the Italian judge when deciding a specific case, is obliged to look for an interpretation of rules which is in compliance with rules established by ECHR and therefore compatible at the same time with art. 117(1). If the judge is not able to find a specific constitutionally oriented interpretation, he will propose an issue of constitutionality due to incompatibility between internal rules and ECHR rules.

On the other hand, the rules of ECHR are different from the European Union laws. Both are supranational law, but they find their constitutional grounds in two different articles, respectively art. 117(1) and art. 11. The consequences are different because art. 11 assumes that “States can recognize and accept limitations of their sovereignty, through the adhesion of supranational organizations” and therefore the primacy of E.U. law foresees that in case of incompatibility between the first and internal rules, the latter shall be disapplied. 4

3 X.XXXXXXX, Corte Costituzionale, rapporti fra ordinamento interno e Cedu; Gerarchia, competenza e qualità nel sistema costituzionale delle xxxxx normative, Xxxxxxx, Milano 1977; Lineamenti di giustizia costituzionale,, Giappichelli, Torino, I ed., 1998; “Itinerari” di una ricerca sul sistema delle xxxxx, XII, Studi dell’anno 2008, Giappichelli, Torino 2009.

4 X. XXXXXXXXX, Xx xxxxxx dei diritti fondamentali xxxx’ordinamento costituzionale italiano ed europeo, Edizioni scientifiche italiane Napoli, 2009. ; La partecipazione paritaria della Costituzione e della xxxxx sovranazionale all’elaborazione del contenuto indefettibile del diritto fondamentale. Osservazioni a xxxxxxx xx Xxxxx cost. n. 317 del 2009, in Giurisprudenza costituzionale, 2010, page 1816-1826, La Carta dei diritti fondamentali tra costituzionalismo multilivello e ordine formale delle xxxxx xxxxx sentenza VFGH del 14 marzo 2012, in Diritto

However, not every State complies with this constitutional scheme concerning the exercise of sovereignty from the external approach and that is the case of the United States. The reason is that the U.S. is a federal State and the Constitution rules on the division of powers between the State at a federal level and the inner States, in order to exercise sovereignty over people. Thus, to the Federal Government are attributed specified powers5, such as broad financial matters in tax law, or the power to rule on commerce and deal with commercial interests6, on the other hand the territorial States may generally legislate in all the matters within their jurisdiction when it is not specified otherwise by the U.S. Constitution. From an inner perspective, this structure can be considered as similar to the one established by 117 of the Italian Constitution, in fact, it is provided by the latter that the State has exclusive legislative powers over specified matters established by the same article, whereas the Regions have legislative powers “over every matter not expressly reserved to the State’s legislation.”

However, concerning the exercise of sovereignty, there is a big difference from our system compared to the U.S., that is the legislative powers of the inner States are not mentioned in the U.S. Constitution, whereas they are mentioned in ours. Notwithstanding the lack of this provision, it is in compliance with the intrinsic nature of federalism that inner States are given a lot of autonomy. In fact, this general independence provided in favor of the States is considered as an “inherent attribute of the States’ sovereignty”7, therefore there is no need to specify it in the Constitution in order to recognize them a high degree of authority. The Constitution, however, establishes limits to this regulation in order to prevent

Pubblico Xxxxxxxxx xx Europeo, 2013, page 372-380; XXXXXXX, Xxxxx xxx diritto nazionale ed europeo a confronto nel dialogo tra le corti supreme, in Diritto e giurisprudenza, 2012, page 100; 5 Art.1, section 1 of the U.S. Constitution “ All legislative powers herein granted shall be veseted in the Congress of the United States.”

6 U.S. Const.,Article I, §8, cl. 3. “To regulate commerce with foreign Nations, and among the several States, and with the Indian Tribes.”

7 X.X.XXXXXX ”Federalism, State Sovereignty, and the Constitution: Basis and Limits of Congressional Power, Congressional research service, 2013; The Constitution of the United States of America: Analysis and Interpretation : 2014 Supplement : Analysis of Cases Decided by the Supreme Court of the United States to July 1, 2014.

conflicts which may affect the national economy such as U.S. Const. Art. I, §10, cl. 28.

2.1. The principle of Sovereignty, the internal view

The principle of sovereignty of the States can be examined from another perspective. In fact, the exercise of sovereignty by the State is shown in the relationship between the State and the private subjects, especially in the contractual relationship. In this field the State can be examined from a dual profile. From one point of view, the State can be a part of the contract in the exercise of private autonomy. On the other hand, the State is the supervisor of the powers which are granted to the parties when exercising the freedom of contract, therefore the first must be necessarily over the latter because of the need to protect the general interests of the community.

Concerning the first aspect, it is generally accepted that also a State can be part of the contract. Problems may arise because it is usually recognized that States are stronger than privates, in fact, if a State decides to be part of a contract it is presumed that the latter is always in a better situation than the private counterpart. The reasons why the State is advantaged vary from the economical, legal and financial perspective and the issues which may arise deal with the misuse of contractual powers in order to discriminate the weak parties.

In fact, the State owns the particular features of sovereignty and independence, which affects the established contractual relationship. Moreover, the State has the power to modify the law of contracts and, in general, all the provisions dealing with legal positions. Concerning this power, it is true that the States can’t be forced

8 U.S. Const. Art. I, §10, cl. 2: “No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Control of the Congress.”

not to legislate because they have contracted certain clauses and they have to respect the law under which those clauses can be enforced, but it is also true that national States could get profit of their notorious supremacy and could issue laws that overbalance legal positions in which the State is part, in favor of the latter. Therefore, the State can’t be subject to subscribe “standstill clauses”9 which forbid that Country to issue legislation in that specific matter, however there is still a way to fight and solve this hypothetical conflict, thus to put in place an “establishment clause”. 10 That is a clause provided in the contract, through which the parties decide to establish and to crystallize a determinate legal position and determinate clauses, nonetheless the hypothetical law changes that would render that clause invalid or unenforceable. This clause is considered as an exception to the general principle which provides that the parties of a contract must be subject to the effects established by law and must be bound by all its modification.11

Furthermore, States could conclude contracts with foreign subjects and in this event, an important issue which intertwines with the principle of sovereignty is choice of law because the States could have an interest to impose to the contractual part its own will, breaching the contractual equality.

According to Professor Xxxxxx00, national States have an interest in applying its national law as explained in his theory called “The concept of governmental

9 X. XXXXXX, Stability of Contractual Relations in the Transnational Investment Process, in Int. Comp. X. Xxxxx.1979, page 401 ss; Transnational Investment Law and National Development, Lagos University Press, 1982.

10 X. XXXXXXX, Il xxxxxxxxx internazionale, UTET Università, Torino, 1994, page 124 ss; Il diritto non scritto nel diritto internazionale. Due modelli di codificazione, Editoriale scientifica, 2012 ; Lezioni di diritto internazionale privato, Padova, Cedam, 2000.; Autonomia privata e commercio internazionale. Principi e casistica, in Istituti di diritto civile, Milano, Giuffré, 2014.

11 Id. page 120 ss.; Contratti internazionali, autonomia privata e diritto materiale uniforme, in Dir. comm. int., 1993, page 755-789.

12 X.XXXXXX, Selected Essays on the Conflict of Laws, Durham, NC, 1963, page 189: “ The court should… inquire whether the relationship of the forum state to the case at bar… is such as to bring the case within the scope of the State’s governmental concern, and to provide a legitimate basis for the assertion that the state has an interest in the application of its policy in this instance”; Change of venue and the conflict of laws, U Chicago Law Review, 1956; Unconstitutional discrimination in the conflicts of laws, Privileges and Immunities, Jale Law Journal, 1960; The Verdict of Quiescent years, Xx. Xxxx and the Conflict of Laws, Chicago Law Review, 1962.

interests”. He maintained that if a case falls within a law’s spatial reach, after the examination of an interpretative process, that State from which the law emanates has a governmental interest in applying it. He further maintained that “an interest is the product of two elements:

1) Governmental policy

2) The concurrent existence of an appropriate relationship between the State having the policy in the transaction, the parties, or the litigation.”

His perspective of “law as an instrument of social control” 13 explicitly refers to the situation in which the State plays the role as a neutral part and the contract is put in place by both parties. Because this approach leaded to favor only determinate subjects, his theory was considered as extreme and by someone, also constitutionally infirm.14

In fact, from a practical point of view this theory was a pro-plaintiff and a pro- defendant approach only when those subjects were local domiciliary, not in case they were situated out-of-staters. It is true that Xxxxxx’x theory expressly refers to the situation in which the State is neutral, however I believe that Xxxxxx’x analysis on the interests of the State in applying its own law can be adopted in the case in which the contract foresees the State as counterpart as well. The reason why I assume this, is that in both cases (State as neutral part and State as counterpart) the interests involved intertwine with the principle of sovereignty and the State wants to exercise its own jurisdiction, nonetheless the latter it is or not part of the contract.

13 X. XXXXXX, Selected Essays page 64.

14 X.XXX,Choice of Law and the State’s interest in protecting its Own”, Xxxxxxx and Xxxx Xxx Review, 1981, page 23; On constitutional ground, 16th edition, 2002; Democracy and Distrust: A Theory of Judicial Review, Valparaiso University Law Review, 1981.

3. Historical developments on party autonomy, the evolution of choice of law

Party autonomy is one of the most ancient principles in the history of law and it has been defined as “one of the most widely accepted paradigms of contemporary private international law”15. It may have several definitions, depending on the matter to which this principle refers to.

Concerning private international law, Xxxxxxxxx Xxxxxxxxxx assumes that “Party autonomy is a shorthand expression for the principle that parties to a multistate contract should be allowed, within certain parameters and limitations, to agree in advance on which State’s law will govern the contract.” In fact, through this expression it can be deducted that subjects who want to create obligations in a multistate contract are free to do that, however they are bound by several limits.

It is important to say that the opportunity to choose the applicable law is a conquest that has been reached in time. Historically, party autonomy has been sanctioned at multistate level by Egyptians between 120-118 B.C.16 At that time, it was issued a decree which provided that contracts written in Egyptian language where subject to the jurisdiction of the Egyptian courts, which applied Egyptian law, whereas contracts in Greek were subjects to the jurisdiction of the Greek courts, which applied Greek law. By this ancient decree, it is deductible that choice of law is an extremely ancient issue and, at the time, parties where able to choose the applicable law exclusively by choosing the contract’s language.

In the Middle ages, the development of ius mercatorum transformed the economy. From an economy based on the social status which foresaw a close mechanism of

15 X.X. XXXXXXXXX, Functional Developments In Choice of Law of Contracts, X. Xxxxxxx, 1985

,page 187; Comparative Conflict of Laws: Conventions, Regulations and Codes, Foundation Press, 2009; Choice of Law in Contract, Iowa Law Review, 1968, page 399 ; Commentary on the Conflict of Laws, Thomson/West, 2006 ; S.C. XXXXXXXXXX, The Hague Principles on Choice of Law for International; Contracts: some Preliminary Comments, The American Journal of Comparative Law, 2013 page 875; Private International Law: Idealism, Pragmatism, Eclecticism, The Hague Academy of International Law, Xxxxx-Nijhoff, 2017; Oxford Commentaries on American Law: Choice of Law,Oxford University Press, 2016.

16 S.C. XXXXXXXXXX, Codyfing Choice of Law Around the World, 2014 page 112

trade, the society has moved to a dynamic system completely neutral to political subjective perspectives.

In time, the economy has been nationalized and States acquired the monopoly of it. Here party autonomy plays an important role in order to react to the State’s will to impose a closed economy.17 However, party autonomy concerning international choice of law was controversial until the end of the second world war, where the division between anti-autonomists and the autonomists got deeper.18

3.1. Anti-autonomists and the U.S. choice of law revolution

A significant example of the dispute between autonomists and anti-autonomists in private international law emerges from the American choice of law system regarding conflicts of law. However, before providing the doctrinal distinctions and related diverse considerations in the U.S. context, it is necessary to give a broad explanation of the U.S. system conflicts of law as it is completely different from our National system because of its federalism. The U.S. Constitution disposes law-making powers at both federal and national level. It works as a delocalized system which has a broad control at federal level. In fact, some specific matters of national concern are attributed to the federal government, whereas all the other matters are attributed to the national States, included most of the private law norms19. Therefore, is the Constitution itself that implicitly introduces conflicts of law, which can be vertical or horizontal. Vertical conflicts are only those that occur between federal and state law and these are solved through the Constitution’s

17 X.X. XXXXXXX, Il xxxxxxxxx internazionale, page 8.

18 X. XX XX, Choice of non-State law and international contracts, In Verbindend Recht, Liber amicorum Xxxxx Xxxx, 2012, page 827; Xxx Xxxxxxxxxx (New Law Merchant): Globalization and international self-regulation. Diritto del Commercio Internazionale, page 555-590; (1998). Lex Mercatoria and Unification of Law in the European Union. In Hartkamp Xxxxxxxxx Xxxxxxx et al, Towards a European Civil Code, 3rd ed, 2004.

19 U.S. Constitution Amendment X: “The powers not delegated to the United Statates by the Constitution, nor prohibited by it to the States, are reserved to the States, respectively, or to the people.”

supremacy clause, which provides that federal principles rule on the conflicts between federal and state law20 . The latter are disputes which may arise between or among:

1) The laws of the State of the United States (interstate conflicts) ;

2) The laws of the States of the U.S. and the laws of foreign countries (international state conflicts) ;

3) The laws of the U.S. and foreign countries (international federal conflicts)21.

Anti-autonomists believe that the opportunity for parties to choose the applicable law relies on the base of a territorial approach. In the U.S. context at the beginning prevailed the theory proposed by Xxxxxx Xxxxx (in 1934 he was the drafter of the first Conflict’s on Law Restatement), according to which “empower the parties to choose the applicable law would be tantamount to give them the power to legislate”, therefore he proposed in the U.S. context an absolute lex loci contractus rule for the Restatement, which was supposed to limit enormously the will of parties because it mandated the application of the law of the State in which the contract was made to all the aspects of the contract.22 Specifically, when an event occurred in a foreign territory, the only law which could operate was that foreign law,23 and his theory was called the “Vested right theory”. This theory foresees the opportunity to apply the forum law only to enforce a determined right, whereas the substantive laws applicable to that right must be necessarily those of the foreign territory.

20 U.S.Constitution Amendment VI: “This Constitution, and the laws of the United States whichshall be made in pursuance thereof; and all the treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding”.

21 S.C. SYMEONIDES, The American Choice of Law Revolution: Past, present, Future, 2006, page 3 ss.

22 S.C. XXXXXXXXXX, Codyfing Choice of Law Around the World page 113 ss.

23 X.X. XXXXXXX, X. XXXXX, The First Restatement of Conflict of Laws on the Twenty-Fifth Anniversary of Its Successor: Contemporary Practice in Traditional Courts, Maryland Law Review, 1997.

From this point of view, Xxxxx’x approach represents the primacy of the principle of sovereignty of the State over the party autonomy’s principle, in fact, he thought that the State must control in a rigid way the will of the parties because the possibility to opt out a specific law may rely on the will to evade fundamental policies, in fact, under his theory, the contract was subjected from the substantial point of view only to the rules established by the specific foreign country without taking into consideration any possible manifested will of party. The advantage of the First Restatement was that the provision proposed a national law system which allowed to reach a solution in all the possible cases of conflicts. Therefore, Xxxxx’x First Restatement on Contract’s conflicts of Law was based on a rigid system intended to provide the legal certainty in conflicts of justices. Its aim was to promote interstate uniformity through a complete and universal application of choice of law.

However, because of its excessive strictness, Xxxxx’x approach has been opposed by those who favored autonomy in choice of law that were fostered by the xxxx of the American choice of law revolution. Thus, slowly the vast majority of the American States started to abandon Xxxxx’x approach. Notorious is the debate between Judge Xxxxxx X. Xxxxx and Xxxxx in 1928 at the American Law Institute which shows the weaknesses of Xxxxx’x approach and the primacy of the autonomist’s approach.24 Famous is Xxxxxxxxx Xxxxxx X.Xxxx statement, who proposed a change from the traditional system to a “set of guiding principles, which make provisions for as much certainty as may reasonably be hoped for in a changing world, and at the same time provide for not only needed flexibility but also continuity of growth”.25

The true revolution has exploded in 1960s, where many courts began abandoning the lex loci contractus rules in favor to other disparate conflicting approaches and in 1971 was issued the Second contracts’ Conflict Law Restatement, section § 187

24 Id note 22.

25 X.XXXX An Unpublished Chapter of the Logical and Legal basis of the Conflict of Laws, Illinois Law Review, 1943, page 422.

which substituted the old one at least in the vast majority of the American States. In the end, in 1990s the traditional contract’s law conflict’s system was completely reformed. Finally, a research promoted in in 2009 shows that forty one of the U.S. jurisdictions abandoned the traditional territorial Xxxxx’x approach.26 There are several aspects on which the Revolution intervened. One of them is the change of perception of rules of private international law on party autonomy in order to better protect the parties’ interests. Conflicts of law are now considered in the U.S. as a set of rules which finds its legal grounds on extraterritoriality, rather than territoriality. Another aspect is that the law selection is not bound to a specific jurisdiction anymore, but rather to the content of the contract and how the parties expressed their will, at least in the vast majority of the cases in which there is not a mandatory rule which forbids the law selection or another limit. Furthermore, there have been changes from the rigidity imposed by the First Restatement on Conflicts of Laws, compared to the new rules which promote flexibility in the specific case27 and this approach is in compliance with the common law U.S. system.

However, the main principle on which the Revolution inspires is the freedom of contract. In fact, it is necessary to say that this Revolution does not establish itself new contract rules on conflict’s law,28 but rather it limits to reject the First Restatements on Conflicts of Laws. In this context, it is important to recall an expression of an important figure of that age, Brainerd Xxxxxx ”We are better off without choice of law rules”29. He maintained that choice of law rules were considered as obstacles to a complete exercise of party autonomy, because these

26 Id note 22.

27 S.C. SYMEONIDES, American Federalism and Private international Law, Hellenic Journal of International Law, 2010 page 14.

28 At least before 1971, date in which the Restatement Second on Conflicts of Law was issued

29 See X. XXXXXX, Selected Essays on the Conflict of Laws , page 180 : “The traditional rules…have not worked and cannot be made to work ... But the root of the trouble goes deeper. In attempting to use rules we encounter difficulties that stem not from the fact that the particular rules are bad,…but rather from the fact that we have such rules at all.”. See also ibid. at 183 : “We would be better off without choice-of-law rules.”

laws hinder the will of parties in choosing the applicable law, therefore his conception was called the “Antirulism”.30

However, in order to counteract Xxxxx’x approach, he proposed a “domestic method” based on the opportunity to choose the applicable law not on a Federal level but rather on a State level. He thought that a statutory construction and interpretation could be considered as more in line with a party autonomy approach. In fact, the general rule established by the First conflicts disposed a preselection of the applicable law, whereas Xxxxxx opted for a case by case analysis taking into consideration the interests of the single States in applying a specific substantive law. Whereas Xxxxx’x approach is the perfect expression of the State’s sovereignty, Xxxxxx’x theory has a limited view of the sovereignty of the States and I believe that it is an important step because is the first theory in this field which takes into consideration more interests instead of the only Federal level. Thus, there was a responsible feeling to counterbalance the old interests with the new ones, in order to better respond to trade’s evolution. However, this revolution could not last for ever because there were too many conflicting theories on choice of law which were merged by court’s interpretation. Furthermore, the U.S. common law system considers jurisprudence as a binding source of law, therefore every court at State level had its own interpretation of the specific case of choice of law.

The result was that, in relatively short time, American conflicts law began looking like “a tale of a thousand-and-one-cases in which each case decided as if it were unique and of first impression,”31 therefore there was a need to individuate a clear, transparent and objective way to solve conflicts of law. The excessive judicial subjectivism has come to an end in the second half of the 1960s, doctrine and

30 S.C. XXXXXXXXXX, The American choice of law revolution: Past, Present and Future, page 14 ss.

31 S.C. SYMEONIDES, American Federalism and Private international Law page 15;

X. XXXXXXXXX, Comments on Xxxxx x. Xxxxxxx, 15 UCLA Law Review, 1968, page 641- 644 “The idea that judges can be turned loose in the three-dimensional chess games we have made of conflicts cases, and can be told to do hand-tailored justice, case by case, free from the constraints or guidelines of rules, is a vain and dangerous illusion.”

