Contracts with CIS Countries — the Georgian Legal Framework
Contracts concluded by Georgian companies with counterparties from the countries of the Commonwealth of Independent States frequently touch several legal orders at once, so their correct drafting is decisive: it determines where a dispute will be heard and which country's law will apply. Georgia's private international law legislation answers three core questions about this relationship: where the dispute may be heard under a forum agreement, which law applies by the parties' choice or in the absence of a choice, and how Georgia recognizes and enforces a decision of a foreign court. On this page these questions are analyzed in detail through the relevant provisions — the norms on forum agreements, on the choice and application of law, and on the recognition and enforcement of decisions.
When trading across the post-Soviet space, a counterparty often seeks to have disputes heard in a court of the same region, which creates additional risk for the Georgian side. That is precisely why it matters that the contract states from the outset both the place of litigation and the applicable law — the law allows this, and below we explain in what form.
Forum Agreements and the Jurisdiction of Georgian Courts
Under the law, the parties may agree on the international competence of a Georgian court even in a case where, under other norms of the law, it is not competent. Such an agreement must be concluded in writing, or orally with written confirmation; in international commercial relations it may take the form corresponding to international trade usages known or reasonably knowable to the parties. This means that in a contract with a CIS counterparty a clause on the jurisdiction of the Georgian courts can be written in and will be binding.
The law also contemplates the situation where Georgian courts acquire international competence through the conduct of the defendant: if the defendant, without protesting the court's competence, agrees to participate in the proceedings, competence arises regardless of the fact that the defendant is represented by an advocate and that the judge informed the defendant of the possibility of lodging a protest, with that notification recorded in the minutes of the hearing. The practical lesson is clear: a foreign company appearing before a Georgian court without objecting to jurisdiction is deemed to have submitted to the process.
The parties may also agree on the international competence of a foreign court if one of them has his place of residence, domicile or habitual residence in a foreign country. At the same time, an agreement on competence established as exclusive under the law is void, and in such a case competence cannot arise through the party's conduct either.
Applicable Law — the Parties' Choice
The determination of rights and obligations arising from contractual relations — in particular the interpretation, performance and termination of contracts, the consequences of invalidity, and breaches of obligations including pre-contractual and post-contractual obligations — is governed by the law of the country chosen by the parties. This means that in a transaction with a CIS partner you may directly stipulate, for example, that Georgian law applies to the contract, and it is that law which will be applied in a dispute.
The law of the chosen country may by agreement of the parties be replaced by the law of another country even after the conclusion of the contract. Note, however, that a choice of law is invalid if it disregards the imperative norms of the law of the country most closely connected with the contract — which is why an analysis of imperative norms is essential when writing in the choice.
Applicable Law in the Absence of a Choice
If the parties have not chosen the law of any country, the contract is governed by the law of the country most closely connected with it. The law presumes that the contract is most closely connected with the country in which the party who was to perform the characteristic contractual obligation had, at the time of conclusion, his habitual residence or the seat of administration.
Special rules apply to particular contracts: where the subject of the contract is a right in a land plot or a right to use a land plot, the contract is presumed most closely connected with the country where the land plot is situated. For a contract of carriage of goods — with the country where, at the time of conclusion, the carrier has its principal place of administration, provided the principal place of loading, unloading or dispatch is in the same country; for an insurance contract — with the country where the principal part of the insured risk exists. In other cases the general rule based on the performer of the characteristic obligation applies.
Recognition and Enforcement of Decisions in Georgia
The real force of a decision obtained in the court of a CIS country depends on whether Georgia recognizes it. Under the law, Georgia recognizes court decisions of foreign countries that have entered into legal force; recognition is refused in defined cases — for example, where the case falls within Georgia's exclusive competence, where the party was not duly notified of the summons under the law of the country of origin, where between the same parties on the same dispute a decision already in force exists in Georgia or a third country, or where the decision contradicts the fundamental legal principles of Georgia. The grounds for refusal are exhaustively listed in the law, and each of them must be assessed individually.
The question of recognition of a foreign court decision is examined by the Supreme Court of Georgia. As for enforcement — on civil and labor law cases, decisions of foreign courts are enforced where they are subject to enforcement; a decision on enforcement is taken after an interested party files the corresponding motion, and the question of deciding on the motion also falls within the competence of the Supreme Court of Georgia.
Frequently Asked Questions
Can we choose the Georgian courts in a contract with a CIS partner?
Yes. The parties may agree on the international competence of a Georgian court even where other norms do not make it competent. The agreement is concluded in writing or orally with written confirmation, and in international trade in a form corresponding to usages.
Which law applies if we make no choice in the contract?
The law of the country most closely connected with the contract applies — presumed to be the country where the party performing the characteristic obligation had its habitual residence or seat of administration at the time of conclusion.
Does Georgia recognize a decision of a CIS court?
Georgia recognizes foreign court decisions that have entered into legal force, but the law provides grounds for refusal, including lack of due notice or contradiction with Georgia's fundamental legal principles. Recognition is examined by the Supreme Court.
How is a foreign decision enforced in Georgia?
On civil and labor cases a foreign decision is enforced if it is subject to enforcement. The interested party files a motion, and the decision on the motion falls within the competence of the Supreme Court of Georgia.
How We Help on Legal.ge
The Legal.ge team assists you with every legal question connected with contracts with CIS countries: we draft correct forum and governing-law clauses, assess the risks of imperative norms, prepare positions on the recognition and enforcement of foreign decisions and represent your interests before the Supreme Court. Contact us on Legal.ge — we will make your cross-border transaction legally protected.