PROJECT WORK

COMPARATIVE ANALYSIS OF HAGUE PRINCIPLES IN CHOICE OF LAW IN COMMERCIAL CONTRACTS

– INDIA & SOUTH AFRICA

SUBMITTED TO: SUBMITTED BY:

Ms. Monika Yadav Mayank Sen (L/1510)

Assistant Professor Student

School of Law School of Law

Raffles University Raffles University

TABLE OF CONTENTS

1. Acknowledgment
2. Research Methodology
3. Introduction
4. Article 2 (4)
5. Article 4
6. Article 6 (2) (b)
7. Article 9
8. Conclusion
ACKNOWLEDGMENT

I take this opportunity to express our humble gratitude and personal regards to Ms. Monika Yadav
for inspiring me and guiding us during the course of this assignment work and also for his
cooperation and guidance from time to time during the course of this assignment work on the topic.
I have prepared this assignment not only for marks but also to increase my knowledge.

Place: Neemrana -Mayank Sen

RESEARCH METHODOLOGY

Aims and Objectives

The aim of the assignment is to present a detailed study of the topic “Comparative Analysis of
Hague Principles for choice of law in Commercial Contracts – India & South Africa ”forming a
concrete informative capsule of the same with an insight into its relevance in the Private
International Law.

Research Plan
The researchers have followed Doctrinal method

Method of Writing
The researcher has used both a descriptive and analytical method of writing in order to
understand the issues better. The researcher has also relied on case law, to get an in depth
understanding of the subject. The method of writing followed in the course of this research
project is primarily analytical.

Sources of Data
The researcher has used secondary sources in order to obtain sufficient data for this project,
namely,

 Online Research Portals

 Articles
INTRODUCTION

The Hague Principles on Choice of Law in International Commercial Contracts are, inter alia,
intended to facilitate the continued development and refinement of the concept of party autonomy
in countries where this notion has in principle been accepted.1 Emerging jurisdictions such as India
and South Africa come to mind,2 where the Principles could be utilized in the enhancement of
domestic rules of private international law with respect to choice of law in international
commercial contracts.3 India and South Africa are two of the BRICS countries, an association of
four major emerging economies (Brazil, Russia, India, and China), together with South Africa as
‘the gateway to Africa’.4 BRICS countries already account for more than 20 per cent of the world’s
gross domestic product,5 and two of the member countries (India and China) currently have the
highest growth rate of large economies globally. India inherited the English common law, also in
the field of private international law. The Indian courts often follow developments in the English
conflict of laws, although, of course, the Indian courts are not bound to English precedent.6 South
Africa has a mixed civil law/common law legal system; this also pertains to the domain of private
international law. The basis of its private international law remains Roman-Dutch, but the
influence of the English common law is rather strong, particularly in the field of obligations.

ARTICLE 2(4): NO CONNECTION REQUIRED BETWEEN THE PARTIES OR THE CONTRACT AND THE
CHOSEN LAW

In the private international law of contract of India, there seems to be no clarity on whether a
connection between, on the one hand, the contract and the parties and, on the other, the chosen law
is required. No South African case law in this regard could be found, but the leading academic
authority favours no connection being required, for the familiar reasons.7 It is suggested that both
in India and South Africa, when the courts eventually have to settle this matter, they should

1
Hague Conference on Private International Law, Principles on Choice of Law in International Commercial
Contracts (HCCH 2015) paras I.4 and P.3. The Hague Principles were adopted by
2
VC GOVINDARAJ, THE CONFLICT OF LAWS IN INDIA: INTER-TERRITORIAL AND INTER-PERSONAL CONFLICT (Oxford
University Press 2011)
3
3 Preamble, paras 2, 3
4
MJ Kahn, ‘The BRICs and South Africa as the Gateway to Africa’ (2011) 111 Journal of the Southern African
Institute of Mining and Metallurgy 493.
5
Id.
6
VG Ramachandran, ‘Conflict of Laws as to Contracts’ (1970) 12 Journal of the Indian Law Institute 269, 275
7
PR Wood, Comparative Law of Security Interests and Title Finance (Thomson, Sweet and Maxwell 2007).
consider guidance from Article 2(4) of the Hague Principles: ‘No connection is required between
the law chosen and the parties or their transaction.’ The policy behind the provision is clear:
practically it makes sense that the parties should be able to choose a non-related, but, for instance,
neutral, stable, or familiar legal system or one that is well developed in the particular field.

