TITLE OF THE PROJECT

DERIVATIVES AND PRIVATE INTERNATIONAL LAW WITH REFERENCE TO UK

BY

SREENADHU V S S G AKHIL

19LLB063

SEMESTER 8

5 YEAR INTEGRATED B.A., LLB (HONS.) COURSE

PRIVATE INTERNATIONAL LAW

UNDER THE SUPERVISION OF

Prof Dr C.P. NANDINI

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY,

NYAYAPRASTHA, SABBAVARAM, VISAKHAPATNAM, ANDHRA PRADESH, INDIA

PIN CODE -531035

1
 ACKNOWLEDGEMENT

I would like to put forward my heartfelt appreciation to our respected faculty of Private
International Law, Prof Dr C.P. Nandini for giving a golden opportunity to me to take up
this project regarding “Derivatives and Private International Law with reference to UK”.
I have tried my best to collect information about the project in various possible ways to depict
clear picture about the given topic. I would also like to express my gratitude towards my parents
& members of DSNLU for their kind co-operation and encouragement which help me in
completion of the dissertation.

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Contents
INTRODUCTION ..................................................................................................................................... 4
Literature Review .............................................................................................................................. 4
A Bird’s Eye View on the Concept of Derivatives ................................................................................ 6
Unraveling the Legal Maze: Navigating the Determination of Governing Contracts in England ........... 8
Decoding the Rule: How the Law Governing is Determined When No Choice of Law is Made .......... 10
Application of the above rules in special reference to Derivative transactions ................................. 11
Jurisdiction Jigsaw: How Courts Decide Where to Hold Dispute Battles............................................ 13
Reflection of Client’s interest in the agreement- The Advantages of Choosing UK Law for Jurisdiction
and Choice of Law ........................................................................................................................... 14
Conclusion....................................................................................................................................... 18

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INTRODUCTION
"If goods don't cross borders, soldiers will"- Frédéric Bastiat's1

The above quote highlights the vital importance of international trade and commerce, not only
for the growth and prosperity of nations but also for maintaining peaceful relations between
them. When countries engage in trade with each other, they have a mutual interest in
maintaining stable and peaceful relations. This is because any disruption in trade can have
severe economic consequences for both nations. In other words, when goods cross borders,
people and nations come closer, and the likelihood of conflict decreases. However, the world
of international trade is not at all perfect. Parties located in different countries can be subject
to different legal systems, which can create significant challenges when disputes arise. This is
where private international law comes in. Private international law is a branch of law that
deals with cross-border disputes. It provides a framework for determining which country's laws
should apply in a given case and how disputes should be resolved. This is particularly
important in the context of derivatives, which are complex financial instruments that can be
difficult to understand. Derivatives are used by companies and investors to manage risk, hedge
against price fluctuations, and speculate on future market movements. However, when these
instruments cross borders, they can create significant legal and regulatory challenges.
Different countries may have different rules regarding the trading of derivatives, which can
create confusion and uncertainty. In this project, the researcher will delve deep into the
intersection of derivatives and private international law, examining the challenges and
opportunities that arise when financial instruments cross borders. The researcher will explore
how private international law plays a vital role in protecting the rights of parties involved in
cross-border transactions while also ensuring that international trade and commerce can
continue to flourish.

Literature Review
 DICEY, MORRIS & COLLINS ON THE CONFLICT OF LAWS

Dicey and Morris on the Conflict of Laws is a well-known and authoritative textbook on private
international law. The book was first published in 1896 and has since been updated by
subsequent authors. The current edition, edited by Lord Collins of Mapesbury, provides a
comprehensive analysis of the principles of private international law, including the rules

1
Chen, J. (2022) Who was Frederic Bastiat?, Investopedia. Investopedia
,https://www.investopedia.com/terms/f/frederic-bastiat.asp.

4
governing the determination of the applicable law, jurisdiction, and the recognition and
enforcement of foreign judgments. The book is widely used by lawyers, judges, and academics
in common law jurisdictions, and it has been translated into several languages.

