Posts Tagged https://www.supremecourt.gov.sg/docs/default-source/module-document/judgement/shanghai-turbo-gd-30-july-2018—final-for-release-pdf.pdf

Floating/Invalid Choice of Law Clauses. The Singapore High Court in Shanghai Turbo.

Marcus Teo has excellent analysis of Shanghai Turbo Enterprises Ltd v Liu Ming [2018] SGHC 172. The issue is well-known in contract law as such and takes one or two special forms in conflicts: what is the fate of a contract as a whole, and /or of contractual clauses individually, when part of a clause is defective.

In the case at issue, the relevant contractual clause read

This Agreement shall be governed by the laws of Singapore/or People’s Republic of China and each of the parties hereto submits to the non-exclusive jurisdiction of the Courts of Singapore/or People’s Republic of China.”

As far as the choice of court part of this clause is concerned, non-exclusive choice of court comes with strings attached, depending on the laws of the States concerned: under the editorship of Mary Keyes, Michiel Poesen and I have contributed to an extensive comparative volume on same wich is forthcoming. However for choice of law one need not look at the specific laws of a State to appreciate that this clause thus formulated is simply a lame duck. No clear choice of law is made at all. The pragmatic solution is to ignore the useless clause and determine the proper law of the contract in the absence of a valid expression of parties’ autonomy. Yet conceptually an argument can, and has been made that to do so ignores the very high relevance of the lex contractus in the very contract formation – a conceptual quagmire which in EU law is addressed by Rome I’s ‘bootstrap’ principle.

In the case at issue, the High Court follows a pro-validation approach (favor contractus): the invalidity of the choice of law clause does not affect the formation of the main contract. A commercially sensible solution which Marcus analysis critically in excellent detail.

Geert.

(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 3, Heading 3.2.7.

 

 

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