On the Interpretation of the Terms «law» and «legislation» in the Context of the Autonomy of Will of the Parties to International Private Law Relations

Abstract

As a general rule, an express written agreement on applicable law is the most successful in the event of a dispute. However, the wording of the agreement, particularly when terms such as «law» and «legislation» are used, can cause significant difficulties in the law enforcement process. The practice of Russian courts and the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation has established the position that the parties' choice of «Russian Federation law» means, first and foremost, their choice of international treaties of the Russian Federation which are an integral part of its legal system and, as far as they are concerned, of Russian regulations. Difficulties in the practice of the International Commercial Arbitration Court are caused by the interpretation of the phrase «Russian Federation law» used in applicable law agreements. In some decisions it is understood as covering only Russian regulatory acts, in others it is understood as implying also international agreements of the Russian Federation. This problem is most acute in the application of the Convention on Contracts for the International Sale of Goods, as the Convention allows the parties to exclude its application. This problem is compounded by the fact that the legislator himself uses various terms in formulating conflict of laws rules. For example, as part of the conflict of laws regulation of contractual legal relations with a foreign element, the Agreement of the countries of the Union of Independent States on the procedure for settling disputes related to business activities uses the term «legislation» and the Civil Code of the Russian Federation uses the term «law». In this regard, we support Oleg Malkin's position on the expediency of using the term «law» both in national conflict of laws rules and in international treaties concluded by the Russian Federation. We believe that if the parties choose the «legislation of the Russian Federation», the ap-plication of international treaties of the Russian Federation will only be justified if the parties themselves confirm that they did not intend to exclude their validity. In the absence of a common position of the parties on this issue, the court and the arbitral tribunal will be forced to interpret the said phrase in the light of its literal meaning and in the light of Art. 3 and 7 of the Civil Code of the Russian Federation as covering only domestic legal acts and excluding (if such exclusion is permissible) international agreements. While acknowledging that in a number of cases the parties to applicable law agreements do not see any difference between the terms «law» and «legislation», we will point out the following. In the absence of an agreed position on the contrary, an express agreement must be interpreted only in accordance with its literal meaning, and a party that does not understand such meaning will suffer the adverse consequences of its misunderstanding. In this regard, the parties to international private law relations should once again be reminded of the recommendation to formulate the texts of applicable law agreements as precisely and unambiguously as possible.