In the context of derivative transactions, Dicey and Morris provide a detailed analysis of the
legal principles that apply in cross-border transactions. The book explains the principles that
courts use to determine the applicable law, jurisdiction, and the enforcement of judgments in
foreign jurisdictions. These principles are particularly relevant in cases where the parties to the
transaction are located in different jurisdictions or where the underlying asset is located in a
different country than the parties. The authors' analysis of the relevant legal principles and their
application to derivative transactions makes this book an indispensable tool for anyone
involved in cross-border transactions. The book's clear and concise style also makes it
accessible to non-specialists who need to understand the legal principles that apply in this
complex area of law.

 DEVELOPMENT OF FINANCIAL DERIVATIVES MARKET IN INDIA- A CASE STUDY

This paper provides a comprehensive overview of derivatives, covering a range of aspects

including the history of derivative markets in India, the growth of derivatives market in India,
various statistics related to derivatives in India, and a comparison of the status of the Indian
derivatives market with the global derivatives market.

The author has explored the origins of derivative markets in India, tracing the evolution of
these markets from their inception to the present day. The paper delves into the various factors
that have contributed to the growth of derivatives market in India, including regulatory
changes, technological advancements, and the increasing demand for risk management tools in
the financial sector. The author has also provided statistical data on the derivatives market in
India, including the volume of trading, the types of instruments traded, and the major players
in the market. But the researcher has referred to the concept of derivatives in this paper as it is
elucidated very beautifully.

 LITIGATING FINANCIAL DISPUTES IN LONDON AND THE FINANCIAL LIST NICHOLAS

HAMBLEN

This paper delves into the intricate interplay between the knowledge and experience of judges
in England, the procedures employed in handling financial contracts, the progress made so far,
and the potential impact of Brexit. The researcher has expertly referred to this paper to

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demonstrate the compelling reasons why and how English law serves as the optimal choice for
jurisdiction and governance in legal matters.

 PRIVATE INTERNATIONAL LAW ASPECTS OF SMART DERIVATIVES CONTRACTS

UTILIZING DISTRIBUTED LEDGER TECHNOLOGY BY ISDA

This academic paper explores the private international law, also known as conflict-of-law,
components of derivatives contracts that are regulated by the laws of Singapore and England
and Wales, and incorporate distributed ledger technology (DLT), also known as blockchain
technology. The focus of the study is to understand the legal implications and considerations
for such contracts when they cross international borders, and how they may be impacted by
differing legal systems and regulatory frameworks.

 THE INTERNATIONAL MARKET FOR CONTRACTS: THE MOST ATTRACTIVE

CONTRACT LAWS BY GILLES CUNIBERTI

This Article aims to contribute to a better understanding of the international contracting process
by unveiling the factors that influence international commercial actors when they choose the
law that governs their transactions. The researcher has referred to various statistics provided
by the author of this article

A Bird’s Eye View on the Concept of Derivatives

The term ‘derivatives, refers to a broad class of financial instruments which mainly include
options and futures. These instruments derive their value from the price and other related
variables of the underlying asset. They do not have worth of their own and derive their value
from the claim they give to their owners to own some other financial assets or security. A
simple example of derivative is butter, which is derivative of milk. The price of butter depends
upon price of milk, which in turn depends upon the demand and supply of milk. The general
definition of derivatives means to derive something from something else. 2

By some estimates, over ninety-four per cent of the five hundred largest companies worldwide
use derivatives to manage the business and financial risk. These include institutions as diverse
as 3M, Cargill, JP Morgan Chase, hedge funds and other types of investment funds, insurance

2
Ashutosh Vashishtha, Development of Financial Derivatives Market in India- A Case Study, INTERNATIONAL
RESEARCH JOURNAL OF FINANCE AND ECONOMICS, Issue 37, Euro-Journals Publishing (2010).

6
companies, and even government entities. Therefore, the importance of derivatives and their
regulation extends far beyond the financial and insurance markets..3

Broadly derivatives can be classified in to two categories as shown in Fig.1: Commodity

derivatives and financial derivatives. In case of commodity derivatives, underlying asset can
be commodities like wheat, gold, silver etc., whereas in case of financial derivatives underlying
assets are stocks, currencies, bonds and other interest rates bearing securities etc. Since, the
scope of this case study is limited to only financial derivatives so we will confine our discussion
to financial derivatives.

