THE DETERMIING THE PROPER LAW OF THE CONTRACTS OF CARRIAGE BETWEEN UKRAINE AND EUROPEAN UNION

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The article analyzes the procedure of determing the proper law of the contracts of carriage between Ukraine and European Union.  There are some suggestions for indentify the proper law of contractual relations in the absence of choice of law.

Keywords: proper law, contract of carriage, choice of law, characteristic performance.

European Union (hereinafter referred to as the “EU”) is one of the largest maritime partners of Ukraine. According to the International Maritime Organisation, in 2011 (the last year for which figures are currently available) cargo traffic between Ukraine and EU exceed 10,000 tons and almost 21,000 miles were sailed.

The economic inter-dependence of the modern world economy is reflected in the inter-dependence of its diverse national legal systems. Legal practitioners in the field of international trade, whether in law firms or in-house, will be only too familiar with need, often the very urgent need, to seek advice, assistance or local intervention, whether in the courts or with local authorities, in jurisdictions worldwide. Needless to say, the short summaries of key legal issues of determining the proper law of the contract of carriage between EU and Ukraine will those seeking to manage a crisis by focusing expectations and enabling them to brief local lawyers with an awareness of the opportunities and pitfalls afforded by the relevant legal system.

In the absence of express provisions in a bill of lading (or charter party), EU courts will rely on the criteria set forth on Convention 80/934/EEC on the law applicable to contractual obligations of 19 June 1980 (hereinafter referred to as the “Rome Convention”), or EC Regulation 593/2008 of 17 June 2008 (hereinafter referred to as the “Rome I”), for contracts concluded as from 17 December 2009.

The general rule under Rome I (which in this respect largely follows the Rome Convention) is that: (a) choice of law will be recognized; (b) the applicable law is that of the state of where the party required to effect the characteristic performance has his habitual residence, unless: (c)(i) it is clear that the laws of another country should apply, in which case they should do so, or (ii) the place of characteristic performance (or other prescribed criteria) cannot be determined, in which case the contract shall be governed by the law of the country with which it is most closely connected [5, p. 3].

Both the Rome Convention and Rome I have specific provisions dealing with contracts of carriage (which include voyage charterparties, but not time charterparties).

Article 4(4) of the Rome Convention provides for specific set of criteria to determine the law applicable to contracts of carriage of goods: “…if the country in which, at the time the contract is concluded, the carrier has his principal place of business is also the country in which the place of loading or the place of discharge or the principal place of business of the consignor is situated, it shall be presumed that the contract is most closely connected with that country. In applying this paragraph single voyage charter-parties and other contracts the main purpose of which is the carriage of goods shall be treated as contracts for the carriage of goods” [1, p. 3].

Article 4(4) of the Rome Convention raised much criticism, since the listed combination of criteria is often not met or appears irrelevant, leading EU courts to rely extensively on article 4(5) that allows to disregard these criteria “if it appears from the circumstances as a whole that the contract is more closely connected with another country” [1, p. 3]. Article 5 of Rome I brought a substantive change, as it provides that the applicable law shall be that of the country of habitual residence of the carrier, provided the place of receipt or delivery, or the habitual residence of the consignor, is also situated in that country. Otherwise, the law of the country of the place of delivery shall apply. However, if it is clear from all the circumstances that the contract, in the absence of the choice of law, is manifestly more closely connected with a country other than that which would govern the contract, following the application of these rules, then the law of the other country shall apply. The provisions for the carriage of goods are to be found in article 6 of Rome I. The Rome Convention and Rome I do not apply to arbitration agreements and jurisdiction agreements.

Rome I also provides that when the series of criteria does not allow for the final determination of the law of the contract, the latter shall be that of the place of delivery. This welcome addition will now preclude any uncertain decisions such at those mentioned above and ease the task of EU courts.

The European Court of Justice (hereinafter referred to as the “ECJ”) recently ruled that the last sentence of article 4(4) applies to any charterparty concerned with the actual carriage of goods, thus excluding only demise chartering [3, p. 2].

The legislation provides for applicability of the law of the country where the carrier has its general place of business, provided the place of shipment or the place of discharge is also situated in this country. If one of the above provisions is not fulfilled, the law of the place of discharging is applied, unless the contract has no “closer link” to another country.

According to The International Private Law Act, when a “foreign element” appears in legal relationships, the parties may choose an applicable law. Ukrainian procedural law allows the parties to refer the dispute to arbitration. The arbitration clause may be represented either by separate agreement (“arbitration agreement”) or as an article of the contract (“arbitration clause”). Ukrainian procedural law provides that during a preliminary hearing, the court should check whether an arbitration agreement was made and, if so, the court should leave the claim without considerations on the merits.

Bibliography

  1. Convention on the Law Applicable to Contractual Obligation, 80/934/EEC. http://www.jus.uio.no/lm/ec.applicable.law.contracts.1980/doc.html.
  2. Intercontainer Interfrigo v Balkenende [2009] ECJ, 2009 SCC 25. http://curia.europa.eu/juris/liste.jsf?language=en&num=C-133/08.
  3. International Private Law Act, Statutes of Ukraine 2005. http://zakon4.rada.gov.ua/laws/show/2709-15
  4. Lucas David, Dickinson Hill. The International Trade Law. London: Sweet & Maxwell, 2011.
  5. Regulation (EC) on the Law Applicable to Contractual Obligations (Rome I), No 593/2008. http://eur-lex.europa.eu/LexUriServ/LexUriServ.d:En:PDF.

 

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