Iran Continental Shelf Oil Company and Iran Offshore Oil Company and National Iranian Oil Company v IRI International Corporation
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WARD,Lord Justice Clarke,LORD JUSTICE CLARKE,Lord Justice Carnwath,LORD JUSTICE CARNWATH |
| Judgment Date | 28 June 2002 |
| Neutral Citation | [2002] EWCA Civ 1024 |
| Docket Number | A2/2002/0008 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 June 2002 |
[2002] EWCA Civ 1024
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(Mr Justice McCombe)
Lord Justice Ward
Lord Justice Clarke and
Lord Justice Carnwath
A2/2002/0008
Mr H Mercer (instructed by Messrs Eversheds, London EC4) appeared on behalf of the Appellant Claimants.
Mr M Tugendhat QC and Mr P Edey (instructed by Messrs Freshfields Bruckhaus Deringer, London EC4) appeared on behalf of the Respondent Defendant.
I will ask Lord Justice Clarke to give the first judgment.
LORD JUSTICE CLARKEIntroduction
This is an appeal by the claimants from a decision of Mr Justice McCombe made on 5th December 2001 in which he held that a contract between the second claimant and the respondent is governed by the law of Texas. The claimants appeal by permission of the judge and invite this court to hold that the contract was governed by English law.
The Claim
The claimants are Iranian corporations ultimately owned by the Government of Iran. The first and second claimants were companies involved in the management and extraction of oil resources from oilfields in Iranian territorial waters in the Southern Gulf. The third claimant was the parent company of the second claimant ("IOOC") and was responsible for the management of the oil resources of Iran. The defendant ("IRI") is a Delaware corporation with its principal place of business in Houston, Texas. It at all relevant times had an office in the United Kingdom.
It is common ground that the contract which has given rise to the issues in this action was concluded by IRI's acceptance, by a letter dated 8th November 1994, of a purchase order No. FPP-00058-LA dated 18th September 1994.
Under the contract IRI agreed to supply and ship on board a vessel in Houston for carriage to Bandar Abbas various parts and equipment required for the refurbishment or repair of an oil rig in the Persian Gulf belonging to the claimants and to send engineers to oversee the installation of those parts and equipment on the rig. In return, the claimants agreed to pay (and in the event did pay) the total sum of US$1,127,388.21 to IRI. I shall return to the terms of the contract in a moment, but it was expressly agreed that the materials were supplied on a CFR (cost and freight) basis and that the sum of US$1,127,388.21 included a sum of US$139,864 for IRI engineers to oversee its installation on the rig. As I understand it, a CFR contract is the same as what used to be called a C&F contract.
After the materials had been shipped under the contract at Houston, President Clinton issued "Executive Order 12959" dated 8th May 1995, which IRI says had the effect of prohibiting it from further dealing with Iranian companies and, in particular, from sending its engineers to the oil rig to oversee the installation of the materials. In any event, IRI refused to send its engineers to do the work, with the result that the claimants had to engage others to do it. In this action the claimants seek the return of the sum of US$139,864 and damages for breach of contract in respect of the extra cost of having the work done and loss of production in the meantime. The cost of having the work done by others is said by the claimants to have been about US$1.3 million. Their total claim, including loss of production, amounts to some US$75 million.
The Preliminary Issue
It is common ground that the English courts have jurisdiction to entertain this action, the resolution of which may depend upon the law governing the contract. The question what law governs the contract was ordered to be tried as a preliminary issue. Before the judge each party alleged that the parties had chosen the governing law. The claimants said that they had chosen the law of Iran, whereas IRI said that they had chosen the law of Texas. Thus the claimants said that the effect of Article 3 of the Rome Convention on the Law Applicable to Contractual Obligations, opened for signature in Rome on 19th June 1980 and signed by the United Kingdom on 7th December 1981 ("the Rome Convention"), was that the contract is governed by the law of Iran. IRI, by contrast, said that the effect of Article 3 was that the contract is governed by the law of Texas. The judge, however, held that the parties had not chosen any law to govern the contract and rejected both cases.
It was, and remains, common ground that if the law applicable to the contract was not chosen in accordance with Article 3 the question of which law governs the contract is to be determined by Article 4 of the Rome Convention. The claimants submitted before the judge that under Article 4 the contract was governed by English law or, alternatively, by the law of Iran, whereas IRI submitted that it was governed by the law of Texas. The judge held that on the facts the contract was governed by the law of Texas under Article 4.2 and that there was nothing in the circumstances to show that the contract was more closely connected with any other country for the purposes of Article 4.5.
