Samcrete Egypt Engineers and Contractors S.A.E. v Land Rover Exports Ltd

Under the Rome Convention on the Law Applicable to Contractual Obligations, an implied choice of law must be a genuine common choice demonstrated with reasonable certainty from the contract or the circumstances. Relevant circumstances may include negotiations showing that a proposed choice-of-law clause was deliberately deleted.

Absent such a choice, a guarantee is presumptively governed by the law of the guarantor’s place of business because payment is its characteristic performance. That presumption may be displaced where the circumstances clearly connect the guarantee more closely with another country. The place where payment, breach and the creditor’s corresponding performance occur may provide sufficient connecting factors.

Land Rover sought payment from Samcrete, an Egyptian company, under a guarantee supporting credit supplied to an Egyptian distributor. The guarantee contained no choice-of-law clause, although the underlying distributorship agreement selected English law and the jurisdiction of the English courts. Samcrete had signed a draft from which Land Rover’s proposed English choice-of-law and jurisdiction clause had been deleted.

Her Honour Judge Alton dismissed Samcrete’s application in the Birmingham Mercantile Court to stay the English proceedings on the ground of forum non conveniens. She held that the guarantee was governed by English law because its connections with England displaced the presumption favouring Egyptian law under article 4(2) of the Rome Convention on the Law Applicable to Contractual Obligations.

The central questions were whether the parties had impliedly chosen English law under article 3 and, if not, whether the article 4(2) presumption should be displaced under article 4(5).

1. Appeal dismissed unanimously. Lord Justice Potter delivered the judgment, with which Lord Justice Thorpe agreed. Although the judge had placed excessive weight on the choice-of-law clause in the underlying distributorship agreement, she had correctly concluded that English law governed the guarantee. On the parties’ agreed approach, that conclusion determined the application for a stay.

2. No choice of law had been demonstrated with reasonable certainty under article 3 of the Rome Convention on the Law Applicable to Contractual Obligations. A Convention-based and purposive approach was required, rather than one confined by domestic rules for implying contractual terms. The court could consider the circumstances surrounding the agreement. Samcrete’s deletion of the proposed English choice-of-law and jurisdiction clause positively indicated that no clear common intention to choose English law existed.

3. Article 4 required the court first to identify the characteristic performance and the country in which the performing party was located. It then had to decide whether the circumstances as a whole clearly connected the contract more closely with another country. The article 4(2) presumption was not merely a fallback for evenly balanced cases. It supplied an objective and geographically focused rule of thumb, although article 4(5) preserved sufficient flexibility for the nature and circumstances of the particular contract.

4. The characteristic performance of a guarantee was the guarantor’s payment obligation. The article 4(2) presumption therefore initially selected Egypt, where Samcrete had its central administration. The guarantee’s use of English and the creditor’s English location carried little independent weight.

5. The presumption was nevertheless displaced. Payment under the guarantee was to occur in England, and non-payment would constitute a breach there. The consideration supporting the guarantee also involved Land Rover supplying products by delivery ex works in the United Kingdom, with payment in sterling. Viewed autonomously, the guarantee’s centre of gravity was consequently in England.

6. The court left open whether a choice-of-law clause in an underlying contract, insufficient to establish an implied choice for the guarantee under article 3, could itself count as a connecting factor under article 4. Potter LJ inclined to the view that it could not, because article 4 concerned objective geographical connections rather than inferred choice.

1. Court of Appeal (Civil Division): Dismissed Samcrete’s appeal and upheld the refusal of a stay, although it corrected the lower court’s approach to articles 3 and 4 of the Rome Convention on the Law Applicable to Contractual Obligations. Leave to appeal to the House of Lords was refused.
2. Birmingham Mercantile Court: Her Honour Judge Alton dismissed Samcrete’s application for a stay on the ground of forum non conveniens. She held that the article 4(2) presumption favouring Egyptian law was displaced and that the guarantee was governed by English law.