ARTICLE 4 (SECOND SENTENCE): CHOICE OF FORUM AND TACIT CHOICE OF LAW

At least two decisions of the Supreme Court8 of India in the latter half of the twentieth century
may be referred to as authority for the view that, in the absence of an express choice of law to the
contrary, the law of the chosen court or localized arbitration tribunal will usually be deemed the
(tacit) choice of the parties.9 However, in 1992, in National Thermal Power Corporation v Singer
Company,10 the leading decision on Indian private international law of contract, the Supreme Court
took the opposite position, namely that a choice of forum will not be sufficient to indicate a tacit
choice of law in the absence of any other relevant connecting factor/s; indeed, choice of forum
may prove to have little relevance in this regard.11 Nevertheless, in two twenty-first-century
decisions by the same court, the previously accepted view is encountered yet again.12 The position
in Indian private international law is therefore no longer clear. In a South African case, Benidai
Trading Co Ltd v Gouws & Gouws (Pty) Ltd,13 it was decided that the choice of a localized arbitral
tribunal does not indicate a tacit choice of law ‘unless a clear inference is to be drawn to the
contrary’. This is a decision of a single judge: no case law seems to be available in respect of the
link between choice of court and choice of law. Academic authority in South Africa is not
unanimous in this regard.14 Both legal systems urgently need clarity on this issue. It is suggested
that both in India and South Africa, when the courts eventually have to resolve this matter, they
could consider guidance from the second sentence of Article 4 of the Hague Principles: ‘An

8
Dhanrajamal Gobindram v Shamji Kalidas and Co (1961) 3 SCR 1020 para 29; British India Steam Navigation Co
Ltd v Shanmughavilas Cashew Industries (1990) 3 SCC 481, para 17.
9
JL Neels, ‘The Nature, Objective and Purposes of the Hague Principles on Choice of Law in International
Contracts’ (2013–14) 15 Yearbook of Private International Law 45, 51–2
10
[1992] 3 SCC 551.
11
National Thermal Power Corporation (n 16) para 15
12
Modi Entertainment Network v WSG Cricket PTE Ltd (2003) 4 SCC 341 para 16; Shreejee Traco (I) Pvt Ltd v
Paperline International Inc (2003) 9 SCC 79 para 7. See also Govindaraj (n 2) 57; Noronha (n 2) 77. Cf Diwan and
Diwan (n 2) 511–12.
13
1 1977 (3) SA 1020 (T)
14
GJ Bouwers, ‘Tacit Choice of Law in International Commercial Contracts: The Position in South Africa and
under the Rome I Regulation’ in CF Hugo and TMJ Mo¨llers (eds), Transnational Impacts on Law – Perspectives
from South Africa and Germany (forthcoming)
agreement between the 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.’

Contractual parties may choose a forum for its convenience, neutrality, experience, or expertise
and not for the purposes of the application of any particular legal system. Furthermore, the forum
will determine the law of the contract in terms of the applicable conflicts or arbitration rules, and
the applicable law may or may not be the law of the country of the seat of the court or tribunal. A
choice of forum should, therefore, on its own not be taken to conclusively indicate a choice of law;
it may be one of the factors to be taken into account to determine the intention of the parties in this
regard.

ARTICLE 6(1)(B): CHOICE OF LAW IN THE BATTLE OF FORMS

Neither Indian nor South African private international law seems to have a rule on choice of law
in the battle of forms. When confronted with this problem in future, the courts in both countries
should consider the two currently leading proposals in the field, namely the knock-out rule on the
private international law level and Article 6(1)(b) of the Hague Principles.15 The latter provision
reads as follows: If the parties have used standard terms designating two 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. The knock-out rule on the choice-of-law level,
in the same scenario of conflicting choice of law provisions in standard-term contracts, entails that
the laws purportedly chosen are both disregarded—there is no choice of law. Article 6(1)(b)
utilizes the knock-out solution for all scenario’s except where the outcome of the application of
both the purportedly chosen legal systems is the same; the substantive law so indicated would then
apply in order to maximize, in an indirect sense, the recognition of party autonomy. The
disadvantage of the Hague solution is the relative complexity of the rule, which may involve taking
note of the domestic law solutions in both countries involved. In any event, the substantive law
position may not always be clear (as both in India and South Africa)16 or perhaps no solutions
exist. The knock-out rule has the advantage of simplicity and ease of application, leading to legal

15
TM Kadner Graziano, ‘Solving the Riddle of Conflicting Choice of Law Clauses in Battle of Forms Situations:
The Hague Solution’ (2012–13) 14 Yearbook of Private International Law 7
16
RH Christie and GB Bradford, Christie’s Law of Contract in South Africa (LexisNexis 2016) 62–3.
certainty, which may be appealing especially in the context of an emerging jurisdiction. But the
Indian and the South African courts will have to make the final choice based on the relative value
placed on party autonomy (in the indirect sense), on the one hand, and ease of application and legal
certainty, on the other.