The Appeal
Neither party challenges the judge's conclusion under Article 3, but the claimants say that the judge should have held that the contract is governed by English law because of the effect of Article 4.2. IRI says that the judge was right to hold that the application of Article 4.2 leads to the conclusion that the contract is governed by the law of Texas. Each party has an alternative case. The claimants' alternative case is that if the judge was right under Article 4.2, he should have held that the effect of Article 4.5 was that the governing law was the law of Iran. IRI's alternative case is that if the judge was wrong under Article 4.2, he should nevertheless have held that the effect of Article 4.5 was that the governing law is the law of Texas.
The Rome Convention
Section 2(1) of the Contracts (Applicable Law) Act 1990 ("the Act") provides that:
"… the Conventions shall have the force of law in the United Kingdom."
By section 1 of the Act it is provided that the term "Conventions" in the Act refers to a series of international conventions, including the Rome Convention. As the judge observed, certain provisions of the Rome Convention were excluded from the incorporation of its terms into English law, but these are not relevant for present purposes. Section 3(3) of the Act provides:
"Without prejudice to any practice of the courts as to the matters which may be considered apart from this subsection —
(a)the report on the Rome Convention by Professor Mario Giuliano and Professor Paul Lagarde which is reproduced in the Official Journal of the Communities of 31st October 1980 may be considered in ascertaining the meaning or effect of any provision of that Convention; …"
The material provisions of the Rome Convention which are set out in schedule 1 to the Act are the following:
"Article 1
Scope of the Convention
1. The rules of this Convention shall apply to contractual obligations in any situation involving a choice between the laws of different countries. …
Article 3
Freedom of choice
1. A contract shall be governed by the law chosen by the parties. The choice must be expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. …
Article 4
Applicable law in the absence of choice
1. To the extent that the law applicable to the contract has not been chosen in accordance with Article 3, the contract shall be governed by the law of the country with which it is most closely connected. …
2. Subject to the provisions of paragraph 5 of this Article, it shall be presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of a body corporate or unincorporate, its central administration. However, if the contract is entered into in the course of that party's trade or profession, that country shall be the country in which the principal place of business is situated or, where under the terms of the contract the performance is to be effected through a place of business other than the principal place of business, the country in which that other place of business is situated. …
5. Paragraph 2 shall not apply if the characteristic performance cannot be determined, and the presumptions in paragraph … 2 … shall be disregarded if it appears from the circumstances as a whole that the contract is more closely connected with another country."
The Rome Convention was entered into between member states of the European Union to harmonise the methods of determining the law applicable to contractual obligations between the member states. Although, unlike the Brussels Convention 1968, which was enacted in the Civil Jurisdiction and Judgments Act 1982, it was not specifically entered into pursuant to Article 220 of the EEC Treaty, the Rome Convention has been described as the "natural sequel to the Convention on Jurisdiction and Enforcement of Judgments": see Giuliano/Lagarde, para A4-04. The fundamental principle of interpretation is stated in Article 18 of the Convention as follows:
"In the interpretation and application of the preceding uniform rules, regard shall be had to their international character and to the desirability of achieving uniformity in their...
To continue reading
Request your trial
-
Timothy Joseph Lawlor v Sandvik Mining and Construction Mobile Crushers and Screens Ltd
...another country." 7 The interpretation of these provisions is helpfully explained by Clarke LJ, as he then was, in Iran Continental Shelf Oil v IRI International corp [2002] EWCA Civ 1024 in a passage which, with respect to the admirable submissions of Counsel on the point, is all I need t......
-
GDE LLC (formerly Anglia Autoflow North America LLC) v Anglia Autoflow Ltd
...the ascertainment of governing law. In this context, it is necessary to refer only to the comments of Clarke LJ in Iran Continental Shelf Oil Co. v IRI International Corp., [2002] EWCA Civ. 1024: “14. In Samcrete Egypt v Land Rover Exports Ltd, [2001] EWCA Civ 2019; [2002] CLC 533, Potte......
-
Base Metal Trading Ltd v Shamurin
...Ltd [2002] EWCA Civ 2019; Ennstone Building Products Ltd v. Stranger Ltd [2002] 1 WLR 3059 (CA); Iran Continental Oil Shelf Co v. IRI [2002] EWCA Civ 1024, all of which cite Credit Lyonnaise v. New Hampshire Insurance Co [1997] 2 Lloyds Rep 1, CA, in particular Hobhouse LJ, and Societé Nouv......
-
Base Metal Trading Ltd v Shamurin [QBD (Comm)]
...3059. Henderson v Merrett Syndicates Ltd [1994] CLC 918; [1995] 2 AC 145. Iran Continental Shelf Oil Co v IRI International CorpUNK [2002] EWCA Civ 1024; [2004] 2 CLC 696. Jakob Handte & Co GmbH v Societe Traitments Mecano-Chimiques des Surfaces (TMCS)ECAS (Case 26/91) [1992] ECR I-3967. Ka......