Significant growth in the international trade and commerce

has appended eminence to clauses of dispute resolution in the private

international law. In a globalized world, everything is believed to be moving

at a speed of knot. New innovative techniques have

enormously affected the manner in which

business is conducted. 

This is especially obvious with

regards to worldwide business transactions. Contracts are closed between two

parties sitting in two different parts of the world and without meeting each

other vis-à-vis. In view of that, more accentuation ought to be placed on the private international legal framework of the

states, guaranteeing that they don’t stale and are up to international

guidelines in managing issues that constantly emerge in International

businesses.

As cross-border transactions constantly arise, a pertinent issue naming “choice

of law” holds significant importance

in the private international law applicable to international commercial

agreements. Contracts are mere pieces of paper without any legitimate impact unless a specific reference

to some private law is given which characterizes the commitments expected by the

parties to the agreement and the recommends the way of redress through the appropriate court system in case of failure to

perform contractual obligations.

A governing law provision in any commercial

contract defines the law which will govern or regulate the contract in the event of a dispute, as opposed, jurisdiction clause

specifies the courts or international institution that will have exclusive

jurisdiction to try the matter or resolve disputes. These clauses are though

equally important as that of the

commercial arrangements between the parties;

they are yet neglected amid

drafting the general terms of the contract and are considered as standard boiler plates at the end of the contract.

It is vital that these conditions

gain as much importance as the substantive arrangements of the agreement.

Failure of parties to agree on the governing law can lead to expensive and

massive suits deciding the relevant law

and jurisdiction to be applied to the agreement.

Corporate Lawyers of Dubai assist numerous multi-billionaire

companies to have tailor-made commercial

contracts prior to entering into an

agreement which suits the requirements of both the parties.

Choice of Law Provision

The decision of governing law for the contract is

one arrangement in the contract where the

parties assign the law of a particular

jurisdiction to oversee and regulate the disputes merging between the parties.

A such, the parties indicate or stipulate that any

claim arising out of the contract will be resolved by the law of a concerned

jurisdiction. This decision generally becomes binding on the parties

when the parties refer the matter to arbitration.

A significant number of parties,

according to statistics of the International

Chamber of Commerce, involves governing law in their contract. A standard

governing law clause states that “ this law of

this country shall govern the agreement”. There are several

preconditions which must be considered prior to choosing a particular which are

detailed as below:

A.     Worthiness of

the Law for resolving dispute:

International law has authorized

parties to adopt any law which might

govern their contract, ergo, parties mustn’t focus on choosing their home

country law for purpose of avoiding additional expenses, but must evaluate the

worthiness of law in different jurisdiction

which will be appropriate for their commercial arrangements. There are numerous

jurisdictions which have an offer importance to case laws and precedents,

whereas several jurisdiction are silent

on such matters and they not even recognize certain notions of the contract.

B.      Jurisdiction issues

Parties generally consider the law of

a particular jurisdiction wherein they wish to resolve the dispute. However,

this standard can be amended as numerous courts are willing to apply foreign

law for resolving the matter if the parties have specifically agreed. Yet, parties should be careful while drafting the contract, as it

will often be burdensome for parties to decide what foreign law should be

applicable, should the dispute arise. They must also be careful as certain jurisdiction does not apply the foreign choice of law and must also consider

the manner in which the court will apply

the foreign law. On the contrary, most international arbitration institution is readily acceptable on the foreign choice of law and have arbitrators who

can easily understand the foreign law to ease the procedure.

C.      Affinity to

the law

Given the vast cases, parties choose the law

which they are familiar to rather than opting a more neutral law. Also, the

latter can bring unaccepted surprises which parties are not aware of

considering dissimilar procedural

aspects.

Jurisdiction Provision

Another most common uncertain clause

is to determine the jurisdiction where the word “may” and “shall” can bring

unwanted confusion. Importantly, if parties which to have a non-exclusive

jurisdiction the word “may” can be utilized,

on the contrary for an exclusive jurisdiction the word “shall” should be used. An

ideal jurisdiction clause states that “the parties shall/may submit their

dispute emerging out of or in connection with the concerned agreement to (court

/arbitration) of this country.”

A bare review of the foregoing

standard jurisdiction clause we note that the first step is to determine which

institution shall be given authority to resolve the dispute that is either

courts or arbitration institute. Both the system have their pros and cons,

hence parties should beforehand determine what should be appropriate for the

said matter. It most certainly believed that arbitration offers wide variety of

options and advantages over courts which are outlined as below:

a.      Choice of

arbitrators expert in such matter;

b.      Private

proceedings;

c.       Binding

decisions;

d.      Choice of

governing law;

e.      Choice of

enforcing judgments in different territory;

f.

Common language of arbitration.

UAE Law and Choice of Law

In UAE international parties may face

needless issues regarding the application

of foreign law to govern the contract. As in certain

cases, courts inherit the jurisdiction and governs it according to the UAE local laws such as Civil

Transactions Law or Civil Procedure Code. In

addition, the courts of UAE will

not let go jurisdiction to another court over a matter where UAE courts will in

all case have the jurisdiction. This is

can be witnessed in the following

disputes:

a.      Disputes pertaining to real-estate situated in UAE;

b.      Contract finalized in UAE;

c.       Happening of an

event in UAE;

d.      Matters

regarding the employment of a resident in

UAE;

e.      Issues regarding

UAE Commercial agencies;

f.

Property matters related to UAE.

In accordance with the above, if the UAE courts

will inherit the jurisdiction, the governing law will be the law of UAE itself.

Accordingly, the court will strike down

the governing law and jurisdiction clause in the agreement.

What

do we learn?

What

if there is no governing law and jurisdiction clause in a particular contract? Before

the parties get an opportunity to

determine the dispute on merits, the parties will have to exclusively determine the courts or law that will govern

the contract, which is an expensive and cumbersome decision. The non-presence

of governing law and jurisdiction clause confuses the parties to determine if there is a dispute or not and leads to unfavourable decisions.