How the Governing Law Is Determined in Contracts with Asian Partners
Trade contracts with Asian countries, wherever their factual circumstances connect the case to a foreign legal system, are governed by Georgia's law on private international law. This law determines which legal order applies when facts connected with foreign law exist, and which norms of procedural law apply to the conduct of such a case. In practice this means that even when a contract is concluded with a partner from China, Japan, South Korea or another Asian jurisdiction, a Georgian court decides — precisely by these norms — which country's law prevails, which court is competent and which form of the transaction is treated as valid. Applying foreign law before a Georgian court is possible, but only within the limits allowed by Georgian legislation, and those limits are drawn by this same law.
International Competence of Georgian Courts
Georgian courts have international competence where the defendant has a place of residence, a domicile or a habitual residence in Georgia. The parties may agree on the international competence of a Georgian court even where, under other norms of the law, it would not be competent. Such an agreement is made in writing or orally with written confirmation, and in international commercial relations — in a form consistent with international trade usages known or ought to have been known to the parties. Georgian courts also acquire competence where the defendant, without protest, agrees to participate in the proceedings — even though the defendant is represented by an advocate and the judge has notified the defendant of the possibility of raising a protest, which is recorded in the minutes of the case. Conversely, the parties may agree on the competence of a foreign court if one of them has a place of residence, domicile or habitual residence abroad; yet agreements on specially protected categories of competence established by the law are void, and in that case a defendant's protest-free participation does not cure the defect.
The Form of Transactions between Parties in Different Countries
The form of a transaction is determined by the law of the country where it was concluded or by the law applicable to its subject matter. Where a contract is concluded between persons present in different countries, the form is considered valid if it satisfies the requirements of either country's law — particularly important for contracts with Asian partners, where signatures are frequently affixed in different states. If the contract is concluded through a representative, the relevant country, for the purposes of the form rule, is the country where the representative is present. For transactions whose subject is a right in land, irrespective of the place of conclusion and of the law of that place, the imperative norms of the country where the land is situated apply to the form; and a transaction creating or disposing of a right in a thing is treated as validly formed if it satisfies the formal requirements of the law governing the underlying relationship.
Choice of Law by the Parties and Its Absence
Rights and obligations arising from contractual relations — interpretation, performance and termination of contracts, consequences of invalidity, breach of obligations including pre-contractual and post-contractual duties — are governed by the law of the country chosen by the parties. The chosen law may, by agreement, be replaced by the law of another country even after the contract is concluded, but a choice of law is void if it disregards the imperative norms of the country most closely connected with the contract. Where the parties have made no choice, the contract is governed by the law of the country most closely connected with it: it is presumed to be the country in which the party performing the characteristic obligation had, at the time of conclusion, its habitual residence or administration. For contracts concerning rights in land, the closest connection is presumed with the country where the land is situated; for carriage contracts, with the country where the carrier has its principal place of administration, provided the principal place of loading, discharge or dispatch is also in that country; for insurance contracts, with the country where the principal part of the insured risk is located.
Frequently Asked Questions
May a contract choose the law of an Asian country?
Yes. The parties are free to choose the law of a country, but the choice is void if it disregards the imperative norms of the country most closely connected with the contract.
What happens if no law is chosen?
The contract is governed by the law of the country most closely connected with it — presumed to be the country where the party performing the characteristic obligation had its habitual residence or administration.
How is an agreement on competence formalised?
In writing, or orally with written confirmation; in international trade, in a form consistent with usages known or ought to have been known to the parties.
When is a Georgian court competent?
When the defendant has a residence, domicile or habitual residence in Georgia, and also by agreement of the parties or where the defendant enters the proceedings without protest.
How We Help on Legal.ge
On Legal.ge we assist at every stage of trade contracts with Asian countries: we draft the contract so that choice of law, competence and formal requirements are addressed from the outset; we assess which country's law attaches to your specific relationship and where a dispute will be heard. We identify which presumption operates if no law is chosen and protect the Georgian party from disregarding imperative norms. The language of the contract, its form and its governing law must be balanced and substantiated from the start. Contact us before negotiations open — experience shows that a correctly drafted contract prevents the dispute before it arises.