The Contemporary Development Of Choice Of Law On Contracts And The Improvement Of Chinese Legislation

Contractual choice of law is antique, for its origin can be traced back to ancientRome, and vigorous, for its continuing development through last millennium. Thedevelopment, which reflected in each facet of contractual choice of law, constitutesthe main theme of this thesis. The following are the questions this thesis endeavors tosolve:(1) the pattern of the evolvement of the contractual choice of law and the logicbehind it;(2) the specific development of contemporary contractual choice of law;(3)what improvement should Chinese legislation to make in light of aforementionedcontemporary development.The current framework for choice of law rules on contract, that is combinationof subjective and objective approach, was established as early in1950s andsuccessfully divided the history of contractual choice of law into two basic phases, i.e.modern phase and traditional phase.The traditional contractual choice of law hold the legislative jurisdiction as thestarting point of its theoretical thinking, and make the protection of governmentalinterest as its main goal."locus regit actum", once being the principle and the onlyrule for traditional contractual choice of law, lost it predominant position whenobjective approach continuingly diversify its approachs. The theoretical standpointthereof, i.e. fairly dividing legislative jurisdiction between states, was entirely preserved, and became direct or indirect goal of some conflict theories, such as "vestrights theory" of Dicey and "Sitz des kechtsverh altuisses" of Saviny. Subjectiveapproach did appear in traditional contractual choice of law but was only treated as anelement for objective approach until1950s because it conflict with traditionaltheoretical standpoint.Modern contractual choice of law is progressing within the framework of choiceof law rules on contract established in1950s, rather than breaking through it.American choice-of-law revolution introduces into conflict of laws interests, policy,and substantial outcomes as well as many other elements, thus imposing substantialimpact on traditional conflict of laws, specifically, the objective approach ofcontractual choice of law. In the mean time, in order to improve the contractual choiceof law but not overthrown the framework, European countries only try to makemodifications by:(1) adopting "characteristic performance theory" in objectiveapproach to increase predictability of choice-of-law rules; and (2) introducing "Lois d'application immediate" to bridge the substantial legislative policy and conflict oflaws. As to the legislation, Rome Convention (1980) and Rome Regulation I heavilyinfluenced modern contractual choice of law. After U.K., the origin and source ofcommon law, signing Rome Convention (1980) and being bind by Rome Regulation I,the contractual choice of law rules is converging in its theory and rules. In general, thecontemporary contractual choice of law has following development, which guide thedevelopment of every specific institutions and rules:(1) Value orientation: substantialjustice has been introduced into choice of law process. The interest of private partiesgradually takes a superior position; social interest attracts increasing attention; andgovernmental interest become less important in choice of law process.(2) Choice oflaw method: Subjective approach, objective approach and substantial method co-existin contractual choice of law and apply in that sequence.(3) The choice of lawapproach and institutions witness a structural segregation, including segregation onthe theoretical basis and application mode between subjective and objectiveapproaches, and segregation on general approach and specific institutions.The major development of modern contractual choice of law lies in two aspects: choice of law methods and specific institutions.The detailed development of choice of law method includes:(1) Thedevelopment of Depecage theory. In modern conflict of laws, the proper law of thecontract has greatly extended its scope of application, which only excludes such issuesas the capacity of contracting parties, the legal effect of inaction of the parties, theformal validity of the contract, the illegality of the performance, and the mode ofperformance.(2) The coupling of "party autonomy" and "Freedom of Contract". Incontemporary contractual choice of law, the limitations to the party autonomy areimposed by exterior means, such as choice of law rules on special contracts andoverriding mandatory rules, and the restrictions to the action of selecting theapplicable law are substantially reduced, if not eliminated. Traditional theoreticalperspective of conflict of laws theory, which makes the states the protagonist ofconflict of laws and pursues the goal of fair distribution of legislative jurisdiction, isunable to explain the contemporary development of party autonomy. The author ofthis thesis presented a view that the origin of "conflict" in "contractual choice of law"is the conflict of interest of contractual parties.(3) The development of objectiveapproaches. The characteristic performance theory, which is able to distributelegislative jurisdiction in a fair and quick manner, evolves into an independentobjective approach. The importance of the principle of closest connection is graduallymarked down.The development of special institutions manifested in following threeinstitutions:(1) Overriding mandatory rules. The overriding mandatory rules, which isan effective measures to safeguard the continental choice of laws system based ondichotomy of public and private law, undertakes most, if no all, part of task for, andemancipates the general approaches from implementing substantive legislation policy.It evolves from single rules scattered in various legal sections to an independent legalinstitution, and reflects the adoption of functionalism approach of continental lawyers.(2) Independent and special legal regimes has to be set up for consumer contract andlabor contract, because the general approaches are unable to implement at the sametime two substantial policies, i.e. freedom of contract and protection of weaker party. (3) The new lex mercatoria, whose number is increasing and the regime is integrating,qualifies to be treated as applicable law for contract. In practice, subjective andobjective approach divides as to the application of lex mercatoria. Through objectiveapproach, it can either be incorporated into contact as a normal clause or be selectedby contractual parties to govern the contract; the objective approach still pursues thegoal of fair distribution of legislative jurisdiction, therefore, it is impossible for theattribution of contractual choice-of-law rules to include lex mercatoria.The ultimate goal of researching cotemporary development of contractual choiceof law is to provide reference to Chinese legislation. Although Chinese contractualchoice of law regime has improved after the adoption of The Law of the Application ofLaw for Foreign-related Civil Relations of the People's Republic of China, manydemerits of contractual choice of law is waiting for perfection. In order to improve theChinese legislation on contractual choice of law regime, following measures arenecessary:(1) Reducing the limitations to party autonomy;(2) Making detailedpresumptions for closest connection principle to facilitate the application by judges,and eliminating unjustified preference for lex fori;(3) Improving the overridingmandatory rules regime, specifying the distinction between overriding mandatoryrules and other mandatory rules by utilizing the experience accumulated in judicialpractice, and establishing the application of overriding rules of third countries;(4)abolishing institutions of evasion of law and designating overriding mandatory rulesto undertake its functions;(5) further improving the conflict rules for consumercontract and labor contract and annulling the current choice-of-law rules for foreigninvestment related contracts.