Iran Continental Shelf Oil Company v IRI International Corporation [QBD]
| Jurisdiction | England & Wales |
| Judge | McCombe J |
| Judgment Date | 05 December 2001 |
| Court | Queen's Bench Division |
| Date | 05 December 2001 |
Queen's Bench Division.
McCombe J.
Hugh Mercer (instructed by Eversheds) for the claimant.
Michael Tugendhat QC and Philip Edey (instructed by Freshfields) for the defendant.
The following cases were referred to in the judgment:
Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) LtdWLR [1979] 1 WLR 401.
Credit Lyonnais v New Hampshire Insurance Co [1997] CLC 909.
Definitely Maybe (Touring) Ltd v Marek Lieberberg Konzertagentur GmbH [2002] CLC 360; [2001] 1 WLR 1745.
Johnson v Taylor Bros & Co LtdELR [1920] AC 144.
Manbre Saccharine Co Ltd v Corn Products Co LtdELR [1919] 1 KB 198.
Print Concept GmbH v GEW (EC) LtdUNK [2001] EWCA Civ 352; [2002] CLC 352.
Contract — Conflict of laws — Sale of goods — Applicable law — Contract for sale of goods on CFR terms — Whether choice of law expressed or demonstrated with reasonable certainty by contract or circumstances — Applicable law in absence of choice — Performance which was characteristic of contract — Whether proper law of contract was law of Texas where defendant had place of business or whether contract was more closely connected with another country — Whether performance to be effected through place of business other than principal place of business — Contracts (Applicable Law) Act 1990, Sch. 1 (Rome Convention), art. 3, 4(2), (5).
This was the trial of an issue to determine the proper law of the contract between the parties.
The three claimants were Iranian corporations ultimately owned by the government of Iran. The defendant was a Delaware corporation with its principal places of business in Texas, USA, and a branch in England. In 1990 the parties entered into a contract for the supply of six “workover rigs” at a price of over $10m. Under that contract disputes were to be resolved in Iranian courts under Iranian law. The claimants also invited the defendant to tender for the repair and refurbishment of a rig which had been damaged in the Iran/Iraq war. The defendant presented a quotation which was subject to its terms and conditions including a provision for the governing law to be the law of Texas. In 1991 a further quotation was made on the same terms. The claimants sent the defendant a copy of their own general conditions providing for Iranian law to apply. There were further negotiations. In January 1992 the defendant presented further quotations, one identifying parts and tools to be supplied and with the defendant's charges for technical assistance separately itemised and one with the costs of technical services rolled up into the price of the goods to be supplied. In 1994 the defendant accepted the claimants' purchase order which was addressed to the English branch, referred to the second 1992 quotation and contained other standard terms but without reference to a choice of law. Performance of the resulting contract by the defendant was prohibited by executive order in the US. The claimants took proceedings in England. They argued that there was an express choice of Iranian law under art. 3 of the Rome Convention, alternatively that the contract was governed by Iranian law or English law by virtue of art. 4. The defendant argued that Texan law was chosen, alternatively that the contract was most closely connected with Texas.
Held, ruling accordingly:
1. On the evidence there was therefore no express choice of Iranian law. Nor was any choice of Iranian law demonstrated by the circumstances of the case under art. 3. The contract was not related to the prior contract subject to Iranian law, nor was there a course of dealing. The claimants received the defendant's initial quotations and conditions without any protest as to the choice of law provision contained in them.
2. There was no choice of Texas law as the law of the contract. The 1992 quotations did not refer to the defendant's standard terms and conditions. Even if the terms were included with the quotations, the defendant accepted a purchase order which contained rival and inconsistent terms. Accordingly there was no choice of any applicable law within the meaning of art. 3.
3. Article 4(2) and (5) had to be applied together since the presumptions in art. 4(2) were only to be disregarded under art. 4(5) to the extent that it was apparent that the contract was more closely connected with “another country”, meaning more closely connected with a country other than that which would be indicated by application of the art. 4(2) presumptions.
4. Applying art. 4(2) the country with which the contract was most closely connected was Texas where the defendant had its places of business. Whatever the characteristic performance, it was to be effected by the defendant. The contract was on CFR terms. The goods were to be manufactured or acquired in the US and shipped from Texas, the prices being quoted ex-works in Houston. The characteristic performance was the supply and delivery of goods in the US under the CFR contract. It was accepted that some labour services in the form of engineering supervision were part of the defendant's contractual obligations but the assistance to be provided by the defendant's technicians on the platform did not affect the conclusion on characteristic performance considering the contract as a whole. (Johnson v Taylor Bros & Co LtdELR[1920] AC 144andPrint Concept GmbH v GEW (EC) Ltd[2002] CLC 352; [2001] EWCA Civ 352 applied.)
5. The characteristic performance was not to be effected through the defendant's UK office. The limited involvement of the UK office did not have that effect.
6. The contract was not more closely connected with another country under art. 4(5), and the proper law of the contract was that of Texas.
McCombe J:
1. In this judgment references to the bundles of documents will take the following format: for example, a citation appearing as 4:16:187 would be a reference to the document to be found at vol. 4 of the trial bundles, tab 16, p. 187.
2. In the present case, there is a dispute, between three Iranian corporations as claimants and a Delaware corporation as defendant, arising out of the latter's alleged failure to perform part of its obligations under a contract by reason of its need to comply with an executive order of the President of the United States, made in May 1995, prohibiting the performance of obligations, such as those in issue, for Iranian undertakings.
3. I have before me the trial of an issue to determine the proper law of the contract between the parties. If that proper law is that of Texas, as contended for by the defendant, then it may be (and, of course, I make no findings about this one way or the other) more likely that the executive order would be held to exonerate the defendant from the performance in question than if the proper law is held to be that of Iran, or alternatively, of England and Wales, as contended for by the claimants. There is no dispute between the parties that this action is properly subject to the jurisdiction of the English court. As I shall describe in more detail later, the contract in question was for the supply by the defendant to the claimants, or one or more of them, of certain parts and ancillary equipment for the purpose of the repair and refurbishment of an oil rig, near Lavan Island in or near Iran, called the R4 rig, together with certain technical assistance in the installation process from the defendant's engineers.
4. The law determinative of the present matter can be relatively shortly stated, but perhaps less shortly and less easily applied to the facts. Section 2(1) of the Contracts (Applicable Law) Act 1990 of the UK provides that “the Conventions shall have the force of law in the United Kingdom ”. By s. 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 on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980 and signed by the UK on 7 December 1981. Certain provisions of the Rome Conventions were excluded from the incorporation of its terms into English law, but these are not relevant for present purposes. Section 3(3) of the 1990 Act provides:
“Without prejudice to any practice of the courts as to the matters which may be considered apart from this subsection –
1(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 provisions of the Rome Convention are set out in Sch. 1 to the 1990 Act.
5. The material provisions for present purposes of that convention 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 express 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 the 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...
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Iran Continental Shelf Oil Company and Iran Offshore Oil Company and National Iranian Oil Company v IRI International Corporation
...(Applicable Law) Act 1990, Sch. 1 (Rome Convention), art. 4(2), (5). This was an appeal by the claimants from a decision of McCombe J ([2002] CLC 372) in which he held that a contract between the second claimant and the respondent was governed by the law of Texas and not by English law. The......