Lloyd's Maritime and Commercial Law Quarterly
FLOATING CHOICE OF LAW CLAUSES
FLOATING CHOICE OF LAW CLAUSES1
The Star Texas
Where a contract with international dimensions contains an arbitration clause, at least four different systems of law may be relevant to disputes arising under it: (i) the law governing the substantive obligations of the parties; (ii) the law governing the arbitration clause (because the latter is a separate contract with a life of its own); (iii) the “curial law”, essentially the law governing the procedure under which the arbitration is to be conducted; and (iv), it seems, the law governing such questions as whether the reference has been terminated.2 “It may be objected that this piles up the proper laws absurdly high”3, but it is difficult to escape from the logic from which this potential variety flows.
The fact that English arbitration law embraces complexity in its choice of law rules does not also imply tolerance of uncertainty. It is not just that the court must be capable of ascertaining what is the relevant law by the application of the relevant criteria. The relevant law must be ascertainable from the moment the agreement is made. The decision of the Court of Appeal in The Star Texas
4 is important because, although it reaffirms this principle, it restricts its operation to the determination of the substantive law governing the contract to arbitrate.5 The judgment of Steyn, L.J., also contains two important sidelights on the choice of law process.
The facts and issues
The case arose out of a claim for hire by disponent owners who had served proceedings on charterers out of the jurisdiction. The ship had loaded chemicals in China. They were found to be leaking when she reached Singapore and she was forced to return to China. The substantive dispute concerned the period for which the vessel was off-hire under the charterparty. The disponent owners had obtained leave ex parte to serve a writ out of the
1. See Briggs, “‘Floating’ Choice of Law and Jurisdiction Clauses” [1986] LMCLQ 508; Beck, “Floating Choice of Law Clauses” [1987] LMCLQ 523; Pierce, “Post Formation Choice of Law in Contract (1987) 50 M.L.R. 176.
2. See Mustill & Boyd, Commercial Arbitration, 2nd edn (1989), 60–62.
3. Black-Clawson International Ltd. v. Papierwerke Waldhof-Aschaffenburg A.G. [1981] 2 Lloyd’s Rep. 446, 455. 2, per Mustill, J.
4. Star Shipping A.S. v. China National Foreign Trade Transportation Corp. (The Star Texas)
[1993] 2 Lloyd’s Rep. 445 (C.A.).
5. So far as the substantive obligations of the contract to which the arbitration agreement is superadded are concerned, different considerations apply because of the passage of the Contracts (Applicable Law) Act 1990, referred to infra.
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