Domestic or foreign law: which law applies?

The foreign element in private-law relations is of fundamental importance because it defines the limits of the application of domestic law in international private-law relations. Essentially, when there is a foreign element, such as foreign parties, contracts of an international character, or even international trade and transport, the question arises as to which law should apply. To clarify this phenomenon, it is important to understand how foreign elements operate within private-law relations and how they are regulated through national laws and international treaties.

A foreign element can appear in different forms: in the subject, in the object of the relationship, and in the rights and obligations arising from it. As regards the subject, the foreign element is usually linked to the status of the parties, such as foreign citizenship, domicile or residence. This may include natural or legal persons not connected with the domestic legal system who are party to a legal relationship. As regards the object, a foreign element appears when the legal relationship concerns property located abroad, such as land or a building outside the country. Likewise, in the context of rights and obligations, the foreign element may relate to a contract concluded abroad or a tort committed outside the country. All these situations may raise the question of which law should apply to the relationship.

The legislation of every legal system must clarify how international private-law relations are regulated. In this context, it is often not necessary for all elements of the relationship to be foreign; it is sufficient that at least one of the parties or circumstances is linked to a foreign country, and this may be enough for foreign law to apply. Thus, when a foreign element appears, the private-law relationship becomes international and therefore necessarily subject to the rules of private international law. The key question, however, is how and when the foreign element will be recognised by our conflict-of-law rule.

The role of conflict-of-law rules in determining the applicable law

When we enter into questions of private international law, the most important mechanism for resolving conflicts of laws is the conflict-of-law rule. A conflict-of-law rule is a rule that determines which law or legal system should be applied where there is an international private-law relationship with a foreign component. In essence, conflict-of-law rules contain connecting factors for determining the applicable law, and the connecting factors may differ depending on the nature of the relationship.

There are two basic ways of regulating international private-law relations: direct and indirect regulation. Direct regulation is achieved through mandatory rules that clearly and precisely define what is considered a foreign state or international decision, as well as the conditions for the recognition and enforcement of such decisions. In this sense, it is important to understand that these rules enable the proper application of law where foreign parties have a direct influence on the legal relationship. Indirect regulation, on the other hand, uses conflict-of-law rules that refer us to the law to be applied in the international private relationship. These rules lead us to the connecting factor, which allows flexibility and precision in regulating complex relationships.

For example, the conventions and agreements adopted by the Hague Conference play a key role on the international stage in harmonising the rules applied in international private-law disputes.

Slaviša Cincarević

Sources of private international law

International private-law relations are thus regulated through different sources of law. Several main sources shape the framework of private international law: domestic and international sources. Domestic sources include national laws, special codes and secondary legislation regulating particular aspects of international private-law relations. International sources are of even greater importance, however, as they include multilateral and bilateral treaties governing relations between states in the field of private law. For example, the conventions and agreements adopted by the Hague Conference play a key role on the international stage in harmonising the rules applied in international private-law disputes.

Likewise, in an inter-state dispute, bilateral treaties between two states may precisely determine the rules to be applied to certain types of international relationships. Although these regulations are important, they do not always provide a clear answer to every question, so further clarification through national laws and case law is needed.

Conflict-of-law rules in different areas

When conflict-of-law rules are applied, different areas of private law use specific connecting factors. For example, in family relations lex nationalis is most often used as the connecting factor, meaning that the law relevant to the national status of the person applies (for example, the law of the state of which one of the partners is a citizen). In property relations, the connecting factor may be lex rei sitae, the law of the place where the property is located. For example, for real estate, the law of the country in which the property is situated applies. As regards torts, lex loci delicti commissi is used, meaning that the law of the place where the tort was committed applies.

Furthermore, in contractual relations the classic principle is party autonomy, which means that the parties may freely choose which law will govern their contract. However, if the parties have not clearly determined the applicable law, lex loci solutionis applies, that is, the law of the place where the contractual obligations are performed.

Conflicts of characterisation and their resolution

One of the frequent challenges in international private-law relations are conflicts of characterisation, which arise when the legal rules of different states interpret or define the same legal institution differently. For example, something defined in one country as a “contract” may be treated in another as a “tort”, which can lead to problems in applying the law. In such situations, a decision must be made as to how to characterise a particular legal institution. Possible solutions include applying lex fori (the law of the court hearing the case), lex causae (the law relevant to the subject matter of the dispute), or two-stage characterisation, which allows a more precise interpretation.

Conclusion

Throughout all these processes, the foreign element plays a key role in shaping international private-law relations. It creates challenges, but also allows flexibility in the application of law, enabling accurate and fair regulation of relationships of an international character. Through an understanding of conflict-of-law rules, the rights and obligations arising from international treaties and the application of different connecting factors, private international law makes it possible to maintain a balance between domestic and foreign interests, providing clear guidance for resolving international disputes and conflicts.

This text expresses the author's professional opinion and does not constitute legal advice for a specific case.