ARTICLE 9(1)(D): CHOICE OF LAW AND LIBERATIVE PRESCRIPTION AND LIMITATION PERIODS

The application of rules of limitation or liberative prescription in India and South Africa
traditionally, at least in part, has depended on the classification of the foreign and the domestic
rules as having a procedural or substantive nature. The Law Commission of India, more than a
decade ago, in effect proposed that limitation should be governed by the proper law of the contract.
The draft bill has a wider reach than the Hague Principles as it also deals with the position where
there is no choice of law. Nevertheless, the Hague Principles could perhaps stimulate a revival of
this reform proposal, which is in conformity with Article 9(1)(d):

‘The law chosen by the parties shall govern all aspects of the contract between the parties,
including but not limited to ... the various ways of extinguishing obligations, and prescription and
limitation periods.’ In South Africa, the Supreme Court of Appeal, in Society of Lloyd’s v Price;
Society of Lloyd’s v Lee,17 accepted the Canadian author Falconbridge’s via media classification
technique in private international law.

This methodology entails that characterization must take place in terms of both the lex fori and the
lex causae—a choice between (the outcome of) the classification techniques must then be made
on the basis of considerations of policy. In the Society of Lloyd’s case, English law was the proper
law of the contract, based on the express choice of the parties. English law makes a distinction
between limitation and prescription rules of a procedural and a substantive nature: a substantive
rule bars the remedy and extinguishes the underlying right, while a procedural rule merely bars the
remedy but does not extinguish the underlying right. The domestic English limitation rules are
seen to be of a procedural nature (as they bar the remedy only and do not extinguish the underlying
right).40 In terms of South African private international law, procedural issues are governed by
the lex fori. South African law makes the same distinction between procedural and substantive
limitation and prescription rules, but the internal South African liberative prescription rules are

17
2006 (5) SA 393 (SCA).
deemed to be of a substantive nature as they extinguish both the remedy and the underlying debt.
Substantive matters of contract law are in the South African conflict of laws governed by the proper
law of the contract.

Under lex fori classification, the liberative prescription rules of South Africa were not applicable
as they are of a substantive nature (according to South African private international law) and, thus,
only applicable if South African law is the proper law of the contract. The limitation rules of the
proper law were likewise not applicable as they are of a procedural nature (according to South
African private international law), and such issues are governed by the local law (according to the
South African conflict of laws). Under classification in terms of the lex causae, the liberative
prescription rules of the forum were still not applicable as they are of a substantive nature
(according to South African private international law) and, therefore, only applicable if South
African law is the proper law of the contract. The English limitation rules continued to remain
inapplicable as they are of a procedural nature also in terms of domestic English law (in terms of
the private international law of the forum, procedural issues are governed by the lex fori). Both
classification lege fori and characterization in terms of the lex causae (the proper law) therefore
led to the situation known as ‘gap’ (neither of the potentially applicable legal systems is prima
facie applicable), resulting in a socalled ‘double gap’. An independent solution had to be found.
The Court chose the proper law of the contract to govern the issue. Indeed, there are many good
reasons to have the proper law govern prescription and limitation. The proper law governs all of
the other matters in respect of the creation and extinction or non-enforceability of rights and
remedies; the legitimate expectations of the parties suggest that the proper law should apply rather
than the lex fori; application of the proper law prevents forum shopping; and most legal systems
today have limitation and prescription governed by the proper law (uniformity of decision). But
was the solution in casu only meant for the situation of a double gap or is it a general rule in South
Africa now that the proper law governs limitation and prescription? The decision, unfortunately,
can be interpreted either way. And that is where the Hague Principles come in.

They may be used in the interpretation of the rules of private international law48 (including on a
national level), and, as already indicated, they provide in Article 9(1)(d) that the law chosen by the
parties shall govern ‘the various ways of extinguishing obligations, and prescription and limitation
periods’. Later case law in South Africa consistently comes to the conclusion that the proper law
applies to liberative prescription and limitation in the particular situation.18 This trend may be
strengthened by support from the Hague Principles. Article 9(1)(d) may indeed be decisive when
the Supreme Court of Appeal in future has to interpret its own decision in Society of Lloyd’s and
provide a definite answer in this regard.

CONCLUSION

From the examples provided above, it is clear that the Hague Principles have real potential to assist
in the interpretation, supplementation, and development of the rules of private international law in
both India and South Africa. It is important to now make judges and arbitrators aware of the
existence and usefulness of the Principles via academic work published locally and, in particular,
via seminars and conferences, involving, notably, the Hague Conference on Private International
Law. In the long term, such interventions may contribute to the international harmonization of
private international law.

18
Monokandilos v Generale des Carriers et des Mines SA 2010 ZAGPPHC 184; Manwood Underwriters (Pty) Ltd v
Old Mutual Life Assurance Company (South Africa) Ltd 2012 ZAWCHC 243.