The (Commercial) Court’s view on Implied Choice of Law under Rome I

Case: Aquavita International SA and another v Ashapura Minecham Ltd [2014] EWHC 2806 (comm)

An application by a defendant to set aside an order giving a claimant permission to serve proceedings outside of the jurisdiction (the claimant alleged a guarantee was governed by English law) has been dismissed by the court on the ground that there was an arguable case the guarantee could be governed by English law.

Rome I, (which is very similar to that of the Rome Convention and applies to contractual obligations in civil and commercial matters), allows a choice of governing law under Article 3 to be express or implied; though it can only be implied if there was a choice of law and that choice was clearly demonstrated by the terms of the guarantee or circumstances of the case.

As the guarantee in this case was closely connected with a contract of affreightment, which contained an express choice of English law, the choice of law was clearly demonstrated.  A further factor was that the defendant had negotiated and agreed the terms of the contract and was also a party to the guarantee.  As such the Judge held it made no business sense for the guarantee and the main contract to be governed by different laws.

Whilst the test under Rome I for determining the applicable law when there is no express choice is different to the old common law test of inferred intention and close connection, where a guarantee is given in respect of obligations under a main contract governed by English law, the court will habitually take the common law approach and infer that the parties had chose for the same governing laws to apply to the guarantee.