English law is often chosen by parties from various jurisdictions to govern agreements with little or no connection to England. In the event of a dispute, the formal validity (or otherwise) of the contract will be governed by English law. In Integral Petroleum SA v Scu-Finanz AG the Court of Appeal considered whether a single representative could bind a company was a matter of formal validity or of the law relating to the place of incorporation.
The case concerned a contract between two Swiss oil trading companies which was subject to English law and jurisdiction. The contract was only signed by one representative on behalf of the defendant. Swiss law required it be signed by two representatives.
The Claimant argued that Article 11 of the Rome 1 Regulation required this to be seen as an issue of formal validity of the contract, and therefore in this case governed by English law. The lack of a second signature would not therefore invalidate the contract. The Defendant said that common law principles required the Court to apply the law of the place of incorporation of the Defendant (i.e. Swiss law) and that the lack of a second signature was fatal to the validity of the Contract.
The Court of Appeal held that common law conflicts principles determined which law governed this issue. According to common law principles, the law of the place of incorporation (here, Swiss law) governed the issue. The Court held that this question did not relate to the formal validity of the contract, and therefore the rules regarding the law governing formal validity in the Rome 1 Regulation were irrelevant. Accordingly, the Court of Appeal upheld the High Court’s decision that this argument was bound to succeed on the evidence of Swiss law, and dismissed the claimant’s appeal.
It may be surprising that the Court did not treat the signature issue as going to the formal validity of the contract, which would have made it a question of English law. Indeed, one of the reasons for the popularity of English law in international commercial transactions is the relative difficulty of relying upon purely formalistic arguments such as that which succeeded in this case. Nevertheless, this decision must be seen as a warning to transactional lawyers to ensure that companies entering into a contract comply with any formal requirements of the place of incorporation of that company as well as the (albeit limited) formal requirements of English law.
Of course, as this issue involves the contrition and application of EU law (the Rome 1 Regulation), the matter is at some point likely to be decided by the European Court of Justice.