Judges realized the true need for a specific set of rules in order to look for a balance between the flexibility and certainty needs.32 Finally, in 1971 was approved the final version of the Restatement Second which represents a compromise between all the most important theories that have been exposed during the Revolution.33

3.2. Autonomists in the national context, Xxxxxxx’x theory

Dealing with the national context, at the beginning there was only an applicable law: that was the lex loci contractus, by which it was provided that the applicable law was the one in which the contract had been concluded. However, that criterion could be considered as appropriate in the past because commercial trades used to be inter praesentes and the contract used to be performed in the same place in which it was concluded. Nowadays times are changed, international trades are increased and there are many forms of performances which may require the intervention of third parties who are involved in different countries. E.g. xxxxx providing new forms of credit assignment which have the registered office in a State different from the one of the parties.34

One of the forerunner of the modern approach in private international law is Xxxxxxxx Xxxxxxxxx Xxxxxxx. His theories represent nowadays the grounds of the actual Italian law 218/95 but unfortunately at the time he had no success. He

32S.X. XXXXXXXXXX, American Federalism and Private international Law page 16 “the traditional system had gone too far toward certainty to the exclusion of flexibility, the revolution went too far in embracing flexibility to the exclusion of certainty.”

33 Restatement Second on Conflicts of Law, Section 187 It will be analized in Chapter II

34 X. XXXXXXX, Autonomia della volontà e scelta di xxxxx xxx diritto internazionale privato, Edizioni Cacucci, Bari, 1999, page 20 ; Norme di conflitto a carattere materiale e scelta xx xxxxx, in Studi in onore di X. Xxxxxxxxx, Milano 1999 ; Specificità del metodo conflittuale e materializzazione del diritto internazionale privato, in Il diritto civile oggi. Compiti scientifici e didattici del civilista. Xxxx xxxxx Società Italiana degli Studiosi del Diritto Civile, Napoli, 2006 ; La scelta xxxxx xxxxx applicabile da parte dei contraenti, in Il nuovo diritto europeo dei contratti: dalla Convenzione di Roma al Regolamento Roma I,, Milano, 2007; Il diritto applicabile ai contratti: norme di conflitto e norme materiali, in : X.Xxxxxxxxx, X. Xxxxxxxx (a cura di), I rapporti economici internazionali e l’evoluzione del loro regime giuridico, Napoli, 2008.

concentrated on the importance of the principle of nationality and equality. The first principle is extremely important from the Italian perspective, especially at the time where he exposed his theories because people could not yet realize the importance of a uniform nationality. In fact, unification of the Italian territory occurred in 1848, whereas Xxxxxxx’x theories are dated to 1851. Furthermore, his theories were well received in the civil code of 186535 . Xxxxxxx’x considerations are very important in this period because they contributed to develop an “Italian awareness” to be part of a nation, in order to acquire a uniform identity.

According to Xxxxxxx, the principle of nationality is closely linked to another general principle of the legal system and the private international law system: the principle of equality, or universality, as expressed in art. 3 of the Italian Civil Code of 1865, according to which the foreigner is admitted enjoying the civil rights attributed to the citizens. This rule is extremely important, because it establishes the abolition of all the inferiorities with foreigners and foreign law, It is in fact from the recognition of perfect equality between States in their mutual relations that the need to recognize the same rights for individuals belonging to the different nations derives, applying similar rules of private international law. The principle of equality and the principle of nationality are therefore intertwined in private international law, and the Unity of Italy is the historical moment in which this weaving can be appreciated.36

35 Art. 9 Civil Code 1865: “The extrinsic forms of the acts between the living and the last will are determined by the law of the place in which they are made. However, it is within the faculty of the disposers or contracting parties to follow the forms of their national law, as long as this is common to all parties.

The substance and effects of donations and dispositions of last will are deemed to be governed by the national law of the settlers. The substance and the effects of the obligations are deemed governed by the law of the place where the acts were made, and, if the foreign contractors belong to the same nation, by their national law. In any case, the demonstration of a different will is saved.”

36 X.XXXXXX, L’Italia e il resto del mondo xxx xxxxxxxx di Xxxxxxxx Xxxxxxxxx Xxxxxxx, Cuadernos de Investigación Historica, 2011 ; X. XXXXXXXXX., Diritto nazionale e diritto della nazionalità: Xxxxxxxx Xxxxxxxxx Xxxxxxx, in AA.VV., Raccolta di scritti in memoria di Xxxxxxxx Xxxxx Xxxxxxxx, vol. I, Edizioni Scientifiche Italiane, Napoli 1990.; X. XXXXXXX, Xxxxxxxx Xxxxxxxxx Xxxxxxx e la scuola italiana di diritto internazionale del secolo 19, Xxxxxxx, Milano 1954.

Whereas in the U.S. rules of private international law at the beginning were considered as territorial laws, in most of the European countries there has always been an immediate recognition “extraterritoriality”. The main reason may rely on cultural and social traditions, which assume the United States as a unique country with many inner States that enjoy a high degree of discretion in the specific matters such as a large independence concerning rules of private law.

Thanks to Xxxxxxx’x contribution, rules of private international law were recognized as extraterritorial in Italy. He divided these rules into two categories:

1) The mandatory rules: laws which can’t be derogated by the exercise of the will of parties. These Mandatory provisions deal with the status and capacity of the people; family’s relationships and hereditary succession ;

2) The voluntary rules: laws which can be derogated by the exercise of the will of the parties, among which contract law. In this matter, the law intervenes only to integrate the contract where the will of parties is not clear or is absent.

Basically, the main concepts of these categories are still existing today, even if they have been modified and renewed by law 218/95 and in the matter of contractual obligations, by the regulation 593/2008. 37

4. Party autonomy, normative grounds

As it has been broadly noticed, party autonomy is a concept that, in time, has been exposed in time to several changes. Starting from the Italian perspective, it is necessary to recall article 1322(1) of the Italian civil code, which states “The parties are free to determine the content of the contract, within the limits imposed by law”38. Apparently, subjects who want to put in being a determinate contract

37 Id.

38 Even if there are different doctrines which assume a discrepancy between the content of the conctract and the opportunity to choose the applicable law.

are obliged to respect only the limits imposed by law. However, party autonomy shall not be subject only to those limits. In fact, it is necessary to report the disposal established by art. 41 of the Italian Constitution, which assumes that “Private economic initiative is free. It can not be carried out in contrast with social utility in such a way to damage safety, freedom and human dignity. The law determines the appropriate programs and controls for public and private economic activity to be directed and coordinated for social purposes.

According to this double disposal, it can be deducted that there is a double limit that should be considered. The first is the “law limit”, the second is the “ social utility limit” that consists in a constitutional bound and these two limits can be considered as two representations of State sovereignty, which one of its goals is to control public and private autonomy. The State has an interest to check that the will of the parties, thus the contract, is concretized in a proper way without infringing their freedom to contract.

However, party autonomy is a particular principle that can be manifested in the contract in a plurality of ways and the national States react on different level concerning their exercise of the power of sovereignty. In fact, as will be examined, every State has its own means to exercise the powers over its own territory and therefore there can be imposed different limits to party autonomy depending on the specific law.

Thus, one of the expression of party autonomy is the freedom to choose the applicable law to the contract. 39 It is true that nowadays is generally accepted that subjects are able to choose the applicable law to their contract, but it is also true that the National States put in place provisions that set limits to this power. The main reason is that, even if from a formal point of view all the people must be

39 G. ALPA, Party Autonomy and Choice of Law Applicable to Domestic Contracts, European Business Law Review, 2014, page 1 ss. “Until some years ago the principle of sovereignty prevailed over the principle of freedom of contract and the parties, wheter they had the same citizenship, could not choose a foreign law applicable to their transaction”; European private Law: Results, Projects and Hopes, in EBLR, 2003; Il diritto privato nel prisma della comparazione, Xxxxxxxxxxxx, 2004.

treated equally, there may be some discrepancies from the substantial point of view. The States are aware of the fact that there are factual divergences between people and these differences may reflect into a contract as well. E.g. in a domestic Italian franchising contract, from a formal point of view both the franchisor and the franchisee are treated as equal, because they are both entrepreneurs. However, from a substantial perspective, usually the franchisor is the strongest party in the specific contract. That is because he is the one that provides his goods, services and brands to the franchisee in change of a sum of money paid from the franchisee (royalty). Usually the franchisor owns a capital very much higher than that of the franchisee, and more than usually the latter is subject to terms and conditions that he would not have accepted, if he had been in a better economic situation. In order to regulate the specific contract, the State has enacted law 129/2004 which must be interpreted, in case of doubts, in favor of the franchisee through the particular mean of the interpretation by analogy of law 192/98.40

The example provided shows that the State’s sovereignty is exercised because of the need to protect subjects who are economically and socially presumed to be weak and therefore imposing limits to the party autonomy. The difference between formal and substantial equality is implicitly recognized by article 3 of the Italian Constitution, which regulate the difference between formal and substantial equality.41 From a comparative perspective, the United States Constitution as well contains a provision which deals with formal and substantial equality42. These

40 Will be discussed in chapter 3 comparing the choice of law interests on weak parties in the U.S and Europe.

41 Art. 3(1) of the Italian Constitution “All citizens have equal social dignity and are equal before the law, without distinction of sex, race, language, religion, political opinions, personal and social conditions.”

Art.3,(2): “It is the task of the Republic to remove the economic and social obstacles which, by limiting the freedom and equality of citizens, prevent the full development of the human person and the effective participation of all workers in political, economic organization. and social life of the country.”

42 Section 1 Fourteenth Amendment of the U.S. Constitution:” No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

comparisons are important premises because they show that the aim of the States, at both national and international level are the same: ensure the substantial equality. However, in order to reach this aim, the National States put in place different forms of provisions that are the expression of the State’s sovereignty.

In any case, dealing with the contractual matter, problems arise concerning the balance between party autonomy and sovereignty when the contract is considered as “International”. I believe that in this field party autonomy and sovereignty are the pillars and, respectively, freedom of choice represents one of the expression of the first concept whereas the limits to freedom of choice are represented by the second. Before analyzing in the specific these two concepts, it is necessary to provide a broad definition of the “International contract”.

5. The concept of “Internationality” of the contract

The internationalization of economy grows as well as the internationalization of the contracts which rule on this economy. At the same time, it is not sufficient anymore to deal only with one State, as internationality itself requires more states involved.43

However, economy is not the only factor that promotes the development of international contracts, in fact it shall be considered the “legal concept” itself as another development factor.

At this point, it is necessary to recall Xxxxxxxxx’s doctrine, he maintained that the legal concepts have no fixed structure and are not rigid, but rather they shall adapt to the legal and historical reality. Moreover, he supported that the relationship between legal concepts and reality is an ongoing process because the historical flow is strictly connected to the legal system44 and the evolution of society reflects

43 X.X. XXXXXXX, Il xxxxxxxxx Internazionale page 2.

44 X. XXXXXXXXX, Xxxxxxx e rappresentanza indiretta, Diritto Civile, Saggi, 1951 page 218-219; Nuovi aspetti del problema xxxxx xxxxx nei negozi giuridici, Messina, Tip. Xx Xxxxxxx, 1934;

on legal orders. Therefore, the social and economic evolution have made automatically risen the need to create regulations for international contracts. According to Xxxxxxxxx Xxxxx, internationality of the contract could be intended in two ways depending on the specific case. The first interpretation is the concept of internationality erga omnes, it means that the contract is international if it has alternatively objective or subjective elements of internationality, regardless the fact that a State is part or not to a Convention. On the other side, the interpretation inter partes assumes that the element of internationality requires links with member States of a determinate Convention.45

5.1. International uniform law

When dealing with party autonomy in international contracts there are two different profiles that can be considered: the first aspect is the material contract’s autonomy, whereas the second is choice of law in conflicts of law46.

Dealing with the first aspect and concerning the exercise of party autonomy in International law, it is necessary to recall the national law adopted in compliance with International Conventions and adopted in the national State following to an act of adhesion by the latter. This procedure is in compliance with the function of internationality of the contractual relationship because the aim that the international community in this field wants to reach is the uniformity of acts in order to level connections between States.

Therefore, usually the regime established indirectly by international law derogates the domestic one because it has a different application’s criteria due to the

Istituzioni di diritto civile: introduzione, diritto delle persone, teoria dei fatti giuridici,Xxxxxxx,

Milano 1933.

45 X. XXXXX, International Conventions and National Conflict System, Recueil des Cours, I, page 172 ss; Corso di diritto internazionale privato e processuale; Diritto internazionale privato, 1972 46 Even if there are several doctrines that will be analized later that maintain that choice of law can be considered as substantial material law.

harmonization’s need,47 thus international material law as implemented in the national legal order is considered as a lex specialis, which necessarily derogates the lex generalis and the first substitutes the latter where required in the specific case. In fact, if national law does not conflict with the material international provision there can be a mutual application of those regimes, whereas in case of conflicts the lex specialis applies. 48 In this field It is useful to recall the judgement of the Court of Cassation49 in which the Supreme Court stated that “ in our legal order r.d.l 1958/1928 as converted into law in 1929 in execution of the 1924 Bruxelles Convention dealing with bill of loading concerning International maritime transport is lex specialis compared to the current law.”

There are two kinds of material uniform international laws: the first set of rules concerns the matters that can be derogated and is applied in compliance with several requirements.

The first of these requirements is the party cooperation. In fact, whether this requirement should miss, the optional law couldn’t be applied. The second requirement is that the contractual relationship must be balanced from a subjective point of view, meaning that both parties should not be in such a situation to accept contractual obligations that they wouldn’t have accepted if they had been in a different and better economical position. The rationale behind this provision is dual, the first reason is imposed to protect weak parties that are not able to contract because they are in hardship, in fact in this case the applicable material law will be the imperative provisions that can’t be derogated. On the other side, there is a constant feeling to warrant the freedom to determinate contractual obligations, in

47 X.X. XXXXXXX, Il xxxxxxxxx internazionale, page 28 ss.

48 Xxx specialis and prevalence of the uniform law have a common rationale, not because of their intrinsic content, the reason of this procedure lies behind choice of law opportunity. In fact, the division between lex specialis and lex generalis is more appropriate to allow a uniform application. Also A. MALINTOPPI , Diritto uniforme e diritto internazionale privato in tema di trasporto, Xxxxxxx, 1955 page 64 ss. ; Id note 47, pag. 30 “Specialità e prevalenza diritto uniforme hanno una ratio comune e un ambito di applicazione derogabile, non a ragione del suo contenuto intrinseco. Ma proprio a causa di quei determinati rapporti è la scelta più appropriata per consentire una uniforme applicazione.”

49 Judgement 2164/1960.

order not to limit the “different normative results of the private party autonomy”.50 An example of this provision may be exposed in the sales of movable goods. In fact, according to art. 6 of the Vienna Convention on International sale of goods parties are able to adopt partially or fully the provisions established by this Convention.51

The second kind of international uniform law foresees imperative contractual relationship, intended to be those relationships in which parties can’t derogate through their will from what is established by law. Again, the reason is to protect contractual disparity and to avoid and eventually solve contrasts or conflicts of undue competitions. An example of international uniform law can be found into International Maritime Law, as the regime has been adopted in Italy with law 243/198, which is covered by several doctrinal opinions as well52. These doctrinal opinions have debated especially on the nature of the contract’s internationality, in this field the debate was between those who maintained as sufficient requirement the international objectivity, versus those who supported international subjectivity as well.53 However, the first thesis has prevailed because of the adoption of the Protocol of Xxxxxx in 1968. In fact, it has expressly been excluded from the qualification of the internationality of the contract all the subjective elements, including the nationality of the ship. The same interpretation is recalled in the article 1 of the 1956 Geneva Convention on the Contracts for the International Carriage of goods by road (CMR)54,which has been executed in Italy with law 1621/1960 and later with l. 241/1982, in the part where it is stated “as specified

50 X.X. XXXXXXX, Il xxxxxxxxx internazionale, page 31 ss.

51 Article 6 CISG: The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.

52 Id note 31.

53 The main exponent of the second theory was Xxxxxxxxx Xxxxxxx Xxxxxxxx.

54 Article 1: “This Convention shall apply to every contract for the carriage of goods by road in vehicles for reward, when the place of taking over of the goods and the place designated for delivery, as specified in the contract, are situated in two different countries, of which at least one is a contracting country, irrespective of the place of residence and the nationality of the parties.”

in the contract”, meaning that there must be an objective criterion in order to evaluate the case.

The rationale behind this choice lies on the need of certainty of law and foreseeability which is foreseen by our national legal order and by current doctrinal and jurisprudential interpretation, thus the international objectivity requirement obliges the interpreters to individuate the location of the execution of the contract that is presumed by the will of party or from the itinerary of the trip. From this point of view, there are no limits or preclusions for the interpreters in order to reconstruct the specific situation. In the end, what is relevant is a “subjective perspective of objective internationality” of the contractual relationship.55 However, it is necessary to consider international material law as applied to the specific contract. In fact, there are more and different contracts regimes in which international material law has intervened and the consequence is that, depending on the specific case, the parties may have more or less freedom to determine their content.

5.2. International choice of law

From the point of view of the choice of law, contracts can be divided into two branches: domestic contracts and international contracts. The first are those who are entirely related to a specific applicable law in a determined national State. On the other hand, international contracts are all those contracts which contain one or more “element of foreignness with the national State”. That is considered as any element of the specific situation, from which can be deducted that the law applicable may not be the one of the national State.56 These elements could be subjective or objective. The firsts deal with personal information of the parties

55 X.X.XXXXXXX, Il xxxxxxxxx internazionale, page 38.

56 E.g. a contract concluded by a citizen of a determined State with a foreigner, or a contract which must be performed into another State, different from the one in which that has been concluded.

such as citizenship; residency; domicile, whereas the seconds deal with a specific aspect of the contract such as the location where the contract has been concluded or the location of performance thereof. 57

Every time in which there is a situation where there may be more applicable laws, it is said that there is a “conflict of law”. Conflicts of laws are ruled by a plurality of sources of laws and the specific case is solved in a different way depending on the law applicable. The most relevant sources concerning the party autonomy, having considered the will to compare rules of law from a comparative perspective, are:

1) Starting from the Italian system, Law 218/95, which examines the national context concerning general rules of private international law ;

2) The European Regulation 593/2008, which examines the contractual choice of law in civil and commercial contracts and establishes specific rules for specific subjects, such as consumers; labour contracts; and contracts of carriage ;

3) Section § 187(2) of the Restatement in the U.S. system and the Uniform Commercial Code (U.C.C.) revised section 1-305, which provide rulings on choice of law in the United States, adopting a different method compared to the European model ;

4) The Hague Conference on principles of Choice of law in commercial contracts, which is a soft law instrument which is aimed to create a uniform application, at an international level, concerning choice of law.

Concerning the application of these sources of law, it must be pointed out the relationship between Law 218/95 and Regulation 593/2008. The first is a national rule of private international law, which has general features compared to the nature of lex specialis of the Regulation 593/2008. In fact, the latter contains a specific

57 X.XX NOVA, Quando un contratto è internazionale? Rivista di Diritto Internazionale Privato Processuale, 1978, page 665 ss.; Obbligazioni e contratti, Xxxx Xxxxxxxxx, 2013.

material scope which applies only to “contractual obligations in civil and commercial matters”58, therefore recalling the direct applicability of the European regulations59 and the fundamental relevancy of article 11(2) and 117(1)60 of the Italian Constitution, the national legal order must comply with E.U. law. The reception of E.U. law is therefore established by article 57 of law 218/95, according to which “The contractual obligations are in any case regulated by the Convention of Rome of June 19th of 1980 on the law applicable to contractual obligations, rendered enforceable with Law of the 18th December 975/1984 without prejudice to other international conventions, as applicable.” This shows the incorporation, put in place by our national law61. However, a few considerations shall be pointed out in relation to the first part of the disposal, where it is stated “In any case”. There are two consequences, the first positive refers to the fact that recalling an international Convention favors the application of a uniform international law. On the other hand, there may be the risk that a subject could be crystalized to the recalled norms, regardless the new Convention on that specific matter. However, current doctrinal and jurisprudential interpretations agree on an extensive interpretation of this norm. It must be interpreted considering

58 Art. 1 Reg. 593/2008: “This Regulation shall apply, in situations involving a conflict of laws, to contractual obligations in civil and commercial matters. It shall not apply, in particular, to revenue, customs or administrative matters”.