A forward contract is an agreement between two parties to buy or sell an asset at a specified
point of time in the future. In case of a forward contract the price which is paid/ received by
the parties is decided at the time of entering into contract. The specified price is referred to as
the delivery price. The contract terms like delivery price and quantity are mutually agreed upon
by the parties to the contract. Futures is a standardized forward contact to buy or sell the
underlying asset at a specified price at a specified future date through a specified exchange.
Futures contracts are traded on exchanges that work as a buyer or seller for the counterparty.
Exchange sets the standardized terms in term of Quality, quantity, Price quotation, Date and
Delivery place. In case of futures contact, both parties are under obligation to perform their
respective obligations out of a contract. But an options contract, as the name suggests, is in
some sense, an optional contract. An option is the right, but not the obligation, to buy or sell

3
Press Release, Int'l Swaps & Derivatives Ass'n, Over 94% of the World's Largest Companies Use Derivatives
to Help Manage Their Risks, According to ISDA Survey (Apr. 23,
2009),www.isda.org/press/press042309der.pdf.

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something at a stated date at a stated price. A call option gives one the right to buy; a put option
gives one the right to sell. Options are the standardized financial contract that allows the buyer
of the option, i.e. the right at the cost of option premium, not the obligation, to buy or sell a
specified asset at a set price on or before a specified date through exchanges. A swap can be
defined as a barter or exchange. It is a contract whereby parties agree to exchange obligations
that each of them have under their respective underlying contracts or we can say, a swap is an
agreement between two or more parties to exchange stream of cash flows over a period of time
in the future.4

Source- Derivatives markets, products and participants: an overview 5

Unraveling the Legal Maze: Navigating the Determination of

Governing Contracts in England
The position in England and Wales is currently governed by the Rome I Regulation. 6 In general,
the parties to a contract are free to choose the law that will govern their contract.7 In this regard,
the law means the law of a country and not some non-national system of law, such as the lex
mercatoria, general principles of law’ or public international law.8

But the following factors will limit the parties’ freedom of choice:

If all the elements relevant to the situation at the time of the choice are located in a country
other than the country of the law that was chosen, then the choice of law cannot prejudice the
application of mandatory laws of that other country. 9 If all the elements relevant to the situation

4
ASHUTOSH, Supra note 2.
5
Michael Chui, Derivatives markets, products and participants: An overview, IFC Bulletin No 35.
6
Regulation on the Law Applicable to Contractual Obligations, (Reg (EC) No 593/2008 (Rome I Regulation).
7
Id. Art 3(1).
8
LORD COLLINS OF MAPESBURY (gen ed), ‘CONTRACTS. GENERAL RULES’, in DICEY, MORRIS AND COLLINS on
the CONFLICT OF LAWS (15th ed) (London: Sweet & Maxwell, 2012) (Dicey, Morris and Collins), vol 2 at [32-
049].
9
Rome I Regulation, Supra note 6, Art 3(3).

8
at the time of the choice are located in one or more member states to the Rome I Regulation,
then the choice of a law other than that of a member state cannot prejudice the application of
mandatory European Union.10 Any overriding mandatory provisions of the law of the forum
must be given effect. Overriding mandatory provisions are those the respect for which is
regarded as crucial by a country for safeguarding its public interests, such as its political, social
or economic organisation, to such an extent that they are applicable to any situation falling
within their scope, irrespective of the law otherwise applicable to the contract under the Rome
I Regulation.11 Effect may be given to overriding mandatory provisions of the law of the
country where contractual obligations have to be or have been performed, if those provisions
render the performance of the contract unlawful. In deciding whether to do so, the court should
have regard to their nature and purpose and the consequences of their application or non-
application. 12 The parties’ choice of law may be implied rather than expressed, since Article
3(1) of the Rome I Regulation states that the parties’ choice can be one that is clearly
demonstrated by the terms of the contract or the circumstances of the case. Unlike the common
law position, it appears that the conduct of the parties subsequent to the formation of the
contract can be taken into account to determine the parties’ intentions at the time of the
contract.13

Examples of situations where a choice of law can be implied include the following 14:

Where the contract is in a standard form known to be governed by a particular law, even though
the law is not expressly mentioned; Where there was a previous course of dealing between the
parties under contracts that had an express choice of law, or where the parties have made an
express choice of law in related transactions; Where the parties’ choice of a forum for the
resolution of any disputes relating to the contract clearly shows they intend for the contract to
be governed by the law of that forum; Where the contract refers to particular provisions of a
system of law.15

A derivatives transaction may have little connection to the country of the law that has been
selected by the parties to the transaction as the governing law. For instance, the parties may
have expressly settled on English law pursuant to the ISDA Master Agreement, but they have

10
Id. Art 9(2).
11
Id. Art 9(1).
12
Id. Art 9(3).
13
DICEY, MORRIS AND COLLINS, Supra note 8, at [32-057].
14
Id at [32-060] - [32-065].
15
DICEY, MORRIS AND COLLINS, Supra note 8, at [32-060]–[32-065].

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no connection to the UK. One might then query whether this is a ground on which the parties’
choice of law might be disapplied by the court. This should not be the case. Under English law,
for a court to disregard the express choice of law, it would have to find that all the elements
relevant to the situation are located in a country other than the choice-of-law country, pursuant
to Article 3(3) of the Rome I Regulation. In Dexia Crediop SpA v Comune di Prato 16, the Court
of Appeal of England and Wales rejected an argument based on the equivalent of this rule in
the 1980 Rome Convention that the choice of English law in the ISDA Master Agreement by
the parties, which were both Italian, was inapplicable because all the elements relevant to the
transaction were located in Italy. The court ruled that the phrase elements relevant to the
situation includes elements that indicate an international situation, and not just elements that
are local to another country. Since the parties had opted to contract on the basis of the ISDA
Master Agreement, which is not intended to be associated exclusively with any country, and
the transaction involved back-to-back contracts with banks outside Italy, there was an
international dimension to the situation. It could therefore not be said that the choice of English
law to govern the contract should be disregarded because all elements relevant to the situation
were located in Italy.

Decoding the Rule: How the Law Governing is Determined When No

Choice of Law is Made
Where the parties to a contract have not made any express or implied choice of law, the law
governing the contract is determined according to the following rules:

1) A contract for the sale of goods or the provision of services is governed by the law of the
country where the seller or service provider has its habitual residence 17.

2) A contract concluded within a multilateral system which brings together or facilitates the
bringing together of multiple third-party buying and selling interests in financial instruments,
as defined by Article 4(1), point (17) of Directive 2004/39/EC, in accordance with non-
discretionary rules and governed by a single law, shall be governed by that law 18. In general,
the public law governing the trading conducted under the systems of the regulated market shall
be that of the home Member State of the regulated market.

16
Dexia Crediop SpA v Comune di Prato, (2017) EWCA Civ 428 at [119]–[137], CA (England & Wales).
17
Rome I Regulation, Supra note 6, Arts 4(1)(a) and (b).
18
Rome I Regulation, Supra note 6, Art 4(1)(h).

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3) Where a contract is not covered by what is stated in paragraphs (1) and (2), or where the
elements of the contract would be covered by more than one of the above possibilities, the
contract is governed by the law of the country where the party required to effect the
characteristic performance of the contract has its habitual residence. 19 The concept of
characteristic performance is meant to isolate the obligation incumbent on one of the parties
which is peculiar to the type of contract in issue, or which marks the nature of the contract.
Payment is not regarded as the characteristic performance; rather, it is the act that is carried out
for the payment that is characteristic.

4) Where it is clear from all the circumstances of the case that the contract is manifestly more
closely connected with a country other than that indicated by what is stated in paragraphs (1)
to (3), the law of that other country applies. 20

5) Where the applicable law cannot be determined from what is stated in paragraphs (1) to (3),
the contract is governed by the law of the country with which it is most closely connected. 21

It is likely that this rule will be used if the place where the contract is performed is different
from the habitual residence or place of business of the party identified according to the rules
mentioned in paragraphs (1) and (2), or the party required to effect the characteristic
performance of the contract as stated in paragraph (3). A court may also take into account
connected contract(s) between the parties when deciding if a particular contract is most closely
connected to the law of a country.

