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.