59 Art. 288(2) TFUE: “The regulation has general scope. It is binding in its entirety and directly applicable in all member States.”

60Art. 11, comma 2: Italy agrees, on conditions of equality with other States, to the limitations of sovereignty that may be necessary to a world order ensuring peace and justice among the Nations Art. 117, comma 1: Legislative powers shall be vested in the State and the Regions in compliance with the Constitution and with the constraints deriving from EU legislation

and international obligations.

61 X. XXXXXXX, Nozioni di diritto internazionale privato, Edizioni scientifiche italiane, 2014 page 21; Sulla scelta xxxxx xxxxx applicabile ai contratti nel regolamento comunitario Roma I, in Scritti in onore di Xxxxxxxxx Xxxxxxxxxxx, Cedam, Padova, 2010, page 731 ss.; Xx xxxxx applicabile alla sostanza dei contratti nel regolamento del 17 giugno 2008 (Roma I), in L’internazionalizzazione delle piccole e medie imprese. Aspetti economici e giuridici, a cura di X. Xxxx, Edizioni Scientifiche Italiane, Napoli, 2010, page 193 ss.

all the substitutive norms issued in time62, that is to say that art. 57 l. 218/95 currently refers to reg. 593/2008.

However, the concept of internationality of the contract is explicated in different ways depending on the source of law.

In fact, according to article 1 of the 1986 Hague Sales Convention, it is provided a positive definition of “internationality”. This provision determines the law applicable to “contracts of sale of goods”:

a) between parties having their places of business in different States;

b) in all other cases involving a choice between the laws of different States, unless such a choice arises solely from a stipulation by the parties as to the applicable law, even if accompanied by a choice of court or arbitration.”

On the other hand, art. 1(2) of the Principles of choice of law in International commercial contracts provides a negative definition of internationality by stating that: “For the purposes of these Principles, a contract is international unless each party has its establishment in the same State and the relationship of the parties and all other relevant elements, regardless of the chosen law, are connected only with that State”. The second definition is preferred by large part of the doctrine, because it requires a case-by-case analysis, therefore it warranties a concrete verification of the internationality of the contract. Moreover, the official comment of art. 1(2) of the referred principles individuates an internationality test63.

62 X. XXXXXXXX XXXXXXXX, Conseguenze della trasformazione della Convenzione Roma in regolamento comunitario per il sistema di diritto internazionale privato, in Studi sull’integrazione europea, 2006 page 309 ss.; Note introduttive, II, in Regolamento XX x. 593/2008 del Parlamento europeo e del Xxxxxxxxx del 17 giugno 2008 sulla xxxxx applicabile alle obbligazioni contrattuali (“Roma I”), Commentario dir. da X. Xxxxxxx e X. Xxxxxxxx, in Le nuove leggi civili commentate, 2009, page 534-547.

63 Official commentary of the Principles on Choice of Law in International Contracts, 1.17: “First, Article 1(2) refers to the establishments of the parties as a relevant element. When the parties’ establishments are located in different States, the contract is international and the Principles apply. This is a simple test that facilitates the ascertainment of internationality without having to refer to other relevant factors. If a party has more than one establishment, the relevant establishment is the one that has the closest relationship to the contract at the time of its conclusion (see Art. 12). Second, even if the first test does not apply, a contract still qualifies as international unless “all

6. Choice of law as a material norm, theories

After asserting that choice of law is an expression of party autonomy, there are two main Italian doctrines which consider a different nature of choice of law. The first doctrine maintains that the law which rules on choice of law (l. 218/95) is a material norm. Before examining this doctrine, there are two extreme theories that deserve to be explained. According to the first approach, the norm attributes directly to the parties the power to rule on their interests and to choose the applicable law through the meeting of their will. In this way, l. 218/95 looses its own effects, because the choice made by the parties finds its grounds exclusively on the contract, better to say on the “will of the parties to be bound”. This theory is also known as theory of the incorporation.64

However, the consequence of this approach is that law 218/95 looses its authority and his proper effects. Therefore, all the limits to which the parties should be subjected, such as the mandatory norms, do not exist anymore. The clause established allows an extension of the will of parties beyond the national limits and parties are not subjects to the distinction between voluntary rules and mandatory norms proposed by Xxxxxxx and reassessed in most actual sources of law65.

Following this line, the second theory which has been criticized by the vast majority of the doctrine is called the “Contract without law”66 and it can be considered as an extremism of the “Incorporation doctrine”. The main feature of this approach is that it reverses the relationship between law and parties. In fact,

other relevant elements” are located in the same State. These relevant elements may be, for example, the place of conclusion of the contract, the place of performance, a party’s nationality, and a party’s place of incorporation or establishment. If a party has more than one establishment involved in the transaction, subordinate establishments that have been disregarded in the first step pursuant to Article 12 (see para. 1.17) may still be taken into consideration.”

64 X. XXXXXXX, Autonomia della volontà e scelta di xxxxx xxx diritto internazionale privato, page 21 ss.

65 The Hague Principles, art. 11 ; Regulation 593/2008, art. 21; Restatement 187(2).

66 Id. note 63.

usually parties can express their will in compliance with limits established by law, whereas according to the authors of this theory, the will of parties is over the law and they are able to determine the content of the contract in an absolute way, thus choosing the applicable law without any other bound.

Now, the theories briefly recalled assume at first the primacy of party autonomy over all, at second that the rules of private international law are considered as “material” thus they are part of the set rules of private law extended to the international context. However, it is important to recall the social function of law and the relevance of this function on the contract67. The agreement has not only effects on the parties, but also on the social context.68 This happens usually in contracts in which both parties are entrepreneur and one of them is economically stronger than the other one, or when a contract which provides a high cost for one of the parties and has effects on the surrounding space E.g. a procurement contract between two private enterprises in order to build a chain of supermarkets has an impact on the social reality of the private subjects that live in the nearby. For this reason, it is necessary to consider that there are interests other than those directly involved in the contract and there may be the need to protect these as well and the only way to safeguard them is to impose limits to party autonomy.

The aim is to avoid the “social disorder” which is created when parties get profit of the other one’s situation and this may happen both at national and supranational level. However, it is useful to consider the reverse situation as well, thus a national interest that is protected by a national law may not be protected as well in an international contract69 but rather it can be a limit that hinders the freedom to contract. In the end, this theory promotes the internationalization of party

67 Id. note 63.

68 X.X.XXXXXXX, La thèorie de l’autonomie de la volontè; Droit international privé, 5th edition, Issy Moulineaux, 2014

69 X. XXXXXXX, Autonomia della volontà e scelta di xxxxx xxx diritto internazionale privato, page 31 ss.

autonomy by attributing to it the same relevance at the internal level, reasserting the substantive character of the rule of private international law.

6.1. Choice of law as a conflict law, theories

Another interpretation of the norms on choice of law considers a different nature from the material norm. Whereas the latter assumes that choice of law deals with substantial internal law, thus represents an expression of the national system of private law, the theory examined right now supports the idea that there is a dissociation between rules on private law and on private international law. According to the authors70 of this theory, the aim of the rules is exclusively to locate the contract in a determinate legal order, therefore rules of private international law acquire a “neutrality feature”. Whereas the supporters of the first theory maintain that the choice of law in the contract allows a direct application of the material norms of the State recalled, the supporters of this theory assume that the choice of law exposed in the contract leads to an indirect application of the norms of the recalled State.71 In this way, the parties’ choice of law becomes a connecting criterion that allows only to individuate the law governing the contract and it acts like a neutral filter without referring directly to the specific foreign law. However, nonetheless the conflictual nature of choice of law private international law, nowadays the concept of neutrality has been eroded and there are many authors who maintain that the existence of a substantial relationship between the choice of the applicable law and private contractual autonomy.

Among these authors, there are some who believe that the choice of law itself represents an expression of a particular branch of party autonomy, that is the

70 X. XXXXX, Internationales Privatrecht, 1995, page 26 ss. ; Gutachten zum internationalen und ausländischen Privatrecht, Baden-Baden 1999 ; X. XXX XXXXX, Principes et mèthodes de solution des conflicts de xxxx, Nijhoff, Leiden, 1969 page 445 ss.

71 X. XXXXXXX, Autonomia della volontà e scelta di xxxxx xxx diritto internazionale privato, page 36 ss.

international party autonomy. This part of the doctrine assumes that there is a difference between the traditional and the international party autonomy. Through the first, subjects are able to determine the content of the contract and the applicable clauses and it relies on the freedom of contract. Whereas the second applies when the contract is international. Thus, part of the doctrine distinguishes between the power to choose the applicable law (kollisionsrechtliche Verweisung) and the power to dispose the content of the contract through a clause which contains the regime established by the foreign law (materiellrechtiliche Verweisung)72. Whereas the first refers to the opportunity attributed to parties to subject the whole contract to the chosen law, the second refers to the act through which the parties regulate their interests thus in the contract is not explicitly recalled the foreign law, but the content of the contract has the same “literal tenor”73 of the foreign law recalled.

However, others have considered that is the internationality itself that would allow parties to choose the applicable law and by this opportunity, the parties put in place a contract inside the contract. Because of the fact that there are two choices that subjects put in being, thus the creation of a binding agreement with a determinate set of rules and the application of a specific law, it can’t be really said that the power of parties concerning the ruling on the content of the contract is completely different in nature from the international autonomy74. Both of them shall be considered as a concretization of legal transactions, (in the abstract sense as “negozio giuridico”) because in both cases the legislator connects the expression of the will of parties with determinate effects, and these effects are respectively

72 X. XXXXXXXX, Le Obbligazioni contrattuali, in : Nozioni di Diritto Internazionale Privato, page 86-87; La «scelta» xxxxx xxxxx applicabile xx xxxxxxxxx, Edizioni scientifiche italiane, 2003; Contratti internazionali e lex mercatoria, , Edizioni scientifiche italiane, Napoli, 2008 ; Potere di scelta xxxxx xxxxx applicabile e funzione delle norme di diritto internazionale privato, in AA.VV., Il diritto civile oggi. Compiti scientifici e didattici del civilista, Atti del I Convegno S.I.S.Di.C, Napoli, 2006. ; X. XXXXXXXXX, Internationals Privachtrecht I, Xxxxxx & Humblot , Leipzig, 1897, page 270 ss.; Die Juristische Willenserklärung, in Jhering's Janrbücher f. die Dogm, 1878. 73 Id.

74 X. XXXXXXX, Autonomia della volontà e scelta di xxxxx xxx diritto internazionale privato, page 36 ss.

the determination of the content and the law applicable. The only difference between these two concepts, according to this doctrine, deals with the function of both of them. 75

Thus, the function of the power to determinate the content of the contract is to rule directly on the specific interests that parties want to reach, and this is in line with the technique of dissociation between material law and private international law because this power refers exclusively to private substantial law, that is the determination of the content. On the other hand, when parties choose to apply a specific law, they put in place a clause in which they recall the applicable set of rules, by this way the subjects do not express directly their will of power but rather they simply defer to the applicable foreign law therefore the application is indirect and the will of parties act as a subjective link between the contract and the need to place it in a national context.

Finally, there are two more theories that deserve to be mentioned, because they go further in explaining the relationship between freedom of choice and choice of law under the conflict of law theory. Specifically, it has been maintained that choice of law in the contractual matter is a rule of international private law that provides the opportunity, given to the parties in an international contract, to choose the applicable law in their agreement.76 Whereas most authors who follow the “conflictual approach” maintain that the function of the choice of law is to localize the contract and to promote an application of a specific set of rules, the doctrine examined in this paragraph leaded by Xxxx Xxxxxx assumes that there is an incompatibility between the concept of freedom of choice and its localizing function. The main reason is that the choice of law expressed by the parties is a representation of their freedom and therefore is the intrinsic concept of freedom

75 X. XXXXXXXX, Diritto internazionale privato italiano, Xxxxxxx, Milano 1974, page 305 ss.

76 X. XXXXXX, Le rôle de la règle de conflit dans le règlement des rapports internationaux, Revue internationale de droit comparé,,1973, page 268-272.

that contrasts with the mandatory element of the connecting criterion.77 In fact, there may be the case in which parties do not put in place an express choice of law and following this theory there would be no connecting criterion that can be applied and the inacceptable consequence would be that the contract in governed by no law. However, according to the general and recognized principle that the will of parties must be subject to the limits imposed by law, the contract must be governed by a national law.

Thus, this doctrine supports the idea that provisions on choice of law deal with the opportunity attributed from the law to the parties to express their international private autonomy.

The second and last theory is an alteration of the first one but is in line with the concept of international substantial autonomy, fully recognized by these supporters78 and is in compliance with the nature conflict law as well.

According to this approach the contractual matter is still ruled by the will of parties, but the function of choice of law diverges depending on the specific case and it is applied a particular mechanism of rule/exception. The general rule is established by provisions on conflicts law, which apply normally to all international contracts, however in the vast area of this contracts there are some of them who would be subject to exceptions and that is the case of international trade contracts.79 Concerning these agreements the doctrine examined maintains that, exceptionally, the contract on choice of law would not be subject to the limits of the lex causae and therefore this decision could be made even if it is in contrast with the lex causae itself. The authors recalled admit a “specific freedom of contract”80 in this sense. However, it is hard to determine whether an international

77 X. XXXXXXX, Autonomia della volontà e scelta di xxxxx xxx diritto internazionale privato, page 67 ss.

78 X. XXXXX, La validitè des contrats en droit international privè France / U.S.A. Revue internationale de droit comparè, Paris, 1989, page 85 ss

79 Id.

80 X. XXXXXXX, Autonomia della volontà e scelta di xxxxx xxx diritto internazionale privato, page 71 ss.

contract could fall into an exception and it revolutionizes the concept of choice of law as a conflict’s law, moreover the scope of the choice of law in international contracts shall be considered as uniform, therefore the internal division between international contract and international commercial contracts can’t be considered as in compliance with this aim because it would lead to the negative consequence of a diverse application depending on the specific case in a matter that looks for certainty of law.

7. Partial conclusions, The Hague Principles

Following an examination of the principles of party sovereignty and party autonomy in conflicts law, it can be stated that they represent two opposite principles. The first is aimed to represent and protect the will of parties in international contracts, through the establishment of provisions which warrant the opportunity to express choice of law in compliance the freedom of contract. On the other side, the second principle tends to set limits to the exercise of the freedom of contract. After the analysis of several doctrines and a broad referral to positive law that examined the nature, the function and the role of these principles in conflicts law it can be assessed that there are a lot of differences between States concerning choice of law in international contracts. Especially comparing the European system to the American legal order, these differences find their grounds in historical, social and constitutional reasons. However, even if there are substantial differences in the application of choice of law, the principle of party autonomy and the principle of sovereignty and, respectively, freedom of contract and limits to this freedom, play the same role and the same function in all the States.

The function is the same, however the application is different from each system and that would be analyzed in the further chapters. In any case, the revolution in choice of law in international contracts could be played by the 2015 “Hague

Principles of choice of law in International Contracts” . In fact, even if it is a soft law instrument, it establishes an opt-in choice mechanism that could be useful to harmonize national provisions in international contracts. The Hague principles seek this harmonization through two ways:81 First, they provide a universal model that lawmakers can use to create, supplement or develop choice of law rules, in fact can be considered as a “code of best practice”82 which could be followed by parties through an expressed or implied choice of law. Second, the Hague Principles are useful to set disputes between litigation and arbitration, in fact art. 3 allows the parties to choose as law applicable not a State law, but rather a non- state law which is “generally accepted on an international, supranational or regional level as a neutral and balanced set of rules.”

Because of the importance and the innovation of this new soft law instrument, the further analysis will consider positive European and American law taking also into consideration, as a model for uniformity and evolution, the Hague principles on choice of law in international commercial contracts.

81 M. PERTEGAS, X.X. XXXXXXXX, Party Autonomy and its Limits: Convergence through the new Hague Principles on Choice of Law in International Commercial Contracts, Brooklyn Journal of International Law, 2014, page 979; Hague Principles on Choice of Law in International Contracts; Entry on "The Hague Conference on Private International Law"; The Hague Choice of Law Principles, CISG and PICC: A Hard Look at a Choice of Soft Law’, American Journal of Comparative Law, 2018, page 175-217

82 X. XXXXX, The Nature, Objective and Purposes of the Hague Principles on Choice of Law in International Commercial Contracts, Journal of South African Law, 2015, page 776 ss. ; Commentary on the Principles on choice of Law in International Commercial Contracts, 1.5 Introduction; “Tacit choice of law in the Hague Principles on Choice of Law in International Contracts”

Chapter II, The Freedom of Choice

1. Freedom in the Hague Principle, article 2

There are many International Conventions in the field of contractual obligations, such as the 1955 Hague Convention on the international sale of goods, the 1980 CISG, or the 1986 Hague Convention on the law applicable to contracts for the international sale of goods. All these Conventions admit and recognize the will of party as the main criterion to determine, in substance, contractual obligations and all these Conventions recognize the existence of international private autonomy.1 However, the most innovative source of law in the matter of international contractual obligations is showed by the 2015 Hague principles on Choice of Law in International Commercial contracts, because it is in line with the most recent approach of the States which is aimed to safeguard the will of parties in international contracts.

Article 2 of the Hague principles on Choice of Law in International Commercial contracts is named “Freedom of Choice”2. It is important to recall art. 2(1) because it reflects the importance attributed to the will of parties in international contracts: “ A contract is governed by the law chosen by the parties”. The fact that the Principles open with a provision which designates as a general assumption the

1 X. XXXXXXX, Autonomia della Volontà e scelta di xxxxx xxx diritto internazionale privato, page 106-107.

2 Art. 2 The Hague Principles : “1. A contract is governed by the law chosen by the parties.

2. The parties may choose :

(a) the law applicable to the whole contract or to only part of it; and

(b) different laws for different parts of the contract.

3. The choice may be made or modified at any time. A choice or modification made after the contract has been concluded shall not prejudice its formal validity or the rights of third parties.

4. No connection is required between the law chosen and the parties or their transaction.”

relevancy attributed to the will of parties in the contract, leads to the conclusion that a party autonomy approach is favored in the principles, whereas the sovereignty principle of the States is subordinated to the first. In so declaring, these principles affirm the notion of party autonomy with limited exception taking into consideration the fact that party autonomy presupposes the free will of both parties freely expressed. However, even if the principle of sovereignty is not the first goal promoted by The Hague Principles, it is necessarily recalled and applied in other provisions established, such as art. 11(1)3 which will be examined in chapter 3 as far as it concerns a limit to the principle of freedom of choice. Furthermore, Xxxxxxxxx Xxxxxxxxxx believes that “it is a truism that party autonomy presupposes the free will of parties, but it may happen that this principle can be more rhetoric than true, because the specific cases usually imply that a there is a weak party and that party autonomy is almost a euphemism”4.

In any case, the aim followed by art. 2(1) is to enhance certainty and predictability in international contracts and to reinforce party autonomy in this matter, moreover the principles recognize that the parties into a contract are those who are in the best position to determine which set of legal principles is the most suitable for their transaction5, therefore it is necessary to attribute them the more power as possible, without breaching the other limits provided by the Principles, in order to better determine their interests.