Application of the above rules in special reference to Derivative

transactions
Pursuant to the Financial Markets and Insolvency (Settlement Finality) Regulations 1991 22,
where a register, account or centralized deposit system within which securities are recorded is
located in a European Economic Area (EEA) state, the rights of the holders of these securities
will be governed by the law of the EEA state where the register, account or centralized deposit
system is located.

Similarly, under the Financial Collateral Arrangements (No 2) Regulations 2003102, various
aspects of book entry securities collateral, such as their legal nature and proprietary effects, are

19
Rome I Regulation, Supra note 6, Art 4(2).
20
Rome I Regulation, Supra note 6, Art 4(3).
21
Rome I Regulation, Supra note 6, Art 4(4)
22
Financial Markets and Insolvency (Settlement Finality) Regulations (1991), SI 1999/2979, implementing
Directive 98/26/EC.

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governed by the law of the country in which the relevant account is maintained. 23 Essentially,
these are implementations of the so-called PRIMA principle: the court will regard the ‘place of
the relevant intermediary account’ as the lex situs of the securities – that is, the place where the
property or a claim to the property is situated.

There may be situations where the above laws and regulations do not apply. Under common
law, the courts will look to the lex incorporationis (the law of the place where the company
was incorporated)24, as the usual reason for identifying the situs of company shares is to
identify the law that determines how they may be dealt with or confiscated.

If the lex incorporationis allows the shares to be dealt with at a place other than the place of
incorporation (for example, because the register is in that place, or the shares are bearer shares,
meaning they can be dealt wherever the certificate happens to be), then that place will be treated
as the situs of the shares.25

Adrian Briggs notes: “Where shares are held in international deposit and clearing systems, and
are therefore to be regarded as ‘immobilized’ (if there is a certificate but which is locked in a
vault operated by or on behalf of the entity which operates the system) or as ‘dematerialized’
(where there is no share certificate at all), it would be possible, but it probably makes little
sense, to say that the shares are situated in any particular place, for the investor does not have
a contractual relationship with the company (in the case of shares) or other issuer (in the case
of other securities).” In such cases, the investor’s contract will probably state that it has a direct
right against the entity (or intermediary) with which it has an account. Any credit or value in
the account will therefore be regarded as situated where the intermediary is situated, once again
applying the PRIMA principle. 26

If a dispute arose over the entitlement of a party to securities used as collateral, this would
therefore be decided by the situs of the securities. Depending on the particular situation, this
could be the lex incorporationis (including the law of some place other than the lex
incorporationis if the latter allows the securities to be dealt with there) or, where the securities
are held in a centralized deposit system, the law of the country where the register, account or
centralized deposit system is situated.

23
DICEY, MORRIS AND COLLINS, Supra note 8, at [24-072].
24
Macmillan Inc v Bishopsgate Investments plc, (No 3) (1987) 1 WLR 387.
25
BRIGGS, PROPERTY IN PRIVATE INTERNATIONAL LAW IN ENGLISH Courts (Oxford: Oxford University Press,
2014) at [9.23].
26
Id at 9.25.

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Jurisdiction Jigsaw: How Courts Decide Where to Hold Dispute Battles
When the parties to a dispute have contractually agreed that the English courts have jurisdiction
over the matter, the English court will generally give effect to the agreement. Alternatively, the
parties may have contractually agreed that a foreign court has jurisdiction over disputes. In this
scenario, an English court will stay any claims brought in England in breach of this agreement
or will refuse permission for process to be served out of the jurisdiction for the purpose of any
English proceedings, unless the claimant can prove there are strong reasons for the English
proceedings to continue.27

Assuming competing jurisdictions to which the 1968 Brussels Convention, the 1988 Lugano
Convention or Regulation (EU) No 1215/2012 apply are not considered, an English court will
only order a stay of proceedings due to England being an inappropriate forum (forum non
conveniens) and the defendant demonstrates that there is a foreign court that is clearly or
distinctly more appropriate than England for the trial of the action, and it is not unjust that the
claimant be deprived of the right to trial in England.28

In general, the court will engage in the following analysis:

The defendant bears the legal burden of proof to persuade the court to grant a stay of the
proceedings. However, there is an evidential burden of proof on any party seeking to establish
the existence of matters that will help to persuade the court to exercise its discretion in that
party’s favour. If the defendant satisfies the court that there is another forum that is clearly
more appropriate for the trial of the action, then the evidential burden shifts to the claimant to
persuade the court that there are special circumstances under why justice requires the trial to
take place in England. It is not enough for the defendant to show that England is not the natural
or appropriate forum; the defendant must be able to show that another forum is clearly more
appropriate. To determine if there is such an alternative forum, the court will consider various
factors indicating the action has the most real and substantial connection with the other forum,
including the parties’ places of business, the law governing their transaction, and the location
of witnesses.

