Choice of Law in Contract and Thai Private International
A Comparative Study
from the European hemisphere, this principle is also manifestly embodied
in private international law in several non European countries, for
example some eastern nations, i.e., China (20) Japan (21) and in Latin American e.g. Chile (22),
Like other countries, Thailand, or Siam as it was called at the time
of the drafting of the Act on Conflict of Laws B.E. 2481, accepted this
principle markedly prescribed in article 13 paragraph one (24).
The principle of private autonomy or the freedom to select foreign private
laws is not exclusively applied to the law of contract but is also extended
to other branches of legal transactions, such as matrimonial regimes
between spouses, tort law (25) and law on will. The
principle of those areas, however, falls outside of the scope of this
is a caveat. Although both common law and continental law system, in
principle, markedly acknowledge the principle, of freedom of contract,
such a principle is not absolute(26). There are, basically,
divergences in doctrinal views on the principle of limitation of the
autonomy of contracting parties. The former approach espoused by a group
of common law countries, save for the United States and Australia(27),
i.e., England (28), Canada (29) and the Benelux Convention on Private International Law(30) take the view that the parties are overwhelmingly entitled to choose
and pick any law in the world in spite of having no connection with
the juridical relation of such a contract(31). This
means that, obviously, the freedom of selecting applicable law by the
parties is unlimited. The landmark of this traditional approach was
Vita Food Products Inc. v. Unus Shipping Co. in 1939 decided by Lord
Wright (32). In this case, the learned judge Lord
Wright, however, also imposed three conditions on the limitations of
party autonomy. The well known phrases rendered by Lord Wright, that
most writers usually quote him as saying are: the intention express
is bona fide, and legal. and [Sic] provided there is no reason for avoiding
the choice on the ground of public policy.
It is necessary to observe that most writers perceive the Such statement
as the rule of a lack of restriction on parties' autonomy, permitting
the contracting parties to freely choose any law applicable to their
contracts, regardless of its real relationship with the contract. But,
according to Prof. Nygh's view, the statement is vague(33).
Also, the concept of bona fide was construed as the limitation of party
autonomy by the Queensland Supreme Court. In this case(34),
although the parties made an expression of choice of law, namely, the
law of Hong Kong, the Court, after paying heed to all relevant facts,
went on to reach the conclusion that the selection of the law of Hong
Kong, as a proper law of contract, was mala fide. Accordingly, the Court
refused to applied the law of Hong Kong to the contract and, instead,
employed Queensland law.
In contrary to the former view, the restricted view upheld by Germany
academia(35), French jurisprudence(36),
the scandinavian commentators(37), the Czechoslovakian
statute(38), the Polish private international law(39),
the American conflict of laws(40) and the Argentine
Draft Code of Private International Law(41) accepted
the view that the freedom of tile contracting parties is restricted
to the closed legal relation relating to the TRANSACTION, i.e., the
common nationality of the parties, the domicile of the parties or the
place of specific performance etc. On the one hand, the chosen law might
be "invalid" or "ineffective" if such law is devoid
of a substantial relationship to the contracting parties or the juristic
act. The professio juris, who are regarded as the champions of this
approach, are Savigny Yntema(42) and Cheshire(43).
In addition, some countries like Austria impose a limitation of applying
foreign law on foreigners who conclude a contract with an Austrian national
or an Austrian subject who concludes a contract with an Austrian national
in Austria. Such cases are subject to the Austrian Civil Code(44).
Apart from Austria, limitations of party autonomy can be found in some
Latin America countries like Chile, Mexico(45), and
The autonomy doctrine, as we have seen, can be usually found in private
international law of most capitalist countries. Not surprisingly, a
communist state like Russia, however, opposes the freedom of contracting
to choose a foreign substantive law as an applicable law because international
transactions are conducted and controlled by a governmental agency,
such as a foreign trade representation or consulates, instead of private
enterprises so it is impossible for these organs of sovereign state
to be subject to foreign jurisdiction and law unless the government
waives state immunity(46). This is in contrast to
Hungary(47) and Poland(48), where
in spite of being former communist states, their private international
law recognizes me party autonomy theory, allowing a private individual
to freely select rules of foreign law applicable to a contract.