The freedom of choice established in art. 2 is limited to a specific kind of agreement, that is the Choice of law agreement. Thus, it differs from other types of agreements both at substantial and procedural level. Concerning the aspect of substantiality, the choice of law agreement differs from the main contract

3 Art. 11(1) “These Principles shall not prevent a court from applying overriding mandatory provisions of the law of the forum which apply irrespective of the law chosen by the parties.”

4 S. C. XXXXXXXXXX, The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments, page 878.

5 Commentary on the principles on Choice of Law in International Commercial Contracts, Introduction 1.3.

concluded. The latter could be any kind of contract within the scope of Principles6, however, because the choice of law agreement is separated from the main contract the latter is subjected to a distinct formation. Consequently, if the main contract is invalid because of violations of national provisions, that invalidity does not necessarily affect the validity of the choice of law agreement as it is separate. This conclusion is reinforced by the provision established in art. 7 of the Principles, which assumes that “a choice of law cannot be contested solely on the ground that the contract to which is applied is not valid.”

On the other hand, concerning the procedural aspect, the choice of law agreement as established in the Principles is also different from jurisdiction agreements and arbitration clauses agreements. In fact, the latter are disposed only for the purpose of dispute resolution agreements, whereas the choice of law agreement recalls exclusively the substantial law applicable. Therefore, it is true that the freedom to which the Principles refer has to be enveloped in party autonomy, however art. 2(1) can be interpreted as the opportunity given to the parties to put in place a new substantial agreement7, useful to determine the best interests for the parties in the contract.

Freedom of choice expressed into art. 2(1) is not limited to give the opportunity to parties to choose any applicable law of any state, but rather parties may also choose for “rules of law” as provided in art. 3 of the Principle. This is an important conquest which has been reached in Private International Law, because the Principles represent the first widely accepted source of law (even if soft) that expressly foresee the applicability to the specific contract of non-national sources of law. 8

6 Art.1 :” These Principles apply to choice of law in international contracts where each party is acting in the exercise of its trade or profession. They do not apply to consumer or employment contracts.”

7 Tertium genus.

8 It will be examined later the relationships with Reg. 593/2008 and the 187(2) Restatements.

Another relevant aspect in the freedom of choice, implied in art. 2(1) and expressly stated in art. 2(3), is the power to modify the law specified at any time. However, there must be set limits concerning the formal validity of the contract and the pre- existing rights of the third parties.9 In fact, the law chosen by the parties governs the validity of the contracts, thus any change of law after the contract’s conclusion may affect the formal validity of the contract or may impose different conditions which affect third parties. In this case problems arise if third parties claim rights over the contract which were supposed to be satisfied under the contract before it was modified. In order to avoid retroactive invalidity and to extend the effects over third parties, if the law is modified by the parties after the conclusion of the contract and under the new law that contract would have been invalid, that contract is still valid. 10

The freedom of choice is also expressed in art. 5, which allows parties to choose the form for which they can dispose the law applicable.11 This provision assumes that no formal requirement is needed to put in place the contract, and this rule is valid for both express and tacit choice of law. The formal validity must comply with the requirements of at least one law whose application is authorized by the applicable p.i.l. However, again, art. 7 plays an important role because it foresees the severability of the contract on choice of law and implies that the invalidity of the main contract does not affect the validity of the choice of law because they are separate agreements.

9 Commentary on the principles on Choice of Law in International Commercial Contracts, Art. 2 Freedom of choice, Timing and modification of the choice of law.

10 Illustration 2-5 Commentary on the principles on Choice of Law in International Commercial Contracts, “Party A and Party B conclude a contract and agree that it is governed by the law of State X. Party C guarantees the obligations of Party A. Subsequently, Party A and Party B modify their contract to change its governing law to the law of State Y. Under the law of State Y, Party A has greater liability to Party B than Party A would have had under the law of State X. While this modification is effective as between Party A and Party B, it may not adversely affect the rights and obligations of Party C. Those rights and obligations continue to be governed by the law of State X.”

11 Article 5 Formal validity of the choice of law :”A choice of law is not subject to any requirement as to form unless otherwise agreed by the parties.”

By the way the matter of commercial contract, especially internationals, deals with agreements which have an onerous consideration. Thus, even if the national legislator does not provide for that specific agreement a mandatory form, parties are strongly recommended to put in place their agreement in written in order to have a safe evidence.12

Even if this recommendation is recognized by the large part of the doctrine for the main contract, thus the substantial contract that parties want to put in place13, I believe that the same statement could be put in place for choice of law agreements. In fact, as these agreements deal with the identification of the of the substantive law applicable in commercial contracts as well, the rationale may be the same in order to better ensure the certainty and foreseeability of the contract as stated also in the Preamble of the Principles. Furthermore, it is true that art. 5 does not specifically mandate a particular form of choice of law clause and it is also true that most systems neither provide a specific form for choice of law, but the main reason is that these systems consider this clause just one term of the whole contract contained in it14 and therefore it is obviously recommended the written form.

1.1. Freedom in the European and national context, Regulation 593/2008 art. 3

The national and the European context are strictly linked concerning the international choice of law set of rules, as the national legal order is currently established in compliance with provisions of Regulation 593/2008.

12 X. XXXXXXXXXX, X. XXXXXXXX, I Contratti dell’Impresa, Giappichelli, Torino, page 23; I contratti per l'esternalizzazione dei servizi e le tutele, in : Europa e Diritto Privato, 2011; I contratti strumentali per la circolazione dei beni nel mercato, in I Contratti dell’Impresa, 2013; Autonomia private e limiti alla disponibilità della nullità contrattuale; in: Contratto e Impresa, 2018.

13 E.g. Sale contract.

14 S.C. XXXXXXXXXX, The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments, page 891.

The first positive provisions concerning freedom of choice in the national context could be found in art. 25 Preliminary Provisions of the 1942 Italian Civil Code, now abrogated15 . However, in this provision there was no expressed distinction between international and domestic contracts, thus the freedom of choice suffered a legislative gap in this specific field, even if it was generally accepted. In time, law 218/95 was issued and, today, it represents the Italian international private law source. However, as mentioned, 16 today the choice of law on international contractual obligations is ruled by the European Union. Thus, there are two reasons which stand behind the primacy of the Regulation 593/2008. The first reason is technical, so even if art. 57 recalls the 1980 Rome Convention, under the theory of incorporation and because of the fact that the Rome Convention and Regulation 593/2008 have the same object, the international contractual field shall fall within the latter because it supersedes the first one.17 On the other hand, the second reason is more historical, in fact in time E.U. competences have increased in order to xxxxxx the certainty and foreseeability of European trades. There may be another reason however, in fact Rome I Regulation is inspired by the same rationale of the Rome Convention, that is to say empowering the will of parties in international contracts.

Moreover, because of the direct applicability of Regulation 593/2008, law 218/1995 applies indirectly and only if its provisions are not in contrast with the

E.U. source of law.

By the way, when Rome I entered into force there were many bilateral agreements which had been already signed by member States that were adhering to other

15 Art. 25 preliminary provisions to the C.C. :” The obligations arising from the contract are governed by the national law of the parties, if it is common, otherwise the law applicable is the one in which the contract has been concluded. In any case the will of parties can dispose in a different way.”

16 Art 57 l. 218/1995: “The contractual obligations are in any case governed by the Rome Convention of 19 June 1980 on the law applicable to contractual obligations, enforced by the Law of 18 December 1984, n. 975, without prejudice to other international conventions, as applicable.”

17 X. XXXXXXXXX, Il Diritto Privato Internazionale Italiano, , Editoriale Scientifica, Napoli, 2004, page 177 ss

conventions providing for other provisions regarding the choice of applicable law, thus it was necessary to dispose a norm that was able to avoid any possible conflict of law. To solve this problem art. 25 of the Rome I Reg. finds two different solutions:18

1) Concerning Conventions already concluded between member States and third States, Rome I Regulation does not preclude the application of multilateral Conventions governing conflicts of law at the time where the obligation arose.

2) Concerning all the other Conventions concluded by Member States between them, Rome I Regulation shall prevail if they have the same object of the latter.

Thus, art. 25 expresses the will of the European legislator to respect binding agreements between member States and foreign States, however it tends to warrant the goal of uniformity in the European context.

The freedom of choice is firstly affirmed in Recital 1119 as a general principle that permeates all Rome I Reg. then it is expressly established in art. 3 of the latter. This article provides a freedom attributed to the party that is higher than the one provided by other sources of law20. In fact, under the E.U. law even if a contract is objectively domestic, it could obtain the requirement of internationality only because the parties want to apply a different law and it is not necessary any substantial connection with other place, thus it is sufficient a pactum xx xxxx

18 X. XX XXXXXX, Diritto Internazionale privato dell’Unione Europea, Giappichelli, Torino, 2011, page 344. ; Art. 25:” This Regulation shall not prejudice the application of international conventions to which one or more Member States are parties at the time when this Regulation is adopted and which lay down conflict-of-law rules relating to contractual obligations. However, this Regulation shall, as between Member States, take precedence over conventions concluded exclusively between two or more of them in so far as such conventions concern matters governed by this Regulation.”

19 Recital 11 Rome I Reg.” The parties' freedom to choose the applicable law should be one of the cornerstones of the system of conflict-of-law rules in matters of contractual obligations.”

20 E.g. Restatements on Conflicts of Law 187(2).

utenda21. This kind of “artificial internationality”22 is innovative because it empowers the will of parties and its autonomy in the international context. At the same time, this provision is in line with the E.U. approach to warrant certainty and predictability of contracts by promoting the will of the parties in verifying which law best represents their interests without impairing one of them.23

Under the E.U. regulation, it is true that the parties can express their choice of law in an expressed or implied way, however, the choice needs to be clear and transparent. The transparency requirement is mandatory because otherwise the judge could not consider the will of parties as a valid criterion in order to identify the law applicable. E.U. law is in favor to party autonomy, that is demonstrated by attributing to parties the most efficient connecting criterion in order to choose the applicable law. In the event that a choice of law is not clear, that clause won’t fall under art. 3 and thus can’t be considered as a connecting criterion. In this event, the clause will be considered as “merely transactional” and it won’t have the effects which are proper of the choice of law, that is the indirect normative effect. In the end in case of non-transparency, art. 4 steps into and the judge is required to look for a specific connecting criterion, as the latter is one of the norms which

21 Art. 3 Reg. 593/2008: “A contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or to part only of the contract.

The parties may at any time agree to subject the contract to a law other than that which previously governed it, whether as a result of an earlier choice made under this Article or of other provisions of this Regulation. Any change in the law to be applied that is made after the conclusion of the contract shall not prejudice its formal validity under Article 11 or adversely affect the rights of third parties.

3. Where all other elements relevant to the situation at the time of the choice are located in a country other than the country whose law has been chosen, the choice of the parties shall not prejudice the application of provisions of the law of that other country which cannot be derogated from by agreement.

4. Where all other elements relevant to the situation at the time of the choice are located in one or more Member States, parties' choice of applicable law other than that of a Member State shall not prejudice the application of provisions of Community law, where appropriate as implemented in the Member State of the forum, which cannot be derogated from by agreement.

5. The existence and validity of the consent of the parties as to the choice of the applicable law shall be determined in accordance with the provisions of Articles 10, 11 and 13.

22 X. XXXXXXXX, , Le Obbligazioni contrattuali, page 84 ss.

23 Id.

provides supplementary criteria in case of absence of will of the parties,24 thus the proper choice of law manifested in a comprehensive way becomes necessary in order to prevent an application of the effects established by art. 4.

This interpretation assumes that the nature of the “pactum xx xxxx utenda” under Reg. 593/2008 is particular. In fact, the choice of law under this law is not a mere transactional choice because when the parties put in place that clause, their interests are not directly protected by the direct effects of the contract. On the other hand, their interests are not represented by a direct applicability of a foreign law, because as it was mentioned earlier, without a specific choice of law in international contracts art. 4 is enforced.

For this reason, the large part of the doctrine assumes that under this Regulation the choice of law shall be considered as a tertium genus clause.25 The nature of this clause is not transactional, nor regulatory, but rather a clause which lies in between these two concepts and allows the indirect application of foreign law, where it is expressed clearly. Therefore, it may be stated that it has an ambivalent nature in between autonomy and heteronomy and it constitutes a particular clause exclusive of private international law which follows two functions26:

1) Regulatory function, exploitable to the interests of the parties to concretize the interests of the international contract.

2) Preventative function, because it is necessary to avoid contrasts concerning the applicable law to the international contract.

24 Art. 4 :” To the extent that the law applicable to the contract has not been chosen in accordance with Article 3 and without prejudice to Articles 5 to 8, the law governing the contract shall be determined as follows:

(a) a contract for the sale of goods shall be governed by the law of the country where the seller has his habitual residence;

(b) a contract for the provision of services shall be governed by the law of the country where the service provider has his habitual residence;

by the law of the country where the property is situated;”

25 X. XXXXXXXX, Le Obbligazioni contrattuali, page 90 ss.

26 Id.

1.2. Freedom in the U.S. context, section § 187 Restatements, section 1- 301 U.C.C.

In the United States, there may be more conflicts between states at national, federal or international level27, nonetheless, from a formal point of view the matter of choice of law in international contracts is treated almost in the same way as the matter of conflicts between national States. In fact, the applicable sources of law are the same as section § 187 Restatement’s makes no distinction between interstates and international contracts.

However, some limitations established by the U.S. Constitution apply only to interstate conflicts, like the Full Faith and Credit clause established in Art. IV(1) of the U.S. Constitution28 which provides that States must recognize legislative acts, public records and judicial decisions of the other States within the U.S. Thus, interstate conflicts are solved on the base of the Constitution.

International choice of law are treated similar to the domestic choice of law because of several reasons.29 These are that 1) international choices of law rarely overcome the localism of state courts 2) the constitutionality claim may consider choices of law as irrelevant because of the constitutional limits, as occurred in All State Insurance Co. Vs. Hague, where the U.S. Supreme court dictated that :” for a state’s substantive law to be selected in a constitutionally permissible manner that State must have a significant aggregation of contract, creating State interests, such that choice of its law is neither arbitrary nor fundamentally unfair”, therefore the U.S. Supreme Court’s orientation is in line with a restrictive approach adopted

27 See Chapter 1, page 3.

28 Art. IV (1) U.S. Constitution: “Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Xxxx prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.”

29 X.XXXXX, Party Autonomy And Beyond: An International Perspective Of Contractual Choice Of Law, Legal studies research Paper Series, Emory International Law Review, 2006 page 513; Rethinking Contractual Choice of Law: An Analysis of Relation Syndrome, Stetson Law Review, 2014-2015 ; Contractual Choice of Law in Contracts of Adhesion and Party Autonomy, 41 Akron Law Review, 2008.

in the U.S. Constitution. It is true that the case recalled regards an interstate conflict, however this judgement may be transposed at an international level as well, because “the clash between international concern about the need of global trade and constitutional claim about contract’s requirements, rarely is won by the first one.”30

Choice of law in the U.S. context finds its legal grounds on two different sections, section § 187 of the Restatements and section 1-301 of the Uniform Commercial Code and their applicability depends on the specific contract.

The Restatements are a complex collection of affirmed jurisprudence issued in time and they represent a “ typical a priori rule and a high degree of confidence on judicial abilities on a case by case analysis”.31 There are two kinds of § 187 Restatements, the First and the Second and because of the fact that in the U.S. context inner States have a broad autonomy in determining and interpreting the contract’s law matter, every State has the opportunity to apply its own interpretation.

Today Section § 187 Restatement First methodology is followed only by a few States, as its main core obligations are not in compliance with general rules of international law on choice of law, because they do not allow parties to choose the law applicable to the contract.32. However, even States that formally still adhere to the Restatement (First)33 or apply different interpretations according to the specific case, expressly recognize that section § 187 warrants the free choice of law as a basic principle of contract conflicts. Thus, it may be assumed that the formal approach maintained by these States is influenced by the most recent international law receptions and they substantially recognize the principles of the Second

30 Id.

31 S.C. SYMEONIDES, Codifying the Choice of Law around the World, page 164

32 Xxxxx’x approach, see Chapter 1.

33 Alabama, Georgia, Kansas, Maryland, New Mexico, Florida, Rhode Island, South Carolina, Tennessee, Virginia Wyoming.

Restatement. 34 On the other hand, Restatement Second is followed by the remaining States and its approach is more modern than the first.35 The freedom of choice established in this section is, compared to the one established in the Rome I Regulation, less warranted.

Restatement Second § 187 divides into 3 subsections, the first two may be useful to put in place general assumptions on freedom of choice. According to § 187(1):

” The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.”

This provision is widely accepted even by States that approach to the First Restatements, because it deals with the freedom of contract and assumes that the parties are free to determine the law to govern their contractual rights, however this is not a rule of choice of law but rather a rule which foresees an incorporation by reference.36 In fact, this rule merely establishes that parties have power to determine the terms of their contractual engagements and they can do that in two ways. The first is by expressing these terms in the contract, whereas the second consists on incorporating into the contract by reference extrinsic material which may be the provisions of some foreign law. In such instances, the forum will apply the applicable provisions of the law of the designated state in order to enforce the intentions of the parties.37

On the other hand, section § 187(2) deals with the case in which is individuated a true conflict of law, thus it states: “The law of the state chosen by the parties to

34 X.X. XXXXXXXX “… courts of all conflicts stripes have flocked to the Second Restatement’s broad endorsement of party autonomy in § 187”., The Internationalization of Contractual Conflicts of Law, Vanderbilt Transnational Law, 1995; Conflict of Laws (6th ed. 2018); Conflicts in a Nutshell (4th ed. 2016); The Choice-of-Law Revolution: An Empirical Study, in Economics of Conflict of Laws, Washington and Xxx Law Review, 1992.

35Even if the U.S. doctrine, who will be analised in the last chapter, is debating for a new Third Restatement.

36 Official Comment Restatement (Second) of Conflict of Laws.

37 Id: “rules relating to construction, to conditions precedent and subsequent, to sufficiency of performance and to excuse for nonperformance, including questions of frustration and impossibility.”

govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement38 directed to that issue, unless either

(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or

(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.”

Therefore, the rule of this subsection applies only when two or more states have an interest in the determination of the particular issue. The rule does not apply when all contacts are located in a single state and when, as a consequence, there is only one interested state. Subject to this qualification, the rule of this Subsection applies when it is sought to have the chosen law determine issues which parties could not have determined by explicit agreement directed to the particular issue. Thus, taking into consideration art. 3(1) Reg. 593/2008 and § 187(2) exclusively from the perspective of the freedom of choice, it can be stated that the second warrants less freedom to the parties than the first because it makes references to the mandatory requirement of the substantial connection or any other reasonable basis of the chosen State and the fundamental policy of a State which has a materially greater interest than the chosen state in the determination of the particular issue , so that § 187(2) has been defined as the expression of a confined party autonomy.39

38 Examples of such questions are those involving capacity, formalities and substantial validity. 39 X.X.XXXXX, Too Clever by Half: Reflections on Perception, Legitimacy, and Choice of Law Under Revised Article 1 of the Uniform Commercial Code, 6, Xxxxxxx & Xxxx Business Law Review, 2015, page 367; American Contract Law for a Global Age, CALI's e Langdell Press, 2017.

However, there is another section that deserves to be analyzed from this perspective, that is 1-301(a) of the U.C.C., which states that ”Except as otherwise provided in this section, when a transaction bears a reasonable relation to this State and also to another State or nation the parties may agree that the law either of this state or of such other State or nation shall govern their rights and duties.”

Apparently, this section admits more freedom in the choice of law contract rather than § 187(2) , because it is recalled only one limit established to party autonomy, that is the “reasonable relation” instead of the double limitations imposed by § 187(2) . Furthermore, if section 1-301 is read under its literal interpretation, it requires a reasonable relation with both States and it shall be considered against the liberal stance to party autonomy to which is inspired the U.C.C.40 Thus, the mandatory substantial relationship shall be interpreted in an extensive way taking into consideration only one State other than the forum State and not both.