The common law position described above has been supplemented by the 2005 Hague
Convention on Choice of Court Agreements 29. This convention came into force in the European

27
Donohue v Armco Inc, (2002) 1 Lloyd’s Rep 425, HL (UK).
28
Spiliada Maritime Corp v Cansulex Ltd (The Spiliada), (1987) AC 460 at 475–478, HL.
29
Choice of Court Agreements, June. 30, 2005, Hague Convention.

13
Union on October 1, 2015, and was implemented in the UK by the Civil Jurisdiction and
Judgments (Hague Convention on Choice of Court Agreements 2005) Regulations 2015, which
amended the Civil Jurisdiction and Judgments Act 198230. Under the latter act, a judgment that
is required to be recognized and enforced under the Hague Convention may be registered, for
the purposes of England, in the High Court, and will have the same force and effect as if the
judgment had been originally given by the registering court.

The Hague Convention essentially states that where the parties to a contract have concluded a
choice of court agreement designating that contractual disputes should be decided exclusively
in a court of a contracting state31, that court shall have jurisdiction to decide a dispute that arises
in relation to the contract, and shall not decline to exercise jurisdiction on the ground that the
dispute should be decided in another court.32 The court judgment designated in an exclusive
choice of court agreement must then be recognized and enforced in other contracting states.33
The application of the Hague Convention to England therefore has the effect of upholding the
choice of court made by contracting parties, where the choice is a court in a contracting state.

Reflection of Client’s interest in the agreement- The Advantages of

Choosing UK Law for Jurisdiction and Choice of Law
The ISDA Master Agreement (annexure) provides an explicit choice of governing law by the
contracting parties. Based on the explanation of the applicable private international law rules,
there is no reason to think that a court in England would not give effect to the parties express
choice of law under the ISDA Master Agreement if any disagreement arose between them over
a transaction. In England and Wales, there is nothing to suggest that the parties’ express choice
of English law would be disapplied by an English court, whether due to the operation of EU
law, overriding provisions of English law or UK public policy.

If you are riding over rough terrain, you need a mountain bike. If you are riding in a race
in a velodrome, you need a slim racing bike. Your choice of bike makes a great deal of
difference to your chances of winning (and keeping out of trouble).34

30
Civil Jurisdiction and Judgments Act, c 27 (1982) (UK).
31
Choice of Court Agreements, Hague Convention., art.3, June. 30, 2005.
32
Choice of Court Agreements, Hague Convention., art.5, June. 30, 2005.
33
Choice of Court Agreements, Hague Convention., art.8, June. 30, 2005.
34
Philip Wood, Why English Law, https://primefinancedisputes.org/files/2019-03/why-english-law-philip-wood-
cbe-qc-hon-.pdf?439c9efb7f.

14
English law is an international public utility. That is because English law is habitually chosen
as the governing law of large financial contracts, such as bank syndications, international bond
issues and derivatives. When parties choose a governing law, they also typically choose the
courts of the country of the governing law as well, either exclusively or non-exclusively. 35

CHOICE OF LAW

 Party Autonomy

English law has always recognised the importance of the parties’ freedom of contract and will
strive to uphold the bargain they make. Provided you contract in objectively reasonably clear
terms, what you agree is what you get. The parties are their own contractual masters. In India,
the concept of party autonomy was enunciated in the central legislature itself. However, this
was subject to specific restrictions. In a recent Bombay HC decision, the court disregarded the
principle of party autonomy which is the de facto globally recognized norm in arbitration. 36