Practice Relating to the Party Autonomy
Like rules of private international law in other countries, Thai conflict
of laws B.E. 2481 (1939) recognizes the principle of party autonomy
clearly embodied in article 13 paragraph one. It stipulates that: "The
question as to what law is applicable in regard to the essential elements
or effects of a contract is determines by the intention of the parties
thereof." The Thai conflict of laws acknowledges both expressed
and inferred choice of law. It should be added that the process of ascertaining
inferred choice of law is very difficult, requiring a judge to carefully
consider, in addition to intrinsic statement or legal terms contained
in the agreement, other relevant circumstances viz. An arbitration clause,
the language, the standard form of the contract, the habitual residence
of the parties and so forth. If a judge does not scrupulously scrutinize
other pertinent circumstances, tie outcome of the decision might be
deemed to be unfair, illogical, or even absurd. A careful analysis of
a judgment is very helpful.
In B.E. 2525, the Thai Labor Court and the Thai Supreme Court had an
opportunity to employ the Act On Conflict of Laws B.E. 2481(49).
The case concerned inferred choice of law. In such a case, the contracting
parties have the same nationality, in this case, American. The contract
was concluded in Singapore and was infringed in Thailand. Then, the
plaintiff sued the defendant before the Thai Labor courts, claiming
compensation for breach of contract. The Thai ruled ruled that, in the
absence of any expressed choice of law, the contract was made Singapore.
Therefore, the Court went on to arrive at the conclusion that the implied
choice can be deduced from the place where the contract was made. Hence,
the applicable law was the Singaporean law conceived as lex loci contractus.
The Thai Supreme Court reviewed this case and decided that no circumstances
indicated both the expressed and implied choice of law, so the law applicable
was, according to article 13 paragraph one, the law common to the parties
when they are of the same nationality. The governing law was, thus,
the American law. However, in this case, the litigant failed to prove
the content of the American law, thereby the Thai Court refused to apply
such law to the case in question. Instead, the Court applied the Thai
law to this case on the grounds that the parties failed to prove the
foreign law before the Court.
Some remarks on the resorting to Thai private international law by the
Thai Supreme Court should be mentioned. First, and perhaps most significant
of all, the Thai Labor Court confused the inferred choice of law with
lex loci contractus which functions as a connecting factor separate
from the inferred choice of law. If we look at article 13 paragraph
one, the following points of contact are: the intention of the parties,
either express or implied, the common nationality of tie parties and
the law of the place where the contract was concluded, respectively.
Obviously, the court resorts to lex loci contractus as a last connecting
factor, after a determination of such two points of contact have failed.
In this case, the Court considered the place where the contract was
made as the inferred choice of law although such place per se is viewed
as another connecting factor.
See article 145 of the General Principles of the Civil Law of the People's
epublic of China 1987. It states that "the parties to a contract
involving forest interest may choose the law application to settlement
of their contract disputes, except as other stipulated by law".
The following work is worth reading for those who need to know about
party autonomy in the Chinese conflict of laws. See Luo Junming Choice
of Law for Contracts in China: A proposal for the Objectivization of
Standards and Their Use in conflict of Laws, Indiana International and
Comparative Law Review 439 et seq (1996).
It should be noted that Japan enacted three statutes relating to private
international law (Law on the Application of Laws (Horei). The first
was enacted in 1890, but was never employed. The second was promulgated
in 1898. And a new one was amended in 1989 and entered into force in
1990. See HIROSHI ODA (ed), BASIC JAPANESE LAWS 443 (1997). Both old
and new private international law acknowledged the intention of contracting
parties. Under article 7 (1) of Law On The Application of Laws (1898),
it provides that: "As regards the formation and effect of a juristic
act, the question as to which is the governing law is determined by
the intention of the parties".; See also Article 7 of the Japanese
Private International Law 1990. See also Chim Kim, New Japanese Private
International Law: The 1990 Horei, 40 The American Journal of Comparative
Law 1, 6-7, (1992); J.E. de BECKER, INTERNATIONAL PRIVATE LAW OF JAPAN
See ALFREDO ETCHEBERRY O, AMERICAN-CHILEAN PRIVATE INTERNATIONAL 58-59
See Draft Code of Private International Law article 35. The text can
be found at 24 International Legal Material 272 (1985).
Article 13 reads that "The question as to what law is applicable
in regard to the essential or effects of a contract are determined by
the intention of the parties thereto".
