The International Guarantee Application Of The Law

International guarantee is very important to international business transactions. When businessmen and business organizations engage in international finance operations or international goods and service trade, international guarantees are frequently provided to secure the performance of these transactions. The laws of different countries and regions have different regulations on the validity of guarantee, scope of the duty of the guarantor and guarantee period. Furthermore, the international convention and practices have different regulations on the obligation of the independent guarantor to examine the documents and the requirement of the documents provided by the beneficiary. Thus judges will make different judgments if they apply different laws or rules to disputes relating to international guarantees. This is often the primary source of conflict of laws. However, it is impossible for the international community to make an international uniform substantive law on guarantee which can be accepted by all countries and regions in the world. Therefore, the only practical method to solve the conflict of laws is that judges shall reasonably choose the governing law for international guarantee disputes.The doctrine of party autonomy has been widely adopted to solve conflict of laws in international guarantee transactions. The parties can choose the governing law either by express way or by implied way. Furthermore, the doctrine of party autonomy is not only for the application of law in cases relating to collateral guarantees, but also for the application of law in those cases relating to independent guarantees. There are some shortcomings in Chinese judicial practices. The most significant relationship doctrine has also been widely adopted to solve the conflict of laws in international guarantee transactions in many countries. In China, The most significant relationship doctrine has been adopted to choose the governing law for the contracts of guarantee with foreign elements in both legislative practices and judicial practices. International convention and practices can also be applied to solve disputes relating to international guarantees.In many international transactions, the guarantor provides guarantee to secure the performance of the principal contract while the counter-guarantor provides counter-guarantee to secure the performance of the contract of guarantee. Therefore, the principal contract, the contract of guarantee, and the contract of counter-guarantee are closely interrelated. In situations where the parties fail to select the governing law for their disputes, the law of the country in which the party Which is due to execute the characteristic performance has its business place shall be the governing law for the contract of guarantee according to the conflict rules of some jurisdictions. However, the governing law for the principal contract shall also govern the contract of guarantee according to the conflict rules of other jurisdictions. In some cases, the Chinese Supreme Court chooses the governing law for the contract of guarantee according to the theory of characteristic performance while in other cases it chooses the governing law for the principal contract to govern the contract of guarantee.In many countries and regions, the judges choose the law of the place where the property is located as the governing law to solve disputes concerning security interest according to the rule of lex rei sitae. However, the judges may find it is difficult to choose the governing law by the rule of lex rei sitae to solve disputes concerning movables or intangibles, which are usually in movable states or difficult to be physically located. In order to adapt to changes and developments in international business operations, different countries and regions try to adopt new conflict rules to choose the governing law for disputes concerning the security interest on movables or intangibles. From the perspective of legislative and judicial practices in China, the problem is that the connecting factors adopted in conflict rules concerning security interest are too simple to meet the needs of foreign business operations.Classification is the precondition of the application of law when judges deal with disputes concerning international guarantees. In the judicial practices of some countries or regions, judges classify collateral guarantees and independent guarantees according to the law of the forum. However, it is impractical for judges to do so in many other countries or regions because the laws there do not exactly define what independent guarantee is. Contradictions in logic may arise if judges try to classify collateral guarantee and independent guarantee according to the governing law of the transaction. The practical method is that judges may classify collateral guarantees and independent guarantees according to their legal characteristics. As to the classification of letters of comfort, judges in some countries and regions adopt the method of literal interpretation while those in other countries and regions adopt the method of teleological interpretation. In China, different methods are adopted by judges in different cases.In many countries, the control of external guarantee is an important part of the control of external debt and foreign exchange. Therefore, many countries restrict the application of foreign laws in litigations relating to international guarantee according to the institutions of the evasion of law and the reservation of public order. In China, the institutions of the evasion of law and the reservation of public order are mistakenly used in some cases. The key factor to be taken into account should be whether the result of the application of foreign law in certain cases will be seriously harmful to the finance management system of China, rather than whether the parties of the international guarantee transactions have violated some mandatory rules when Chinese judges try to restrict the application of foreign law according to the institution of the reservation of public order. It is not suitable to restrict the application of foreign law according to the institution of the reservation of public order if the parties only violate the regulations on the registration of external guarantee. If the parties violate the regulations on the examination and approval of external guarantee, it is still possible for judges not to restrict the application of foreign law according to the institution of the reservation of public order.