 A Body of Precedent

The Indian judiciary is vast at some 17,000 judges, and while it boasts many professional and
diligent judges, the system is under strain. With almost 24 million cases currently pending in
the system, the courts are understaffed, meaning bottlenecks and delays are endemic.
Depending on the court, commercial cases may take in the region of 5, 10 or 15 years to reach
judgment. In such an environment, commercial cases may even be abandoned as they
eventually approach trial, as the pace of development, inflation, and the passage of time render
the original dispute no longer relevant or economic to contest.37 On the other hand, English law
has been determining cases involving international financial disputes for many years, which
has enabled it to build up a formidable body of precedent to assist parties and their advisers to
know where they stand and to be able to predict the outcome of any disputes when they arise.
It has long recognised the importance of certainty for commercial parties. Judges are
commercially minded, they seek to prioritise and promote certainty and consistency, and to
avoid hard cases making bad law. The developed state of English law enables clear legal advice

35
Ibid.
36
M/s. Addhar Mercantile Pvt. Ltd. v. Shree Jagdamba Agrico Exports Pvt. Ltd, Arbitration Application No 197
of 2014 along with Arbitration Petition No 910 of 2013.
37
Arbitration in India: Dispute resolution in the world's largest democracy (2019). HERBERT SMITH FREEHILLS,
https://www.herbertsmithfreehills.com/latest-thinking/arbitration-in-india-dispute-resolution-in-the-worlds-
largest-democracy.

15
to be given and costly disputes thereby avoided. Moreover, it is not bound by any code or
prescriptive rules. It is able to and does adjust to the rapidly changing commercial world and
seeks to keep up to date with modern developments and needs. It has a wide range of remedies,
both legal and equitable, which assists it to do so.

 Jurisdiction

In relation to choice of jurisdiction, the reasons for choosing English law are also good reasons
for choosing English jurisdiction since, for obvious reasons, English judges are regarded as
best placed to decide issues of English law which may arise, particularly issues of difficulty.
Other well recognised reasons for choosing English jurisdiction include the following: 38

(1) The quality, independence, impartiality and integrity of the English judiciary. This reflects
a reputation built up over a long period of time and a proven track record. High Court judges
are chosen from the foremost legal practitioners and already have extensive legal experience
and expertise, This is exemplified by the specialist and trained judges who sit in the Financial
List.

(2) Specialist courts. Under the umbrella of the Business and Property Courts based in the Rolls
Building, there are number of specialist courts able to deal with business disputes of differing
kinds, and for financial services work there is now the Financial List.

(3) Modern courts and flexible court procedures. The Rolls Building is the largest business
court centre in the world. It is a modern building with all the facilities required for 21st century
litigation.

On the other hand, according to survey conducted by Vidhi Legal Policy India is a long way
off from having world-class courts. The survey shows that only one state (Delhi) and one Union
Territory (Chandigarh) have court complexes that meet NCMS standards. 39

38
Litigating Financial disputes in london and the financial list, The Rt Hon Sir Nicholas Hamblen Lord Justice
of Appeal judiciary.uk/wp-content/uploads/2019/05/Financial-List-speech-by-Lord-Justice-of-Appeal.pdf.
39
Sumathi, Diksha and Reshma, Building Better Courts Surveying the Infrastructure of India’s District Courts,
https://vidhilegalpolicy.in/wp-content/uploads/2019/08/National-report_single_Aug-1.pdf.

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 Source- The International Market for Contracts: The Most Attractive Contract Laws 40

The above picture clearly shows (ICC data) England was the most attractive choice of law
compared to other countries. Because of the above reasons, I preferred the UK as the
jurisdiction and English as the choice of law in the agreement.

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Gilles Cuniberti, The International Market for Contracts: The Most Attractive Contract Laws,
https://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?article=1767&context=njilb.

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Conclusion
In conclusion, the general rule is that parties to a contract have the freedom to choose the law
that will govern their contract. The Rome I Regulation also provides rules for determining the
law governing a contract when no choice of law has been made. For example, a contract for
the sale of goods or the provision of services is governed by the law of the country where the
seller or service provider has its habitual residence. In derivatives, mostly shares being the
underlying assets, when there is no choice of law specified, the habitual residence can be taken
into account. It is essential for parties to a contract to carefully consider their choice of law and
ensure that it aligns with their intended purpose and objectives. Failing to do so may result in
the application of mandatory provisions that could have unintended consequences on the
contract's outcome. Therefore, it is advisable to seek legal advice when entering into a contract
to ensure that the choice of law is appropriate and suitable for the situation at hand.