Concerning the relationship between § 187(1) and Section 1–301, the latter does not expressly distinguish between a contractual choice of law and incorporation by reference, but the official comments correct this deficiency by stating that the parties are free to displace the U.C.C. waivable rules by incorporating by reference in their contract the law of a state that lacks a reasonable relation or, for that matter, non-state norms, such as the UNIDROIT principles41, thus the equivalent of § 187(1) is stated in U.C.C. 1-302(a)42. In the end, the U.C.C. provisions on choice of law look more libertarian norms then their counterpart in the Restatements in the United States, however what makes the first less applicable than the second is the scope. In fact, the U.C.C. applies and overcomes the Restatement only when

40 S.C. SYMEONIDES, Party Autonomy in Rome I and II from a Comparative Perspective, Convergence and Divergence in Private International Law- Liber Amicorum, 2010, page 520.

41 Id note 41.

42 § 1-302. U.C.C. :“(a) Except as otherwise provided in subsection (b) or elsewhere in [the Uniform Commercial Code], the effect of provisions of the Uniform Commercial Code may be varied by agreement.”

the specific contract falls into its scope, as established by section 1-10243 of the latter.

Concerning the relationship between art. 3(1) of Reg. 593/2008 and 1-301 U.C.C., the first prevails over the latter in the matter of freedom of contract because is more warranted in the European context. By the way there has been in the past an important proposal which has not passed because of lack of consent by the vast majority of the States. In fact, in 2001, the U.C.C. Commissioners proposed a major revision of Section 1-301, which drew heavily from the Rome Convention. Besides introducing the European concept of “mandatory rules”, the proposed revision would have differentiated between consumer contracts and business-to- business contracts, as well as between international and U.S. interstate contracts, and would have imposed different party autonomy restrictions for each category.44

These ideas did not demonstrate successful results among State legislations and, by 2008, only the U.S. Virgin Islands had adopted the proposed revision, thus forcing the U.C.C. Commissioners to withdraw it. Therefore, the American jurisprudence and doctrine is fully aware of the limitations imposed on contractual choice by the national law, however the economical and domestic conflicts look hard to be solved in a brief time45.

2. Modes of expression: expressed, tacit choice

After having examined the general concept of freedom of choice as established in positive law, it is useful to show a comparison on how the choice of law can be

43 1-102 UCC: ”This article applies to a transaction to the extent that it is governed by another article of the Uniform Commercial Code.”

44 S.C. SYMEONIDES, Conflict of Laws, 4th edition, 2004 page 983-987 ; X. XXXXXX, Party Autonomy in Choice of Commercial Law: The Failure of Revised U.C.C. 1-301 and a Proposal for Broader Reform, Seton Hall Law. Review, 2006.

45 This issue will be further developed in Chaper IV.

expressed in the contract and how the different sources of law approach to this issue.

The modes to form choices of law can be expressed or implied in the contract. Whereas the first way has always been agreed by the doctrine and the jurisprudence, the second one has been object of discussion for a long time. For example, during the draft of Reg. 593/2008, there has been a debate on the opportunity to consider the implied choice of law as a tacit but clear and transparent choice, instead of a clause supposed to be interpreted by the presumed will of the parties. Furthermore, the debate was ongoing on the possibility to consider the choice of court equal to the choice of law based on the fact that one of the most significant elements according to which the European judges can verify if there is or not a choice of law, is the forum choice, as it was considered in Germany that used to apply a tacit choice of law equals to the lex fori46 However, the introductive Recital 1247 of Rome I Reg. can be considered as a left over of the old proposal, as it assumes that the choice of a specific court is one of the elements from which can be deducted the law applicable, even if today it is not an exclusive element, whereas in the past it was.

Another issue was whether it could be considered as an implied choice of law, the fact that the parties recalled in the contract a determinate provision of foreign law. This clause can be considered as a choice of law today only whether it satisfies the requirements established by art. 3(1), thus “The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case.” There has been also a provisional change compared to the past Rome Convention, which established that the law applicable should have resulted “in a reasonably certain way” from the provisions of the contract or from the

46 X. XX XXXXXX, Diritto internazionale privato dell’unione europea, , page 357 ss ; Codice delle convenzioni di diritto internazionale privato e processuale, Giuffrè, Milano, 1999.

47 Recital 12, Reg 593/2008 “An agreement between the parties to confer on one or more courts or tribunals of a Member State exclusive jurisdiction to determine disputes under the contract should be one of the factors to be taken into account in determining whether a choice of law has been clearly demonstrated.”

circumstances of the specific case, whereas nowadays it is stated that the choice must result “clearly”. There are two interpretations which has intervened on this modification, according to the first, the provisional change has not brought news in the meaning of the norm. This vision is supported by the Xxxxxx Awlor vs Sandvik in which the English Court of Appeal explained that the change of language was not intended to involve a change of meaning, but simply intended to bring English and German texts in line with the French text of the convention, thus it was and it still is intended as “ the contract is taken as a whole point ineluctably to the conclusion that the parties intended it to be governed by that law48. On the other side, the opposed interpretation assumes that the slight modification from art. 3(1) of the Rome Convention into art. 3(1) of Rome I is in compliance with the need for certainty that the Rome I Reg. pushes for in order to avoid the event in which the judge individuates a presumed, but not real, will of the parties.49

Finally, in order to verify whether the choice of law is clear or not, part of the doctrine has individuated some objective indicators, the occurrence of which does not necessarily entail the choice of law, however they are useful to support a construction of the contract50 and they take into consideration all the circumstances surrounding the conclusion of the contract:

1) The establishment of a clause which derogates to the jurisdiction;

2) The establishment of a clause by which parties individuate provisions in a different legal order than the lex forum;

3) The establishment of standard contracts explicitly dictated taking into consideration the place from where the party who puts in place the standard terms comes from;

48 X. XXXXX, E.U. Private International Law, Xxxxxx Xxxxx Pub. 3rd Revised edition, 2014, page 299 ; Territorial targeting in E.U. Private law, in Information & Communication Technology Law, 2013

49 X. XX XXXXXX, Diritto internazionale privato dell’unione europea, , page 360 ss.

50 X. XXXXXXX, X. XXXXXXXX: “Relazione sulla convenzione relativa xxxx xxxxx applicabile alle obbligazioni contrattuali “, Gazzetta ufficiale n. C 282 del 31/10/1980.

4) If there are two connected contracts and for one of them is not provided the law applicable whereas for the other one it is provided, the first may be subject to the law expressly provided by the second, because the parties may have impliedly wanted to subject them to the same law;

5) If the same parties put in place a contract concluded after another contract which has the aim to concretize the interests of the first one, there may be an implied choice of law.

Furthermore, these indicators are in compliance with the general rules of contracts provided by the states, because the implied choice of law has to be individuated through the means of the interpretative rules established by national laws, for example these indicators are in line with the national context, because they are individuated by art. 1362 c.c. and art. 1363 c.c.51 52 In so doing, express and tacit choice provisions allow certainty and predictability and let parties know the legal regime to perform its application, facilitating the transaction.

The European Union is very developed and legally advanced on this issue, however on the international side there are many divergences. During the development of the Hague Principles there was a discussion on where applying or not the implied choice, because some States do not have this opportunity in their legal system.53 Moreover, there are also some countries’ legislations that do not have specific provisions on the mode of expression of the parties’ choice of law54 but through the analysis of abstract contract principles identifiable by analogy from general rules on contracts’ interpretation, it is understood that tacit choice is

51 1362 cc.: ”In interpreting the contract it must be investigated the common intention of the parties and not limit oneself to the literal meaning of the words. To determine the common intention of the parties, their overall behavior must be assessed even after the conclusion of the contract "; 1363 cc” The clauses of the contract are interpreted by means of the others, attributing to each the meaning that results from the whole act.”

52 X. XXXXXXXX, Le Obbligazioni contrattuali, page 103.

53 X. XXXXXXXX & X.X. XXXXXXXX, Party Autonomy and its Limits: Convergence through the new Hague Principles on Choice of Law in International Commercial Contracts, 984-985

54 X.X.XXXXXXXX, X.XXXXXXXX XXXXXX, Towards a uniform application of party autonomy for choice of law in international commercial contracts, Journal of Private International Law, 2016, page 444.

allowed. This is the case of the Venezuelan Private International Law Act of 1998(Venezuelan PIL Act), which remains silent on the issue. In fact, Article 29 accepts party autonomy, but it provides no specific indication of its mode of expression.55

In the end, because of the non-mandatory nature of these principles, a more liberal approach prevailed even if some of these States were in disagreement because of national divergences56. Therefore art. 4(1) of the Hague principles is in line with the provision established by Rome I Regulation, as it was strongly inspired by the latter during the drafting period. Nowadays art. 4 states that: “A choice of law, or any modification of a choice of law, must be made expressed or appear clearly from the provisions of the contract or the circumstances.”

Thus, Art. 4(1) as well states that the parties to a contract may expressly or tacitly choose for rules of law. The choice can be made before, at the same time, or after the conclusion of the main contract and is not required the use of particular words in order to give effect to the clause.57 Moreover, as there is no formal mandatory requirement, art. 4 shall be in compliance with art. 5, thus a choice of law could be done orally as well. The same issues examined in Rome I Regulation apply for art. 4(1) in tacit choice as the first is the more liberal source of law in this matter, therefore the modes of expression of choice have been transposed in the Hague Principles. In the end, what is relevant is that the real intention of the parties must be effective and presumed intention is not sufficient to determine the existence of a choice of law.

The only divergence in the meaning of art. 3 of Rome I and art. 4 of the Hague Principles is that it expressly recognizes the difference between choice of court and choice of law. In fact, art. 4(2) assumes that, “An agreement between the

55 Id.

56 E.g. China: Article 3 of the Law of the People’s Republic of China on the Laws Applicable to Foreign-Related Civil Relations (Chinese PIL Act).

57 Official Comment, art. 4 Hague Principles: “phrases sufficient are: contract is “ governed by” or “subject to” a particular law.”

parties to confer jurisdiction on a court or an arbitral tribunal to determine disputes under the contract is not in itself equivalent to a choice of law”, in fact even if nowadays it is generally recognized the distinction between choice of court and choice of law, the distinction has never been specified in any provision. Thus, it can be considered as a reception of the most recent doctrinal and jurisprudential approaches. By this way article 4 affirms that such a choice is not in itself equivalent to a choice of law. This express clarification avoids a common point of confusion in practice: the parties’ decision to choose a particular court or arbitral tribunal as the forum used for resolving disputes does not automatically lead to the conclusion that the parties have selected the law of that forum as the law governing the contract.58

The implied choice is recognized in the U.S. system as well. Restatement Second

§ 187 and thus 23 American states which follow this approach assume that a reference to legal expressions or doctrines of a particular State, in the contract, is sufficient to be considered as an implied choice.59 However, differently from Rome I Reg. and the Hague Principles, the Restatements do not foresee in its provisions the opportunity attributed to parties to choose in an implied way the applicable law. Thus, it is necessary to recall some American case law which witness the admission of implied choice of law in the U.S., an example may be provided by the judgement of the Supreme court of Texas Sonat Exploration co.

x. Xxxx Pressure Control Inc.: in this case the contract was a master service agreement which was supposed to be performed in multiple locations. The Supreme Court of Texas’s judgment stated that the agreement disposed several provisions that foresaw the application of two different laws depending on where the operations had to be performed. When the latter were performed on navigable waters, maritime law would have applied, and where operations were performed in Texas or New Mexico, Texas law would have applied. During the contract’s

58 M. PERTEGAS & X.X. XXXXXXXX, Party Autonomy and its Limits: Convergence through the new Hague Principles on Choice of Law in International Commercial Contracts, page 987 ss. 59 Id note 59.

performance a dispute concerning indemnity provisions arose in relation to an operation in Louisiana. The appellant argued before the Supreme Court of Texas that the parties had impliedly chosen Louisiana law to apply to operations in Louisiana because of (1) the use of the term “statutory employer,” a legal term peculiar to the state of Louisiana, and (2) the inclusion of an additional insured provision in the agreement.60

The Court rejected this argument because of three reasons. First of all, the Court assumed that the indemnity provisions were printed in capital letters, typical form of the State of Texas, indicating Texas law. Furthermore, the Court maintained that the additional insured provision was inserted in order to avoid the effect of Louisiana’s indemnity law and could not be treated as a sort of implied choice of law. Lastly, the court stated that it not sufficient for parties to put in place “mere implied references” in order to apply Louisiana law to the entire contract, therefore in this case tacit choice of law extendible to the whole agreement should be clearly visible.61

Another case in which implied choice of law has been recognized is Xxxxxxxx x. XxxXxx North America Inc. reasoned by the Supreme Court of Montana. 62

Here, the Supreme Court agreed with Xxxxxxxx’x argument concerning the interpretation of the facts in compliance with § 187 and maintained that parties chose Montana law to govern their contract. Although the decision to apply Montana law was not expressly stated in the employment contract, the parties agreed that income taxes, unemployment insurance premiums, and wages were to

60 Sonat Exploration Co.x. Xxxx Pressure Control, Inc. Supreme Court of Texas November 21st

, 2008.

61 Id note 59.

62 Xxxxxxxx x. XxxXxx North America Inc. July 6th , 2004 Background: “Xxxxxxxx was employed by C&S Directional Boring from March 2000 to January 2001. C&S Directional Boring is now a subsidiary of MasTec. MasTec is a Florida corporation, and the division of its business relevant to this appeal is operated out of Purcell, Oklahoma While working in Indiana, Xxxxxxxx had a dispute with his supervisor and was fired. Xxxxxxxx filed a Complaint in the Thirteenth Judicial District Court against MasTec alleging violations of Montana's WDEA, Title 39, Chapter 2, Part 9, Montana Code.

be paid in Montana. For the Court, this choice constituted an expression of the intent of the parties to have all the contract provisions governed by that law and the latter maintained that “a contract provision may be broad enough to indicate the entire contract be governed by the laws of the state governing the particular provision.”63

Thus, even in the U.S. context can be noticed that the mode of expression of choices of law can be considered as similar to the other systems because implied choice is allowed as well. In fact, even if not expressly stated, the Supreme Courts adopted the parameters established by Professor XxXxxxx00 in determining choices of law, specifically, in Sonat the Supreme Court analyzed the capital letters, which are by the way considered as common Texan standard terms.

On the other hand, these judgements, as many other in the U.S., are in line with the approach to tacit choice envisaged by the Hague Principles. In Xxxxxxxx, the Court reasoned that the intention of the parties could be clearly individuated by the circumstances of the case, specifically that both wanted perform the most relevant parts of the contract in Montana and this is in line with the provision of art. 4 of the Hague Principles, where it is assumed that “A choice of law must be made expressly or appear clearly from the provisions of the contract or the circumstances”.

63 “ Official comment Restatement (Second) of Conflict of Laws, § 187(1971); “generally, when parties have chosen the state of the applicable law they will generally refer to it expressly in their contract, however even when the contract does not refer to any state, the forum may nevertheless be able to conclude from its provisions that the parties did wish to have the law of a particular state applied.”

64 See note 53.

2.1. Modes of choice expression: depeçage

The process65 of separating the elements comprising a legal relationship so as to subject them to the laws of several different legal systems is known as depeçage.66 The first source of law which introduced the depeçage is the 1980 Rome Convention and its provision has been entirely reproduced in art. 3(1) of the Rome I Regulation67, according to which “ By their choice the parties can select the law applicable to the whole or to part only of the contract.” Thus, parties are allowed to choose more laws applicable to different parts of the contract, however there are some divergences concerning the sources examined.

There may be two kinds of depecage, direct and and indirect. The first one is wanted by the parties because they may expressly or impliedly choose more laws applicable to the contract, however their intent shall be clearly represented. On the other side, the indirect depeçage may occur68 when the parties choose the law applicable to part of the contract and keep silent concerning the remaining part of the latter. Thus, the technique of the indirect depeçage involves the situation in which the parties have exercised the freedom not to choose the applicable law of the contract. In this case the sources examined provide two different solutions. The main examples can be found in a comparison between the Hague Principles and

65 In view of some authors, the definition of depeçage is not clear, e.g. according to S.C. XXXXXXXXXX, Issue-by-Issue Analysis and Dépeçage in Choice of Law: Cause and Effect, University of Toledo Law Review, 2014, Page 8:” Various courts have referred to dépeçage as a “mystical doctrine,” a plain “doctrine,” a “legal theory,” an “approach,” a “principle,” a “rule,” a “technique,”or a “process.” Dépeçage is none of the above. It is not the goal of the choice-of-law process, not even the goal of issue by issue analysis. Rather, dépeçage is the potential and occasional result of issue-by-issue analysis.”

66 M. PERTEGAS, X.X. XXXXXXXX, Party Autonomy and its limits: Convergence through the new Hague Principles on Choice of Law in International Commercial Contracts, page 994-995. 67 S.C. SYMEONIDES, Codifying choice of law around the world, page 122.

68 It does not necessarily occur, e.g. if the parties are bound under the Hague Principles on Choice of Law in Commercial contracts and choose as applicable law to part of the contract the lex forum, the other part will be governed by the latter as well.

Rome I Reg.69 In fact, art. 2(2) of the Hague Principle admits the depeçage as well, stating that “parties may choose a) the law applicable to the whole contract or to only part of it; and b) different laws for different parts of the contract” however, it diverges from the Rome I Reg. because the latter provides at art. 4 complementary solutions in case parties decide to choose the law applicable only to part of the contract or in case parties do not decide any law applicable whereas the first does not provide anything.

Under Article 2(2)(a), parties may choose the law applicable to only part of the contract. When the parties make such a partial choice of law, the remainder of the contract is governed by the law otherwise applicable in the absence of choice, whereas Under Article 2(2)(b), parties may also choose the law applicable to different parts of their contract with the effect that the contract will be governed by more than one chosen law.70

By the way, the Hague Principles do not provide criteria for determining the law applicable in case of absence of choice, therefore when a partial choice of law has been put in place, the law applicable to the remainder of the contract will be determined by the court or arbitral tribunal of the specific case ( the lex forum ) under the rules that are applicable in the absence of choice. However, art. 2(2) shows a relationship with Article 9 of the Principles, that defines the scope of the chosen law. Art. 9(1) assumes that "The law chosen by the parties shall govern all aspects of the contract between the parties, including but not limited to…". Thus, from a literal analysis can be assumed that art. 9(1) is antithetical to the notion of party autonomy, as the word "all" contradicts Article 2(2) and makes Article 9 an obligatory rule, rather than a supplementary rule of interpretation. When the parties choose a law for the entire contract, the word "shall" addresses the application of

69 Even if the the depeçage is known and applied in the U.S. as well, trhough the interpretation of 187(2) e.g. see Sonat page 20.

70 Official Comment on Principles on Choice of Law in Commercial Contracts, art.2.

the chosen law to all the issues listed in Article 9, even though the choice of law clause may be phrased in a way that suggests a narrower scope.71

On the other hand, art. 4 Reg. 593/2008 provides several criteria to determine the law applicable when parties do not have chosen the law applicable to the whole international contract, or whether they do not have chosen the law for the remainder part of the contract.72 Thus, the indirect depeçage is provided in both sources of law, the only difference between them concerns the criteria under which that is determined. The Hague principles apply the law of the forum, whereas the Rome I Reg. provides more criteria depending on the specific contract.

The Commentary on Hague Principles, however, notes the risk of contradiction or inconsistency that may result from dépeçage in the determination of the parties’ rights and obligations and for this reason the parties should ensure that their choices “are logically consistent.”73

3. The freedom not to choose, absence of choice

As the parties have the freedom to choose the applicable law to the contract, they have the freedom not to choose that. Apart from the possible occurrence of the indirect dépeçage, the absence of choice of law in international contracts find different solutions. In the Hague principles, there is no specific provision that rules on the event in which parties do not specify a decision on the applicable law74 and

71 .S.C. SYMEONIDES, The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments, page 895.

72 E.G. : In a B2B sale contract between and Italian seller and a Spanish buyer, parties choose to apply the Spanish law concerning the location of the payment of the good, whereas they remain silent on the remaining part concerning the delivery of the goods. In this case art. 4(a) of the Rome I applies and:” a contract for the sale of goods shall be governed by the law of the country where the seller has his habitual residence;” therefore the remaining part falls under Italian law.

