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When law becomes fact - resolving a conflict of laws

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The High Court has dismissed what were “always difficult and ambitious claims” in Pan Oceanic Chartering v Unipec, and has given guidance on a tricky question of conflict of laws.

Pan Oceanic, a New Jersey brokerage company, sought damages for lost commissions from Unipec resulting from early termination of Unipec's contract with a ship owner, Tankers International.

Pan Oceanic claimed that, under New Jersey law, Unipec had breached an “implied in law” promise not to deprive Pan Oceanic of its commissions. Given that the cause of action relied upon arose under New Jersey law, it was necessary to determine the applicable law. So the court had to look at Rome I (contractual obligations) and Rome II (non-contractual obligations).

The court held that determining whether an obligation was contractual was an autonomous exercise, to be conducted without regard to English law or New Jersey law.

Pan Oceanic argued that the autonomous test should be conducted by assessing the facts upon which it relied, with absolutely no regard to New Jersey law. Anything else, it said, would be impermissible under the Rome regime, and would amount to putting “the applicable law cart before the characterisation horse”.

The court disagreed, holding that it would be impossible to identify the relevant facts without an understanding of what New Jersey law required as “without the foreign law, the source of the obligation [did] not exist at all”.

The court concluded that, autonomously characterised, the “implied in law” promise was a contractual obligation for the purpose of Rome I. It was “a legal obligation freely consented to by one person towards another.”  This meant that English law applied and so the claim based on the “implied in law” promise fell away.

If Rome I did not apply then the court held that the “implied in law” promise was a non-contractual obligation under Rome II. Under Rome II, New Jersey law would still not be the applicable law since the place of damage was New York, not New Jersey. There was no evidence on New York law but for these purposes all that mattered was that the applicable law was not New Jersey law.