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ACCA Applied Skills · Corporate and Business Law (Global) · International trade, international legal regulation and conflict of laws

A contract between firms in two countries has no governing law clause. A dispute arises and the court in the forum country must decide which country's law applies. Which approach describes what the court will typically do?

The court will typically apply its conflict of laws rules to find the law of the country with the closest connection to the contract. It does not automatically apply forum law or the claimant's law, and it does not refuse to hear the case.

  1. AApply the law of the forum court's country in every case
  2. BApply the law of the country with which the contract has its closest connection, using its own conflict of laws rulesCorrect
  3. CApply the law of the country of whichever party sues first
  4. DRefuse to hear the case until the parties agree on a governing law

Explanation

Where no law is chosen, the court applies its conflict of laws rules to identify the proper law, typically the system with the closest and most real connection to the contract. Applying forum law automatically or the claimant's law is not the general approach.

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