73 M. PERTEGAS, X.X. XXXXXXXX, Party Autonomy and its limits: Convergence through the new Hague Principles on Choice of Law in International Commercial Contracts, page 994-995.

74 Official Comment on Principles on Choice of Law in Commercial Contracts, 4.17:” If the parties intentions are neither expressed explicitly, nor appear clearly from the provisions of the

the main reason that explains this legislative choice deals with the goal of the Principles and explains why these have been adopted as a "soft" instrument rather than a binding Convention. In fact, it has been very difficult to find an agreement between States that have different legal orders, especially in the Private law/ International Private law matter.

It has been recognized that a “high degree of convergence that exists among the various systems on the issue of party autonomy is largely absent in selecting the applicable law in contracts that do not contain a choice-of-law clause”75, thus there may be an opportunity to issue a source of law which deals with uniform solutions in case of absence of choice of law at a later stage as it is far more difficult to attain consensus on a broad instrument that would cover all choice-of-law issues in contract conflicts.76

On the other side, the European and the U.S. legal orders contain provision which are aimed to find solution in case the parties do not decide the law applicable at the international contract, respectively stated in art. 4 Reg. 593/2008 and Restatement’s Second § 188.

3.1. The European context, art. 4 Reg. 593/2008

Starting from the the European context, if the parties have not chosen the law applicable or if the electio juris has been declared inexistent or invalid under the

contract of from the particular circumstances of the case, there is no choice of law agreement. In such a case, the Principles do not determine the law governing the contract.”

75 S.C. SYMEONIDES, The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments, page 877.

76 Conclusions and Recommendations adopted by the Council on General Affairs and Policy of the Hague Conference, April 7th - 9th 2010: "The Council noted that there was support in the Working Group for a comprehensive draft instrument also including rules applicable in the absence of choice. The Council confirmed that priority should be given to the development of rules for cases where a choice of law has been made."

substantial or formal profile or under art. 3(5) of the Rome I reg.77 then the law applicable is determined by art. 4 of the latter and it sets several connecting criteria depending on the specific contract,78 excluding contracts of carriage, consumers, ensuring, employment contracts which criteria are defined in art. 5-8. Art. 4(1) refers to the most used connecting criteria which is the residence, and its definition is provided by art. 19 taking into consideration the moment in which the contract has been concluded.79

It is necessary to specify that art. 4 imposes presumptions, which can be refuted before the court.80 On the other hand, the Commission’s proposal of 2005 would have converted the presumptions into firm rules and the test of the closest connection would have been eliminated, but this proposal has not been accepted

77 Art. 3(5): ”The existence and validity of the consent of the parties as to the choice of the applicable law shall be determined in accordance with the provisions of Articles 10, 11 and 13.”

78 Art. 4 Reg. 593/2008: “(a) a contract for the sale of goods shall be governed by the law of the country where the seller has his habitual residence;

(b) a contract for the provision of services shall be governed by the law of the country where the service provider has his habitual residence;

(c) a contract relating to a right in rem in immovable property or to a tenancy of immovable property shall be governed by the law of the country where the property is situated;

(d) notwithstanding point (c), a tenancy of immovable property concluded for temporary private use for a period of no more than six consecutive months shall be governed by the law of the country where the landlord has his habitual residence, provided that the tenant is a natural person and has his habitual residence in the same country;

(e) a franchise contract shall be governed by the law of the country where the franchisee has his habitual residence;

(f) a distribution contract shall be governed by the law of the country where the distributor has his habitual residence;

(g) a contract for the sale of goods by auction shall be governed by the law of the country where the auction takes place, if such a place can be determined;

(h) a contract concluded within a multilateral system which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments, as defined by Article 4(1), point (17) of Directive 2004/39/EC, in accordance with non-discretionary rules and governed by a single law, shall be governed by that law.”

79 Art. 19 Reg. 593/2008: “1. For the purposes of this Regulation, the habitual residence of companies and other bodies, corporate or unincorporated, shall be the place of central administration. The habitual residence of a natural person acting in the course of his business activity shall be his principal place of business.

2. Where the contract is concluded in the course of the operations of a branch, agency or any other establishment, or if, under the contract, performance is the responsibility of such a branch, agency or establishment, the place where the branch, agency or any other establishment is located shall be treated as the place of habitual residence.”

80 X. XXXXX, E.U. Private international Law, page 312.

as it has been criticized and considered as an involution, in contrast to the innovative legal progresses of Rome I Regulation.81 Nowadays art. 4 is pervaded and inspired by the principle of proximity,82 this principle assumes that the specific international contract is submitted before the law of the country which has the strictest connection. This is not an abstract criterion, in fact it is necessary that the judge individuates also ex officio83 case by case the elements which lead to the application of the most significant and true connection of the State.

The proximity principle is showed in all sections of art. 4, and its structure individuates more connecting criteria following a specific order, thus the lack of requirements in order to satisfy one criterion leads to the application of the next.84 In fact, the second criterion which starts up only if art. 4(1) is not applicable, is established by art. 4(2)85 and that is known as the “characteristic performance criterion”. If the contract is not included in the cases described by art. 4(1) or falls into more cases described by the latter because has more elements included in

81 X.XXXXXXX, La Proposta di regolamento Roma I, »: spunti critici su collegamento obiettivo e rapporti con le convenzioni di diritto internazionale privato uniforme, in Xx Xxxxx Applicabile ai Xxxxxxxxx xxxxx Proposta di Regolamento Roma I, Xxxx xxxxx giornata di studi Rovigo, 31 marzo 2006, a cura xx XXXXXXXX X., 2006 , page 42; Riflessioni sull’autonomia come limite: l’equilibrio tra libertà e condizionamento nel diritto dell’Unione europea, tra Unione, Stati membri ed individui, , AA. VV., Liber Amicorum Xxxxxxx Xxxxxxx. De la Cour CECA à la Cour de l’Union: le long parcours de la justice européenne, Giappichelli, Torino, 2018.

82 X. XXXXXXX, Nozioni di diritto Internazionale Privato, page 39; Sulla scelta xxxxx xxxxx applicabile ai contratti nel regolamento comunitario Roma I, in Scritti in onore di Xxxxxxxxx Xxxxxxxxxxx, Cedam, Padova, 2010, page 149 ss; X. XXXXXXX, Le principe de proximitè dans le droit international privè contemporain, in Recueil des cours de l’Acadèmie de Droit International de la Haye, 1986, page 25 ss. ; X. XX XXXXXX, Diritto Internazionale Privato dell’U.E. :” The principle of proximity finds its legal grounds on the need to ensure to the conflict law, the elasticity necessary in order to render it more respondent to the needs of the internationalization and globalization of the private relationships and to avoid the rigor of a localization a priori, through automatic connecting criteria.” page, 367.

83 because deals with the conflict of laws and the judge is supposed to know the law applicable 84 On the other hand, there are other provisions which establish more connective criteria which could be followed alternatively, e.g. art. 28 of L. 218/95”The marriage is valid, as regards the form, if it is considered as such by the law of the place of celebration or by the national law of at least one of the spouses at the time of the celebration or by the law of the State of common residence at that time.”

85 Art. 4(2) Reg. 593/2008:“Where the contract is not covered by paragraph 1 or where the elements of the contract would be covered by more than one of points (a) to (h) of paragraph 1, the contract shall be governed by the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence.”

different hypothesis ruled by art 4(1), the law applicable is the one of residence of the party who has to put in place the “characteristic performance”.86

The definition of the latter is generally accepted, even if there may be interpretative hardship in some cases. The characteristic performance is usually individuated in the non-monetary performance in onerous contracts or those in which there is a consideration, therefore is that performance which counteracts the payment. An example may be showed in the procurement contract, where the service or construction put in place by the contractor has to be considered the specific performance because it is able to express the social-economical function of the procurement contract,87 in fact the concept of the characteristic performance represents the function of the legal relationship of the particular case.

However, the concept of characteristic performance is not defined in an absolute way and thus may be found exceptional cases because in some contracts there is not necessarily a particular performance.88Another critique which has been put in place89 concerning this criterion is that it tends to apply the most familiar law exclusively in favor of the party who puts in being the specific performance, without regarding to the interests that the other party may have, thus it does not apply an analysis case by case but rather an abstract presumption and the result is that the strongest part of the contract may be unjustifiably empowered.

Whereas Art. 4(1) and 4(2) individuate the “center of gravity” of the contract,90 art. 4(3) establishes an exceptional criterion, which is able to disapply the former two. According to art. 4(3) :” Where it is clear from all the circumstances of the

86 X.XXXXXXX, La prestazione caratteristica nella Convenzione di Roma del 19 giugno 1980, Giuffrè, Milano, 1990 ; X. XXXXXXX, Aspetti problematici della prestazione caratteristica, Riv. Diritto Internazionale Privato e Processuale, 1993, page 513 ss.

87 X. XXXXXXXX, Le obbligazioni contrattuali, page 120.

88 E.g. the barter contract or the contracts in which there is an exchange of sum of money.

89 Id note 85.

90 Recital 19(2) Reg.593/2008:” In the case of a contract consisting of a bundle of rights and obligations capable of being categorised as falling within more than one of the specified types of contract, the characteristic performance of the contract should be determined having regard to its centre of gravity.

case that the contract is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply” Thus, it is assumed that the judge should verify the circumstances of the specific case, however there is a divergence in the judgement whether the case falls into one or the other section. In fact, if the contract falls under 4(1) or 4(2) the judge is not obliged to motivate in a specific way why these articles have been applied, because of their abstract nature. On the other hand, the application of 4(3) requires a very specific motivation because it takes into consideration particular circumstances which shall be particularly pointed out in the motivation.91

Thus, the criteria to determine art. 4(3) are different from the others. However, the parameters to establish if the contract is “manifestly more closely connected with one State” are not unquestionable. Especially, part of the doctrine assumes that there is a relationship between art. 4 and art. 3(1) concerning the implied choice of law.92

In fact, this doctrine maintains that a narrow interpretation of art. 4 would lead to an implied choice of law rather than an exceptional criterion that supplement the absence of choice and they assume that if the contract is manifestly more closely connected with one State, is equal to say that there has been an implied choice of law because it appears “clearly from the circumstances of the contract”, as art. 3(1) requires. However, there is no room for this interpretation as the vast majority of the doctrine through a literal interpretation of the Regulation affirms the supplementary nature of art. 4(3).

Finally, in case all sections of art 4 can’t apply, art. 4(4) states that “the contract shall be governed by the law of the country with which it is most closely connected.”, thus it has a residual nature as its effects activate when the case does not fall into the other sections. The judge, in order to apply art. 4(4) must use different interpretations from those used to determine the criteria of art. 4(1) and

91 Id, note 87.

92 XXXXX XXXXX, E.U. Private international Law, page 306.

4(2) because it has to evaluate the case examining the specific circumstances, where the abstract criteria are not applicable. The risk is to let the judge decide in a way which could overcome the area of discretion, and thus create prejudice on certainty and foreseeability of law, differently from what happens when the legislator defines the abstract criteria of art. 4(1,2).93

3.2. The United States, §188

In parallel to the European context, in the United States the absence of choice of law in international contract is ruled as well. The reference provision is § 188 on conflicts of law and its rules can be compared to art. 4 of Rome I Regulation. The first difference is merely literal and can be shown in §188(1), according to which:” The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in s 6.” In fact, whereas art. 4 of Rome I deals with the “closest connection” or the “characteristic performance”, § 188(1) recalls the “most significant relationship” which can be fully equated to the closest connection requirement.

The second consideration recalls the scope of the norms, as in Europe are applied different criteria depending on the specific contract put in place by the parties, whereas §188 does not make any distinction between the specific contracts and it applies the same criteria for each of them, in fact the parameters recalled in

§188(2)94 do not foresee typical contracts. This uniform application is in

93 X. XXXXXXXX, Le obbligazioni contrattuali, page 122.

94 § 188(2):” In the absence of an effective choice of law by the parties (see 187), the contacts to be taken into account in applying the principles of s 6 to determine the law applicable to an issue include:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(d) the location of the subject matter of the contract, and

(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.

compliance with the general American conflicts of law legal order because, in contrast to the Rome I Regulation, it does not provide exceptions due to rationalization’s reasons.

Furthermore, another distinction deals with the nature of these criteria. In fact, the application of art. 4(1) and 4(2) of Rome I Reg. is based exclusively on abstract parameters and the vast majority of them refers to the residence’s requirement, thus there is no evaluation of the specific case if the elements of the norms are satisfied, on the other side § 188 always requires a case by case analysis and this methodology can be deducted in both § 188(1;2) because they recall § 695. Thus, the principles stated in § 6 underlie all rules of choice of law that are used by the judge in evaluating the significance of a relationship, with respect to the particular issue, to the potentially interested states, the transaction and the parties.96

§188(1) establishes that “a court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law” thus, it is expressed that in case of absence of choice of law in the contract97, the court has a constitutional limit which can not overcome, therefore is obliged to apply its own rules of private international law in order to individuate the law applicable to the specific case. However, because of the fact that the statutes which provide for the application of the local law of one state, rather than the local law of another state, are few in number,98 the courts are used to refer to the factors listed in §188(2) that can be

956 §: (1) “A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law.

(2) When there is no such directive, the factors relevant to the choice of the applicable rule of law include:

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and

(g) ease in the determination and application of the law to be applied.”

96 Official Comment, §6.

97 Domestic or international, because it applies to both cases.

98 Official Comment, §6(1).

divided into five groups. Each of this group represents an interest of a determinate subject and the judge, in order to determine the applicable law shall observe these rules and shall give priority to one or more of them, depending on the specific case:

1) The first group is aimed to protect the harmonization of relationships at transnational level, furthermore the official comment recalls the international relations as well and this reference supports the idea that sections § 187 and § 188 refer also to international contracts and are not limited to domestic agreements;

2) The second group recalls the interests of the states involved in the specific issue and the interests of the forum to apply the specific law;

3) The third group involves the needs of the parties, namely the protection of their justified expectations and certainty and predictability of result;

4) The fourth group is directed to implementation of the basic policy underlying the particular field of law;

5) The fifth group deals with the needs to protect the judicial administration.99 Therefore, when dealing with the contractual matter, in case of choice of law problems of allocation when there is no choice of law neither expressed or implied put in place by the parties, the judge shall implement the principles established by

§ 6 with those provided by § 188(2).

4. The connection between the chosen law and the parties, art. 2(4) of the Hague Principles

The freedom of parties to choose the applicable law is applied in a different way depending on the legal system. Some legal orders require a substantial connection between the chosen law and the parties or their transactions, others not. Once again, the Hague Principles demonstrate its innovative scope in art. 2(4). This

99 Official Comment, §188(1).

provision foresees that “No connection is required between the law chosen and the parties or their transaction”, thus it warrants to the parties the broadest freedom in choosing the law applicable to the contract, without referring to any other connection, fully in compliance with the aim of the Hague principles in promoting party autonomy in choice of law. Furthermore, this provision is in line with the increasing delocalisation of commercial transactions,100 in fact, the Hague principles recognize that the parties of a contract shall have the freedom to choose with no binding connections mainly for two reasons. The first is that the parties may want to apply a specific law because it balances the rights and duties of both subjects or because it does not favor any of them, thus its neutrality. On the other side, the second reason may consist on the fact that a specific law provides a favorable regulation for the kind of transaction put in place by the parties.

The first reason has particular consequences in a global economy, where art. 2(4) fits perfectly. In fact, the opportunity to choose the applicable law affects the global market in two ways.101 The possible negative consequence in choosing a third and neutral law may be the expensive cost for parties, because it obliges them to put in place additional searches and information costs, thus parties’ profit maximization is affected.102 However, among the potential neutral laws, rational parties can be expected to prefer a contract law that is often chosen by the subjects who are used to contract in that specific field. Moreover, the law of the State chosen would benefit from a ‘network effect’103, that is an economical mechanism

100 Official Comment on the Hague Principles on Choice of Law in Commercia Contracts, 2.14 101 S. VOEGENAUER, Regulatory Competition through Choice of Contract Law and Choice of Forum in Europe: Theory and Evidence, European Review of Private Law, 2013, page 24–25 ; The Harmonisation of European Contract Law: Implications for EuropeanPrivate Laws, Business and Legal Practice, Oxford: Xxxx Publishing, 2006 ; The European Community’s Competence to Pursue the Harmonisation of Contract Law – an Empirical Contribution to the Debate, Xxxx Publishing, in The Harmonisation of European Contract Law: Implications for EuropeanPrivate Laws, 2006.

102 E.G. transaction costs.

103 Id note 103 : ”The value of a product or service to a single user depends on the number of other users. The more users adopt the product or service, the greater its social value. Once the number of users of the network has reached a certain threshold (‘xxxxxxxx xxxx’), it will be exponentially more attractive to an increasing number of users and will ultimately become dominant.”

which can be applied to legal systems as well. In fact, it has been observed that the larger is the number of transactions governed by a legal regime, the more it can be predicted that others will also opt for that legal order and the consequence is that the market of the law chosen will be improved and implemented, developing the specific transaction and ensuring in a better way the interests of future parties. 104

As it has been noticed, the Hague Principles admit the broadest freedom of choice of law in the contractual matter, however art. 2(4) as the other sections, is subject to specific limits in order to warrant minimum controls on party autonomy and to avoid fraude à la loi. These limits are exceptions to party autonomy, they are the ordre public and overriding mandatory laws established by Article 11105. Thus, art. 11 is considered a “sufficient counterbalance” to the ability of the parties to choose an unconnected law to apply to their contract.106

It is true that the Hague Principles are the most innovative source of law in private international law, however The opportunity to choose the applicable law to an international contract which is not connected to the parties or the transaction is common in some other systems at p.i.l.107 The most relevant example is Rome I regulation, which is also a model for the Hague Principles from this point of view. Art. 3(1) of reg. 593/2008 recalls the general principle under which parties are free to determine the law applicable to the contract, however the further sections establish several exceptions to party autonomy. Specifically, there are two apparent limits which are underlined by art. 3(3,4):108

104 Id.

105 It will be analyzed in Chapter III.

106 M. PERTEGAS & X. X. XXXXXXXX, Party Autonomy and its limits: Convergence through the new Hague Principles on Choice of Law in International Commercial Contracts, page 992 107 An example may be art. 7(1) CISG: “A contract of sale is governed by the law chosen by the parties. The parties' agreement on this choice must be express or be clearly demonstrated by the terms of the contract and the conduct of the parties, viewed in their entirety. Such a choice may be limited to a part of the contract.”

108 Art. 3(3) Reg. 593/2008: “Where all other elements relevant to the situation at the time of the choice are located in a country other than the country whose law has been chosen, the choice of the parties shall not prejudice the application of provisions of the law of that other country which cannot be derogated from by agreement.”

1) Art. 3(3) recalls the obligation not to derogate the mandatory laws of the State which has all the relevant elements of the contract.

2) Art. 3(4) imposes a bound for intra-European transactions. It demands to the obligation not to derogate the Community laws which has been properly implemented, when all the elements of the contract refer to a specific E.U. member State.

However, differently from section § 187(2) of the Restatements, the limits imposed by art. 3 are considered as a posteriori limits, because expressly refer to “the time of the choice”. Thus, a priori, in the European context it is implicitly recognized the opportunity to choose the applicable law to the international contract with no connection referred to a specific State but the only limits which are required are applied after the conclusion of the contract, without influencing its broad scope.

The only exceptional geographical limits that are imposed a priori in Rome I Regulation with the contractually chosen State are established in contracts for the carriage of passengers and insurance contracts. The mandatory call is showed in contracts for the carriage of passengers when art. 5(2) of Rome I says:” The parties may choose as the law applicable …… only the law of the country where”, the word “only” limits the parties’ choice to the laws of the country of:

1) The passenger has his habitual residence; or

2) The carrier has his habitual residence; or

3) The carrier has his place of central administration; or

4) The place of departure is situated; or

5) The place of destination is situated.