See Peter E. Nygh, The Reasonable Expectations of the Parties As A Guide
to the Choice of Law in Contract And In Tort, 251 Recueil Des Cours
(1995), at 294-295 Frank Vischer, supra note 11, at 123.
See Beda Eortmann, Choice of Law by Arbitrators: The Applicable Conflict
of Law System, 14 Arbitration International volume 98 (1998).
In Australia, the question is whether contracting parties are able to
absolutely freely select any system of law in the world. On this point,
the practices of Australia are not consistent. There were several cases
confirming the principle of restriction of an expression of choice of
law. Nonetheless, an Australian court ruled that although the New York
Law did not directly connect to the contract at all, shch law can be
applied to the contract. The following cases were in favor of the limitation
of party autonomy: Re Helbert Wagg & Co  Ch 323 at 341; Kay's
easing Corpn v Fletcher (1964) 64 SR (NSW) 195 AT 205 per Walsh J. These
cases cited by P.E. Nygh in CONFLICT OF LAWS IN AUSTRIA 215 (1976).
The following cases were opposes to the limitation of chosen law: B.H.P.
Petroleum Pty. V. Oil Basins Ltd.  V.R. 725, 747; Kutchera v.
Buckingham International Holding Ltd  I.R. 61,68; John Kaldor
Fabricmaker Pty Ltd v Michell Cotts Freigh (Australia) Pty Ltd (1989)
N.S.W.L.R. 172, 185. The case previously mentioned can be found is PETER
NORTH, PRIVATE INTERNATIONAL LAW PROBLEMS IN COMMON LAW JURISDICTIONS
See PETER NORTH, supra note 27, at 114-115
See JEAN-GABRIEL CASTEL, INTRODUCTION TO CONFLICT OF LAWS 165 (1978);
Like British Court, Canadian Courts adopted a concept of bona fide applicable
to the chosen law, albeit lacking real connection with the contract.
See also JEAN-GABRIEL CASTEL, PRIVATE INTERNATIONAL LAW: A COMPARATIVE
STUDY OF RULES PREVAILING CANADA AND THE UNITED STATES 200 (1960).
See E.M.Meilers, The Benelux Convention on private International Law,
2 The American Journal of Comparative Law 1,8 (1953).
MARTIN WOLFF, supra note 2, at 418; JOHN O'BRIEN, CONFLICT OF LAWS 329
Cited by JOHN O'BRIEN, supra note 31, at 310.
See P.E. NYGH, CONFLICT OF LAWS IN AUSTRALIA 216 (1976).
Golden Acres Ltd v Queensland Estates Pty Ltd  Qd 378 quoted by
P.E. NYGH, supra note, at 216.
MARTIN WOLFF, supra note 1, at 417. Nonetheleaa, Professor Drobnig took
the different position that the parties are able to choose any law applied
to the contract. See ULRICH DROBNIG, supra note 14, at
See GEORGES R. DELAUME, AMERICAN-FRENCH PRIVATE INTERNATIONAL LAW 120
See Ole lando, supra note 4, at 5.
See Hessel E. Yntema, "Autonomy" in choice of Law, 1 The American
Journal of Comparative Law 341, 350. (1954).
See K.GRZYBOWSKI (et al), STUDIES IN POLISH LAW 154 (1962).
See RUSSELL J. WEINTRAUB, COMMENTARY ON THE CONFLICT OF LAWS 376-377
Article 35 states that "
choice of law must not favor a dishonest
interest of the parties; Such never occurs where there is, in the scope
of private international law, a reasonable connection between the contract
and the country whose law applies". The Text can be found in 24
International Legal Material 272 ff (1985).
Id. At 357
CHESHIRE AND NORTH PRIVATE INTERNATIONAL LAW, P.M. NORTH (ed.) 199-202
According to article 36 of the Austrian Civil Code: "If a foreigner
in this country enters into a bilaterally obligatory transation with
a national, it shall be governed by this Code Without exception
See ERNST RABEL, THE CONFLICT OF LAWS: A COMPARATIVE SYUDY volume two
See FERENC MADL, THE LAW OF TRANSACTIONS 74-75 (1982).
Id at 75.
See K. GRZYBOWSKI (et al), supra note 39, at 153-154
See The Judgment of Supreme Court No. 3223/2525.