Also as I reflect on the advantages of choosing UK law for jurisdiction and choice of law in
the ISDA Master Agreement, I realize that parties have the freedom to choose their governing
law and jurisdiction. I find it reassuring that English law is habitually chosen as the governing
law of large financial contracts, such as bank syndications, international bond issues, and
derivatives. This is because English law recognizes the importance of party autonomy, and will
strive to uphold the bargain made between the parties. Indian judiciary is vast, with almost 24
million cases currently pending in the system, which leads to bottlenecks and delays. In
contrast, England has been determining cases involving international financial disputes for
many years, which has enabled it to build up a formidable body of precedent to assist parties
and their advisers to know where they stand and to be able to predict the outcome of any
disputes when they arise. This is because English judges are commercially minded, seek to
promote certainty and consistency, and avoid hard cases making bad law. Based on the above
factors, I prefer the UK as the jurisdiction and English as the choice of law in the agreement. I
find it reassuring that English law is not bound by any code or prescriptive rules, and is able to
adjust to the rapidly changing commercial world and seeks to keep up to date with modern
developments and needs. I conclude that the UK and English law are favourable choices for
international financial transactions.

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 DERIVATIVE AGREEMENT

This Derivative Agreement ("Agreement") is made and entered into as of 20-05-2020 by and
between Khadri Company Limited, a company organized under the laws of India, with its
principal place of business ("Buyer"), and Akhil Company Limited, a company organized
under the laws of uk, with its principal place of business ("Seller").

RECITALS

WHEREAS, Buyer desires to enter into a derivative agreement with Seller for the purpose of
hedging its exposure to [specify underlying asset or risk];

WHEREAS, Seller desires to enter into a derivative agreement with Buyer to provide hedging
services to Buyer with respect to [specify underlying asset or risk];

NOW, THEREFORE, the parties hereto agree as follows:

Definitions

Capitalized terms used in this Agreement shall have the meanings given to them in Appendix
A. Hedging Services

(a) Seller agrees to provide hedging services to Buyer in accordance with the terms and
conditions of this Agreement.

(b) Buyer shall notify Seller in writing of its desired hedging strategy, including the underlying
asset or risk to be hedged, the duration of the hedging period, the notional amount of the hedge,
and any other relevant information.

(c) Seller shall use commercially reasonable efforts to execute the hedging strategy in
accordance with the terms and conditions of this Agreement.

Payment

(a) Buyer shall pay to Seller the hedge price as specified in Appendix A for each derivative
contract entered into under this Agreement.

(b) Payment shall be made by wire transfer or other mutually agreed-upon means.

Representations and Warranties

(a) Buyer represents and warrants that it has the power and authority to enter into and perform
this Agreement.

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(b) Seller represents and warrants that it has the power and authority to enter into and perform
this Agreement.

(c) Each party represents and warrants that it is not subject to any legal, regulatory, or
contractual restrictions that would prevent it from entering into and performing this Agreement.

Term and Termination

(a) This Agreement shall remain in effect until the termination of all outstanding derivative
contracts entered into under this Agreement.

(b) Either party may terminate this Agreement at any time upon written notice to the other
party.

(c) In the event of termination, the parties shall settle all outstanding derivative contracts in
accordance with the terms and conditions of this Agreement.

Governing Law and Jurisdiction

(a) Governing Law. This Agreement will be governed by and construed in accordance with the
laws of United Kingdom

(b) Jurisdiction. With respect to any suit, action or proceedings relating to any dispute arising
out of or in connection with this Agreement (“Proceedings”), each party irrevocably submit to
UK Court

Entire Agreement and Amendment

(a) This Agreement, including Appendix A, constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior and contemporaneous
negotiations, understandings, and agreements between the parties, whether oral or written.

(b) This Agreement may not be amended except in writing signed by both parties.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.

BUYER:

KHADRI COMPANY LIMITED

SELLER: AKHIL COMPANY LIMITED

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