Art. 3(4) Reg. 593/2008: “Where all other elements relevant to the situation at the time of the choice are located in one or more Member States, the parties' choice of applicable law other than that of a Member State shall not prejudice the application of provisions of Community law, where appropriate as implemented in the Member State of the forum, which cannot be derogated from by agreement.”

On the other side, with regard to insurance contracts, Article 7109 differentiates between contracts covering ‘large’ risks, wherever situated, and contracts covering other risks situated within the territory of an EU member State, 110 providing art. 7(2) several criteria:

1) The law of any Member State where the risk is situated at the time of conclusion of the contract;

2) The law of the country where the policy holder has his habitual residence;

3) In the case of life assurance, the law of the Member State of which the policy holder is a national;

4) For insurance contracts covering risks limited to events occurring in one Member State other than the Member State where the risk is situated, the law of that Member State;

5) Where the policy holder of a contract falling under this paragraph pursues a commercial or industrial activity or a liberal profession and the insurance contract covers two or more risks which relate to those activities and are situated in different Member States, the law of any of the Member States concerned or the law of the country of habitual residence of the policy holder.

Therefore, it can be so stated that from the structural point of view and concerning the possibility to choose the contract law with no potential limits, Rome Regulation lies in between the Hague Principles and § 187(2) of the Restatements. Thus, on one hand it is located a step back the Hague principles because the latter expressly

109 Art. 7(2) Reg. 593/2008: ”An insurance contract covering a large risk as defined in Article 5(d) of the First Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance shall be governed by the law chosen by the parties in accordance with Article 3 of this Regulation.

To the extent that the applicable law has not been chosen by the parties, the insurance contract shall be governed by the law of the country where the insurer has his habitual residence. Where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with another country, the law of that other country shall apply.”

110 S.C. XXXXXXXXXX, Party autonomy in Rome I and II from a comparative perspective, page

525.

recognize the right attributed to the parties whereas the former recognizes it implicitly. On the other hand, it is a step forward the Restatements, because it pushes for party autonomy and freedom of contract and imposes exceptional geographical substantial a priori connections only to specific kind of contracts, whereas in the United States the limit of substantial connection affects the conclusion of all interstate/ international contracts both a priori and a posteriori.

4.1. The connection between the chosen law and the parties, the U.S. context and the substantial connection under § 187(2)

The freedom to choose the applicable law in the United States a priori is less protected than the European counterpart. Art. § 187(2) assumes that: ”The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either

(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or

Concerning the general freedom of contract, what makes the difference from the European and the International model is that the American choice of law needs at least one of these requirements, explicated in § 187(2a) :

1) The substantial relationship between the chosen law and the parties or the transaction ; or

2) Any other reasonable basis under which the parties have chosen that law.

First, it is necessary to say that the Restatements do not provide a definition of the terms “substantial relationship” and “reasonable basis”, thus it has been considered that this legislative vacuum is a deliberate policy choice.111 In fact, this decision is fully in compliance with the American system because it shows a low degree of confidence in the legislator’s ability to establish one general rule suitable to all solutions and, on the other side, it demonstrates a high degree of confidence in the courts’ ability to do the same on a case-by-case basis. Furthermore, the mandatory requirements are in line with what is established by the commentary to §187, as the provision does only apply “when two or more States have an interest in the determination of the particular issue”.

Thus, the substantial relation or any other reasonable basis must be relevant in the sense of creating another State interest in applying its own choice of law112 and, more important, it must not be fictional. Thus, the mere will of parties in choosing another State law, both foreign or domestic, can not be interpreted by judges as a valid connecting criterion if it is not truly related with that State. Even if the Restatements do not provide a definition of “substantial relation”, case law and doctrine intervened attributing interpretations of the latter. The purpose of this substantial relationship requirement is to limit and control the exercise of party autonomy in choosing the applicable law, because the U.S. system tends to overview the parties’ transactions in order not to evade the otherwise applicable local law. This limitation, however, is restricted to the case in which there is no a priori contact established with the foreign nation sufficient to create a substantial relationship.

111 S.C. SYMEONIDES, Party Autonomy in Rome I and II from a Comparative Perspective, page 517.

112 X. XXXX, Party Autonomy in the Private International Law of Contracts: Transatlantic Convergence and Economic Efficiency, Comparative Research in Law & Political Economy. Research Paper No. 4/2007, 2007, page 10; The Problems of International Transactions: Conflict of Laws Revisited. In: Journal of Private International Law, 2010, page 59-91; Conflict of Laws in a Globalized World, Cambridge University Press, 2007.

Substantial relationship means that there must be specific a priori factual contacts with the chosen State. These contacts may be different depending on the specific case, however they shall comply with the factors enlisted in section 6, even if it is usually referred to the place of performance of the contract or the domicile of a party because these factors "virtually exhaust all important elements of the transaction and no other State may therefore usually be selected by the parties”113.What is different from the European context and is shown in section 6, is that the will of parties is not considered per se as a connecting criterion, thus the judge can not consider a choice of law substantively related to the parties or the transaction only on that base. In fact, in case of expression of the will of parties with no a priori contact falling into § 6, the consequence will be the occurrence of

§188 and thus will be applied the criteria established for absence of choice of law.114

However, art. § 187(2) enlists another criterion alternative to the requirement of the substantial relationship, that is the “reasonable basis” for the parties to choose a law of a specific State or Nation. Under this option, parties may choose a law that has no substantial relationship if there is some other basis that makes the choice reasonable. As anticipated, the Restatements do not provide for definition of this criterion, therefore it is necessary to recall the doctrinal opinions and case law because the regime is subject to flexible interpretations.115Thus, the main case in which parties choose a law different from their country deals with the development of the State. In fact, a reasonable basis can be considered a case where the parties conclude and perform the contract in an undeveloped State which is not able to satisfy the interests of the parties, and this event must be construed

113 X.X. XXXXXX ET AL., Conflict of laws, page 947-48, 4th ed. , 2004; Cases and materials on conflict of laws, 19th ed. , 1981.

114 A.D. XXXXXXXXXX, Party Autonomy and Choice-of-Law:Restatement (Second), Interest Analysis, and the Search for a Methodological Synthesis, Hofstra Law Review, 1976, " Such a basis exists when the parties are contracting in countries whose legal systems are strange to them as well as relatively immature.", page 8.

115 X. XXXX, Party Autonomy in the Private International Law of Contracts: Transatlantic Convergence and Economic Efficiency, Page 12 ss; Id note 116.

according to § 6(1d) of the Restatements, which expressly recognizes as interpretative criterion the protection of justified expectations.

However, there are other situations in which the parties have other reasons that fall into the broad definition of 187(2a). In Xxxxx v. Xxxxx Xxxxxxxx Pontiac-Buick, Inc.116, both parties, a car dealer and the buyer, were from Arkansas and put in place retail installment agreement, however, the car dealer had its domicile in Texas and in the contract was specifically provided that the buyer should have contacted in case of questions or inquiries, the address and telephone number based in Texas. Furthermore, evidence showed that it was signed a separate agreement in bold which foresaw “ To contact the holder of your Contract about this account call the number appearing with the Assignee's name in the ASSIGNMENT section. Additionally, under the GENERAL TERMS section, it is agreed that the contract will be governed by the law of the State of Texas.”

Thus, because of the provided evidences from the contract, the Supreme Court of Arkansas assumed that it was irrelevant the fact that both parties were resident in the same State, as the will of parties to apply Texas law was expressed under general terms in a separate agreement and this assignment in combination with the buyer’s knowledge of it established a reasonable basis with Texas. On the other

116 Supreme Court of Arkansas. No. 98-191. January 28th , 1999 :” usury case involving a choice- of-law provision in a retail installment contract. After entering the agreement, Xxxxx began to make payments on the Buick Skylark to First Fidelity by mailing the payments to First Fidelity's Texas office, which First Fidelity required. Some months later, Xxxxx stopped making payments and fell into default. He then filed suit in Sebastian County Chancery Court on June 17, 1997, naming Xxxxx Xxxxxxxx and Autobond, to whom the contract had been assigned when Xxxxx went into default, as separate defendants. Eight days later, the vehicle was repossessed from Xxxxx'x place of employment. Xxxxx'x complaint alleged that the retail installment contract was usurious under Arkansas Constitution, Article 19, section 13, and that, because Xxxxx Xxxxxxxx and Xxxxx were Arkansas residents, and the contract was a wholly Arkansas contract, Xxxxx Xxxxxxxx and Xxxxx could not choose for Texas law to govern their agreement. Xxxxx later amended his complaint to add First Fidelity as a party defendant. The second amended complaint claimed that the subsequent assignment to First Fidelity by Xxxxx Xxxxxxxx was merely a scheme to cloak its usurious nature. Xxxxx amended his complaint a final time on September 3, 1997, whereby Xxxxx added that Xxxxx Xxxxxxxx had violated certain federal Truth-in-Lending laws. The prayers for relief of the various complaints asked that the chancellor find the contract void for usury and allow Xxxxx a double recovery for the interest paid on the contract. Xxxxx also demanded the return of his vehicle free of any liens. Finally, Xxxxx requested that First Fidelity be enjoined from putting any provision in its contracts in violation of Arkansas usury law.”

hand, there may be situations in which the parties do not have a good reason for a choice of law, and example may be provided by the commentary to Restatement § 187(2a) which assumes that the parties enter into contracts for serious purposes and usually do not provide for choice-of-law clause “in the spirit of adventure” or to provide “mental exercise for the judge”. 117 This interpretation as well is in line with the true mandatory a priori contacts, thus it must not be merely fictional.Based on these approaches, section § 187 looks quite restrictive. It has in fact been argued that the substantial relationship and reasonability tests allow only a limited freedom of contractual choice, thus improvement to the first lex loci contractus is very circumscribed and the requirement that the chosen law must have a significant, objective connection to the parties or their contract can be compared to the various theories of localization which spread in the past.118 However, there are other approaches of different States which must be considered.

One of them is adopted by several States that have enacted provisions which allow the opportunity to choose the applicable law of the contract, regardless any substantial relationship, exclusively depending on the amount of the transactions and there are two main reasons behind this inner State legislative choice.

The first is that not every State is equal, thus each State has discretion in deciding the legal order concerning private international law matter. The second is an economical reason, in fact several U.S. State legislator preferred to confer a higher freedom of contract to the parties rather than other States when the transaction is relatively onerous in order to satisfy the need to “secure and augment reputation as a center of international commerce"119 Thus, Texas has enacted a provision that allows a choice of law for transactions which are over $1,000,000.00 regardless of

117 Id note 117.

118 X. XXXXXXXX, Aspects philosophiques du droit international privè, 1958, page 83; Les conflits de xxxx en matiere de contrats, 1938 page 38; H.A. GRIGERA NAÓN, Choice of law problems in international arbitration, Fordham International Law Journal, 1992, page 155-157; The Role of International Commercial Arbitration, , 65 Arb. 266, 1999, page 266.

119 Radioactive, X.X. x. Xxxxxx, 153 X. Xxxx. 2d 462, United States District Court S.D. New York, July 29th 2001.

whether the transaction bears a reasonable relation to that jurisdiction. Furthermore, other States as California, Delaware and New York120 provide their own legislation, by which impose a specific threshold.121

On the other side, another approach is followed by those States that are into the U.C.C., in fact if a contract falls into that scope the U.C.C. shall prevail over the Restatements because of its lex specialis nature.

120 CAL. CIV. CODE § 1646.5:” Notwithstanding Section 1646 , the parties to any contract, agreement, or undertaking, contingent or otherwise, relating to a transaction involving in the aggregate not less than two hundred fifty thousand dollars including a transaction otherwise covered by subdivision (a) of Section 1301 of the Commercial Code , may agree that the law of this state shall govern their rights and duties in whole or in part, whether or not the contract, agreement, or undertaking or transaction bears a reasonable relation to this state.” ;

DEL. CODE XXX. tit. 6, § 2708: “a) The parties to any contract, agreement or other undertaking, contingent or otherwise, may agree in writing that the contract, agreement or other undertaking shall be governed by or construed under the laws of this State, without regard to principles of conflict of laws, or that the laws of this State shall govern, in whole or in part, any or all of their rights, remedies, liabilities, powers and duties if the parties, either as provided by law or in the manner specified in such writing are: (1) Subject to the jurisdiction of the courts of, or arbitration in, Delaware; and (2) May be served with legal process. The foregoing shall conclusively be presumed to be a significant, material and reasonable relationship with this State and shall be enforced whether or not there are other relationships with this State. (c) This section shall not apply to any contract, agreement or other undertaking: (1) To the extent provided to the contrary in § 1-301(c) of this title; or (2) Involving less than $100,000.” ;

N.Y. GEN. OBLIG. LAW § 5-1401: “Choice of law. 1. The parties to any contract, agreement or undertaking, contingent or otherwise, in consideration of, or relating to any obligation arising out of a transaction covering in the aggregate not less than two hundred fifty thousand dollars, including a transaction otherwise covered by subsection one of section 1-105 of theuniform commercial code, may agree that the law of this state shall govern their rights and duties in whole or in part, whether or not suchcontract, agreement or undertaking bears a reasonable relation to this state. This section shall not apply to any contract, agreement or undertaking (a) for labor or personal services, (b) relating to any transaction for personal, family or household services, or (c) to the extent provided to the contrary in subsection two of section 1-105 ofthe uniform commercial code.”

121 Id note 117; X. XXXXXXX, Into the Abyss: How Party Autonomy Supports Overreaching 1rough the Exercise of Unequal Bargaining Power, Xxxx Xxxxxxxx Law Review, 2003, page 421; Survey of New York Commercial Law, 53 Syracuse Law Review, 2003, page 383.

4.2. The connection between the chosen law and the parties, the U.S. context and the substantial connection under 1-301 U.C.C.

Section 1-301 of the UCC provides that, “when a transaction bears a reasonable relation to the forum State and also to another State or nation the parties may agree that the law of either the forum State or of such other State or nation shall govern their rights and duties.” This section is substantially akin to the previous 1-105 of the U.C.C., as the proposal of the revised 1-301 has been rejected by the vast majority of the States between 2007-2008. Thus, in contracts covered by current 1-301 of the U.C.C., a reasonable relation with the chosen State is the only express condition for allowing a contractual choice of law. This approach differs from the others examined because it is more liberal, as it is shown by the single limit of the reasonability of the relation imposed, opposed to the double limit of the Restatements. Thus, the right of the parties to choose the governing law is attributed to multi-state and international transactions. Second, the parties are limited in their choices to the law of one of the jurisdictions that bears a reasonable relation to the transaction and there is no distinction between commercial and consumer transactions.

An example is shown in Dayka & Xxxxxxx, LLC. V. Del Monte Fresh Produce N.A., Inc.122, where the Arizona Court of appeals provided a broad interpretation of the reasonable relationship established in 1-301 by assuming that “the law of the debtor’s jurisdiction governs perfection if the debtor is located in a jurisdiction with a system for recording security interests for priority.”123 In fact, in this case even if the debtors resided in Mexico, evidence showed that Mexico did not have an established system for recording security interests at the time of the agreement between the debtors and the counterpart. Therefore, the court maintained that the debtors were located in the District of Columbia and the laws of that jurisdiction

122 Benkendorf v. Advanced Cardiac Specialists, Arizona Court of Appeal, 269 P.3d 704, January 24th 2012.

123 Id.

governed the perfection of the contract. This case shows how the reasonability test applies differently, in fact, if the case had been interpreted under the Restatement

§ 187(2), the court would have probably applied Mexican law because the criterion of residence falls into the “substantial relationship”, thus it would have prevailed over the “reasonability test”. On the other hand, the U.C.C. allows more flexibility and judges are called to apply the specific case considering all the circumstances.

Thus, as Mexican law did not provide specific regulation at the time of the agreement and in addition the debtor had a connection124 with another State, the Arizona Court of appeal reasonably applied, for the sake of the transaction, the law of that State which provided regulation for the system of recording security interests.

5. Freedom to choose the terms of the contract. The Battle of Forms

In order to put in place a valid agreement it is required that the parties meet their will, which is manifested in the match between offer and acceptance. However, during the course of the 20th century commercial transactions changed considerably compared to the first years of the latter, thus have emerged new forms of commercial contracts that impose the so named “standard terms”125. These terms are very common in these kinds of transactions and at the same time are difficult to interpret when the will of the parties is not clearly stated. However, during contract formation and in compliance with the exercise of the freedom of contract, the parties have the opportunity to include in the negotiations of the

124 Even if it is a weaker connection than the residence criterion.

125 X. XXXXXX XXXXXXXX, Solving the Xxxxxx of Conflicting Choice of Law Clauses in Battle of Forms Situations: The Hague Solution, Yearbook of Private International Law, 2013 page 71 ss.; Primary drafting responsibility for the official commentary to Article 6, in Hague Principles on Choice of Law in International Commercial Contracts, Official Commentary, Hague Conference of Private International Law, 2013, page 27-31.; The Hague solution on choice-of- law clauses in conflicting standard terms: paving the way to more legal certainty in international commercial transactions?, in Uniform Law Review, 2017, page 351-368.

agreement their own standard terms and this opportunity attributed to the parties finds the legal grounds on the cornerstone of contractual relationships, thus the principle of party autonomy which consents to parties to construct their contractual relationship according to their needs and requirements.126

However, problems may arise when under the specific circumstances of the contract is not clear which terms the parties intended to be part of the contract. In fact, it may occur that the terms of the offer differ from the terms of the acceptance because the party who is supposed to accept alters the terms and the offeror does not respond to the change.

More in general, every time in which there is a discrepancy between the terms of the contract, it is said that there is a battle of forms and the issue is relevant both at domestic and transnational level. Battle of forms thus can be considered from a domestic and material point of view or from the perspective of private international law. Concerning the first case in order to determine the applicable solution, what is relevant is the interpretation of the material law provided by the States’ legal order. On the other hand, international contracts are subject to a more complicated issue, that is the case in which the parties intended their own construction of standard terms when referring to the contract and interpretations differ one from the other.

Courts in all legal systems experience difficulty in resolving this issue on the basis of general principles of contract law, both at domestic and international level. Furthermore, the matter is plumped by the fact that not every State dispose provisions in their legal order that deal with the battle of forms problems. An example may be the Italian legal order, in fact the general principles established by art. 1326-1327127 of the Civil Code dispose rules on offer and acceptance, but

126 X. XXXXXXX, X.X. XXXXXXXXXX,The battle of forms: a comparative analysis, Comparative and International Law Journal of Southern Africa, 2006, page 1; The Requirements for the Inclusion of Standard Terms in International Sales Contracts, Potchefstroom Electronic Law Journal, 2011.

127 Art. 1326 c.c.: ” The contract is concluded when the person making the proposal is aware of the acceptance of the other party. Acceptance must reach the offeror within the term established

the Code and Italian law in general do not specifically deal with material rules on the battle of forms and more important these norms can not be transposed in international contracts when choice of law problems arise, as they are not rules of private international law.

In fact, this is the point at issue. Thus, as each Country is free to follow its own rules on battle of forms, if it whishes, questions may be arisen when the transaction is international and the States provide different solutions on the applicability and the interpretation of the “standard terms”. The Hague Principles on Choice of Law on International Commercial contracts are very important from this perspective, because rules on battle of forms as a choice of law in transnational contracts have never been challenged before any State because of its complexity.

Before providing its solutions and in order to better understand the innovations proposed by the Hague Principles, it is necessary to examine the various theories used to solve the battle of forms from the material perspective. I believe that an analysis of the United States legal order 128 in this context is the most appropriate because American case law and the U.C.C. adopted basically all the approaches which can be found separately in other courts of other States, thus American law provides a mixtum of approaches all in a single country.

by him or in that necessary according to the nature of the deal or according to the uses.”; 1327 cc: If, at the request of the offeror or due to the nature of the deal or the uses, the service must be performed without a prior reply, the contract is concluded in time and in the place where the execution began.”

128 Even if the U.S. is not the only legal order that deals with the battle of forms. E.G. Australia,

N.C. SEDDON/ X.X. XXXXXXXXXX, Cheshire and Xxxxxx's Law of Contracts 9th Australian ed. 2009; England, X. XXXXXXX, The Law ofContracts (12'h ed.), London 2007, X. XXXX, The Law of Contract, 12th ed., London, 2007, China, X. XXXX, Contract Law in China, Hong Kong et al. 2002.

5.1. The material Battle of Forms, an analysis from the American perspective

The American legal order is used to the issue of battle of forms. Before the formation of the U.C.C, divergences between the terms of the contract were solved exclusively under the common law, thus a bunch of black letter law has been imprinted in the Restatements. From 1952 on when the U.C.C. was issued, American States started to adopt it in order to warrant a uniform law application in specific matters. Thus, the relevant section of the U.C.C. concerning the battle of forms is 2-207, which applies in commercial sales contract and provides a mixtum of the battle of forms theories applied differently depending on the specific case.

Thus, American case law shows that there are more ways in which a battle of forms can be resolved, at least four129, depending on the judge’s interpretation and on the specific State’s legal order.

The first solution adopted by common law American courts when the issue does not fall within the U.C.C. is the mirror image rule. According to this theory, in order to validate the agreement, it is necessary that the offer and the acceptance match, thus the terms imposed in the first must be the same of those established in the latter. In case of divergence between these these two acts, the acceptance that contains additional or different terms from the offer is treated as a counter offer, therefore if the recipient of the counteroffer starts performing the contract without objecting on the new terms, a contract has been formed because the beginning of the performance constitutes acceptance of the terms of the final offer in the series triggering the effect that the last set of terms prevails and becomes part of the contract. Because of the fact that the counter offer prevails on the previous offer,

129 Id note 129.

the solution adopted is called last shot rule, as a corollary of the mirror image approach.130

The traditional mirror image approach is shown in Ardente vs Horan131, here the Supreme Court of Rhode Island judged in favor of Xxxxx, the defendant, assuming that “a valid acceptance that is capable of forming a valid contract must be definite and unequivocal and must not impose additional conditions or limitations on the offer, unless such conditional language is clearly independent of the actual acceptance.”132 In fact, the court found that Xxxxxxx’x letter imposes additional conditions that alter his acceptance under the mirror image rule as his letter of acceptance is conditional, and thus operates as a rejection of the Horans’ offer that is incapable of creating a valid contract. Thus, his letter operates as counteroffer with additional terms and no contractual obligations are created.

On the other hand, when the transaction falls into the U.C.C. scope, according to 2-207133 the latter provides different approaches depending on the interpretation

130 X.X. XXXXXXXXXX, X. XXXXXX, X.X. XXXXX, X.X.X. XXXXXX. X.X. XXXXXX, Contracts cases and materials, 8th edition Foundation Press, 2013, page 201; X. XXXXX, La battle of forms nel diritto xxxxxxxxx, in Diritto internazionale, 2006, page 5.

131 Supreme Court of Rhode Island 366 A.2d 162 (1976), “Xxxxxxx and Xxxxxxxxx Xxxxx, the defendants, offered to sell residential property in the city of Newport and Xxxxx Xxxxxxx, the plaintiff, bid $250,000 for the property. The Horans’ attorney communicated that the bid was acceptable and prepared a purchase and sale agreement which he forwarded to Ardente. The latter executed the agreement, and his attorney forwarded it back to the Horans. Ardente also included with the agreement a check for $20,000 and a letter asking if certain furniture and fixtures were a part of the transaction and requesting that they remain with the property. The Horans refused to sell the items listed by Xxxxxxx and returned the unsigned purchase and sale agreement and the

$20,000 deposit to Ardente. The Horans refused to sell the property to Xxxxxxx, and Xxxxxxx brought suit seeking specific performance.”

132 Id.

133 Section 2-207 U.C.C. “(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2) The additional terms are to be construed as proposals for addition to the contract between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or

(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In

of the contract. Because of the fact that results diverge on the specific cases and different rules may be applied, Section 2-207 represents a hybridism134 in battle of forms and no other Country has a similar provision.

The first part of section 2-207(1) shows the first shot rule, which can be considered as an opposite rule compared to the common law approach. Whereas the latter requires a perfect match between offer and acceptance, the first admits the divergence between the terms of the offer and those of acceptance in order to form the contract if the two requirements imposed by 2-207(1) are satisfied. First, it must be a definite and seasonable expression of acceptance and second, it must reach the recipient within a reasonable time. In this event, the terms of the contract are essentially those of the offer and the additional terms are included in the agreement. However, the last shot rule is subject to a limit provided by the second part of 2-207(1), the overcoming of which forbids the application of the rule, imposed by the same norm. Thus, it does not apply if the “acceptance is expressly made conditional on assent to the additional or different terms”.

Section 2-207(2) as well reasserts the different approach compared by the common law, stating that if the parties to the contract are both merchants135, the additional terms “automatically become part of the contract” However it sets limits to the first shot rule when there are determinate circumstances. Thus, (a) the offeror has stated in his offer that he will agree only on the basis of his terms; (b) the additional terms will materially alter the existing contract; or (c) the offeror has already objected or objects within a reasonable time.

such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.”

134 X. XXXXXX XXXXXXXX, Solving the Xxxxxx of Conflicting Choice of Law Clauses in Battle of Forms Situations: The Hague Solution, page 78.

135 U.C.C. Section 2-104, “ a merchant is defined as a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill”.

The main example of the application of 2-207(1) is provided in Xxxxxx x. Xxxxxxx & Xxxxxx Corp.136 and this is also the case where the court established the prevalence of the U.C.C. by stating that ”the mirror image rule of the common law, which treated an acceptance with different or additional terms as a counteroffer, has been replaced.”137 According to the Court’s analysis, an acceptance that contains additional or different terms is effective under 2-207(1). Furthermore, according to 2-207(2) in agreements between merchants, the different or additional terms are deemed accepted, unless they materially alter the agreement. If, however, the offeree’s acceptance was made expressly conditional on acceptance of the additional or different terms, there must be assent to those terms, or the acceptance is not effective and no contract is xxxxxx000.

Lastly, another consequence of the application of 2-207 may be the knock-out rule. This rule is not expressly stated in the U.C.C. as the latter provides solutions when the terms disposed in the acceptance are additional, however it does not expressly foresee regulation for the case in which terms added are different. Therefore, case law and doctrine hold that different terms knock each other out and the contract is governed by the terms common in substance and the different terms are replaced by the default rules of the U.C.C.139

The application of the knock out rule has been used in Northrop Corporation v. Litronic Industries140 where the court eliminated from the contract both terms

136 Xxxxxx x. Xxxxxxx & Xxxxxx Corp., United States Court of Appeals for the Sixth Circuit 453 F.2d 1161, January 6th 1972 :” Xxxxxx, plaintiff, who did business as Carpet Mart, purchased carpets from Xxxxxxx & Xxxxxx Corp, the defendant, for three years before bringing an action against Xxxxxxx for fraud and misrepresentation regarding the quality of the carpets. Xxxxxxx moved to enforce an arbitration clause that was printed in small print on the reverse side of all of its sales acknowledgment forms. These forms were sent to Xxxxxx in response to Xxxxxx’x telephone orders and were received by Xxxxxx in almost all cases prior to Xxxxxx’x receipt of the carpet shipment. Xxxxxx accepted each of the carpet shipments without objecting to the terms on the sales acknowledgment forms.”

137 Id note 140.

138 Id note 140.

139 X. XXXX, The battle of the forms: Comparative and economic observations, page 200. 140Northdrop Corp. v. Litronic Industries, United States Court of Appeals for the Seventh Circuit, 29 F.3d 1173 July 18th 1994 : ” Litronic Industries, the defendant, sent a written offer to Northrop Corporation, the plaintiff, to sell Northrop printed wire boards. The offer contained a 90-day

imposed by the parties and replaced them with U.C.C. 2-309. The court stated that section 2-207(2) of the U.C.C. only specifically addresses additional terms, and not different terms, thus it is a matter of the Court to decide which approach adopt and, in this case has been adopted the majority view141and thus knocked both terms out.

5.2. The international Battle of forms, first approaches and the Hague Principles

After examining all the substantive approaches which could be encountered in domestic battle of forms, the issue shall be transposed at an international level. There are yet many problems in qualifying the best approach in interstate transactions in the U.S. context and these problems are even more difficult to solve in international agreements. In fact, if every State follows its own approach on resolution of standard terms142 and parties into an international contract refer to its own standard terms, which law should be applied? Because of the fact that there was no black letter law until 2015, judges who were called to solve the specific cases applied the same theories transposed at an international level, however there was no uniform criteria and each State could apply its own interpretation.

warranty on the boards. Xxxxxxxx informed Litronic by phone that it accepted the offer and would send Litronic a formal purchase order. Based on previous business with Northrop, Litronic was familiar with Northrop’s purchase order form, which provided for a warranty that contained no time limit. Xxxxxxxx received the boards but did not complete its testing of the boards until six months later. Xxxxxxxx returned the boards to Litronic, claiming they were defective. Litronic refused to accept the returned boards because its 90-day warranty had lapsed. Xxxxxxxx claimed it had an unlimited warranty under the terms of its purchase order. Xxxxxxxx brought a diversity suit against Litronic.

141 There are other two approaches concerning the regulation of the “different terms”, mentioned by the Court in this judgement:” 1) the leading minority view assuming that the different terms included in the acceptance are ignored; 2) under California’s approach, UCC § 2-207(2) is interpreted to treat different terms the same way as additional terms, with new terms in an acceptance becoming part of the contract if they are not materially different from those included in the offer.”

142 E.G. Canada applies last Shot rules and Swiss applies first shot rule.

One of the first way to solve international conflicts consists on simplifying the issue by applying the lex fori.143, however nowadays this option shall be considered as residual because of several reasons.

1) The first is showed by authoritative doctrine who assumes that “applying the lex fori is however an imperfect solution and reliance on the law of the forum raises an obvious forum shopping objection"144, in fact the application of the latter is not in compliance with the aim of uniformity to which international private law is inspired and the forum is often chosen for procedural reasons that do not share a link between the contract and the lex fori;

2) Another reason is that the law of State where the court is based may lead to a solution completely different to those referred by the parties’ Countries145, thus the will of parties can be impaired under this perspective;

3) Finally, the last reason deals with a black letter rule established in time by many sources of law146, included the Hague Principles147. Today is in fact a general principle of international private law the severability between choice of law and choice of courts, thus the fact that the parties have chosen a determinate law does not entail the choice of a determinate court and viceversa.

143 X. XXXXXX XXXXXXXX, Solving the Xxxxxx of Conflicting Choice of Law Clauses in Battle of Forms Situations: The Hague Solution, page 82 ss.

144 X. XXXXX, Die Quelle der Partei autonomie und das Statut der Rechtswahlvereinbarung im internationalen Vertragsrecht, Basel 2011, page 151 ; Id note 148.

145 E.G. a case where party A refers to the standard terms of the State X which applies the last shot rules and party B refers to the standard terms of the State Y which applies the first shot rules. As the court is unsure on which law apply it decides to interpret the case according to the law of the forum, which refers to the knowck out rule.

146 UNCITRAL Model Law on International Commercial Arbitration, Article 16:” Competence of arbitral tribunal to rule on its jurisdiction (1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.” 147 The Hague Principles, art. 7:” A choice of law can not be contested solely on the ground that the contract to which it applies is not valid.”

Another common approach to solve the international conflicts is to apply the knock out rule. This approach has been examined in the domestic context and it has been transposed in private international case law if parties use conflicting choice of law clauses in their standard terms. In this case the choice will be ineffective and the different choice of law standard terms are knocked each other out in the same way as the domestic context. The consequence is that the applicable law is determined according to objective connecting factors.148 However, this theory has been criticized because of the fact that no will of parties is respected and this way of resolution of the conflict rejects the expectation of both parties149 In this uncertain context, the Hague Principles intervened for the first time ever in the history of private international law in the field of international battle of forms. Thus, it is necessary to provide an analysis of article 6. This provision is very concrete, as it individuates all the possible conflicts of choice of law and it shows solutions in order to solve the specific cases. Art. 6(1) assumes that:” Subject to paragraph 2,

a) whether the parties have agreed to a choice of law is determined by the law that was purportedly agreed to;

b) if the parties have used standard terms designating different laws and under both of these laws the same standard terms prevail, the law designated in the prevailing terms applies; if under these laws different standard terms prevail, or if under one or both of these laws no standard terms prevail, there is no choice of law.”

Concerning its structure art. 6(1) differentiates between two situations: Art. 6(1)(b) shows those in which the parties have used “standard terms” designating different applicable laws whereas Art. 6(1)(a) deals with all other situations150. Furthermore this provision can be divided into two sections, the first describes solutions for

148 X. XXXXXXX, XXXXX, XXXXXX the Conflict of Laws, Xxxxx & Xxxxxxx, page 32-103; C.M.V. XXXXXXXX/ X. XXXX, The Conflict of Laws , 3rd ed. , Oxford 2006, page 184; Id note 148.

149 Id note 148.

150 Commentary on Hague Principles on International Commercial Contracts, 6.1.

false conflicts whereas the second deals with true conflicts. Furthermore, the commentary on art. 6 provides examples in order to better comprehend the solutions adopted.

The false conflict may occur when the contract falls into the scope of art. 6(1a). According to the latter case if a party has proposed an offer to an international contract by choosing a specific law referring to its interpretation of standard terms, and the other party refers to its standard terms without challenging or choosing another law applicable, then it shall be considered that the recipient has “purportedly agreed” to the law chosen by the offeror. This case shows a false conflict because there is not an expressed will by one of the parties, thus it is generally recognized an implied consent151. The norm is not innovative however, as it is also supported by an extensive interpretation of art. 10 of the Rome I Regulation152 which assumes that “The existence and validity of a contract, or of any term of a contract, shall be determined by the law which would govern it under this Regulation if the contract or term were valid.”. To this aim, art. 10(1) first part recalls the opportunity to assume the existence of any term of the contract by the law that would govern it and in this case it must be considered as the law purportedly agreed to by the party that has not explicated its choice.

Another false conflict is found in art. 6(1b) 1st part of the Hague Principles, which describes the case in which both parties select as applicable law in the standard terms two different laws. However, under both of these laws the conflicts are solved in the same manner, thus there is no true contrast between the parties’ intent.153

151 X. XXXXXX XXXXXXXX, Solving the Xxxxxx of Conflicting Choice of Law Clauses in Battle of Forms Situations: The Hague Solution, page 88.

152 Id note 155, 6.2.

153 Commentary on Hague Principles on International Commercial Contracts, Scenario 1:” Party A makes an offer and refers to its standard terms, which contain a clause designating the law of State X as the law applicable to the contract. Party B expresses acceptance of the offer and refers to its own standard terms, which designate the law of State Y as the applicable law. With respect to battle of forms scenarios, the domestic laws of State X and of State Y both provide that the standard terms last referred to prevail (last-shot rule).”

On the other hand, art. 6(1b) 2nd; 3rd part describe true conflicts of law situations. Under both of these provisions the parties to a contract select as applicable law in its standard terms two different laws that apply two different rules which define the battle of forms, however, the consequences of these cases are the same as the Hague Principles propose as applicable solution the knock out rule. In fact, in the case specified in art. 6(1b) 2nd part, the diverse laws in standard terms selected by the parties apply, respectively, the first shot rule and the last shot rule154 Thus, the choice of law clauses in both standard terms are disregarded and the applicable law is identified through the application of rules that apply in the absence of contractual choice. Thus, Article 6(1)(b), 2nd part, establishes a knock-out rule at private international law level.155 The same result occurs in 6(1b) 3rd part, which specifies the situation in which one or both of the laws selected apply in its standard terms the knock out rule156, therefore the law applicable shall be considered as the one which would be applicable in case of absence of choice of law as no effective choice has been put in place.

Lastly, the knock-out rule is applied also in contracts where one or both parties refer to standard terms of a chosen law that does not provide regulation on domestic battle of forms. However, it is true that the Hague Principles recall in these situation the law in absence of choice, but it is necessary to recall that the scope of the Hague Principles does not extend up to decide the law applicable in the absence of choice157, thus that law must be determined through the rules established by domestic private international law according to the specific case.

154 Commentary on Hague Principles on International Commercial Contracts, 6.16 Scenario 2: “ Party A, the offeror, designates in its standard terms the law of State X, and Party B, the offeree, designates the law of State Y. One of the designated laws follows the first-shot rule, while the other law follows the last-shot rule.

155Commentary on Hague Principles on International Commercial Contracts, 6.17 156Commentary on Hague Principles on International Commercial Contracts, 6.18 Scenario 3:” Party A designates in its standard terms the law of State X, while Party B designates the law of State Y. State X follows a knock-out rule, while State Y follows a different rule, such as the first- shot rule, or the last-shot rule.”

157 S.C. SYMEONIDES, The Hague Principles on Choice of law for International Contracts: Some Preliminary Comments, page 877.

All the rules examined in Art. 6 establish regulations at an abstract level which should apply from a general perspective with no reference to the specific contractual situation, as it is sufficient to verify the legislative choice of the State dealing with standard terms. However, there are two circumstances in which shall be taken into consideration the “specific case”. The first deals with the situation of some countries providing hybrid theories, like the U.S. context examined in the previous paragraph. Concerning these Countries the Hague Principles provide exceptionally a focused interpretation according to the specific case because it is necessary a judicial analysis that ascertains the specific substantive law applicable for the battle of forms issues. Furthermore, the specific analysis is expressly needed under art. 6(2), that foresees “ The law of the State in which a party has its establishment determines whether that party has consented to the choice of law if, under the circumstances, it would not be reasonable to make that determination under the law specified in paragraph 1” Thus, the latter provides an exception to the general and abstract rules established by art. 6(1) when is required “under the circumstances.”158

6. Choice of Non-State law

Another important way to express the freedom of contract is showed in the opportunity attributed to the parties to choose as applicable law a non- State law. Nowadays subjects who put in place commercial transactions may have an interest to apply non-State norms because they are created to satisfy the needs of commercial practices and these are in compliance with the globalization of the economy159. These are systems of transnational relevance called rules of law160, they are different from sources issued by the States and can be considered as a

158 Id note 158, 6.20.

159 X. XXXXXXXX, Le obbligazioni contrattuali, page 106-114.

160 Official comment to the Hague Principles, 3.1:” the term “rules of law” is used to describe rules that do not emanate from State sources.

complex of rules created by practice which application has been constantly repeated in time161. In fact, the latter fall within party autonomy’s limits and find their origin in the lex mercatoria, which started to affirm in the end of XIX century162 when international transactions enhanced.

The main aim of non-State laws is to uniform substantive law at international level in order to simplify transactions, however they are usually put in place in form of soft law and the only ways to attribute them binding nature is to implement them in national laws or to specify these rules into a contract. Thus, if these are recalled in international agreements, non-State law can be relevant from two perspectives that are in compliance with the distinction between kollisionrechtliche and materiellrechtliche. According to the latter, non-State laws can be put in place at contractual terms level, this means that they are included and limited to the content of the contract through the technique of incorporation by reference and the consequence is that these norms are subject to the mandatory provision of the law chosen, therefore they are dismissed in case of non-compliance with imperative norms of the specific case. On the other hand, if parties intend non state norms in the sense of kollisionrechtliche, the recalled set of rules will be considered applicable as a choice of law and the consequence is that the contract won’t be subject to the mandatory law of the State of the specific case, because parties have chosen non state norms as governing law.

However, in contrast with the overwhelming use in commercial practice, non state norms are most of all associated with the first nature because of two reasons and both of them deal with the nature of private international law. Thus, non-state laws have not the same importance of international private law because the latter is considered a special law which applies in specific situations and second, p.i.l. rules

161 They are consistent with the element of diuturnitas and, depending on the specific case, they may share the opinio juris as well.

162 X. XX XXXXXX, Diritto internazionale privato dell’unione europea., page 352 ss.

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THE POWER OF WILL AND CHOICE OF LAW IN INTERNATIONAL CONTRACTS

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