Conflict of Laws and Choice of Law

Abstract

We discuss the law and economics of conflict of laws and choice of law, focusing on the law in the US. We first consider choice of law when the parties have not effectively chosen their governing law by contract. We address four questions: (1) Why do courts ever apply anything other than the law of the forum? (2) If a court sometimes applies foreign law, is a rule-based or more modern standard-based approach to its choice preferable? (3) Why have so many states abandoned rule-based approaches in favor of standard-based ones? and (4) Is there any real practical difference between the First Restatement and modern approaches? We then discuss costs and benefits of enforcing parties’ contractual choice of law provisions. We conclude that permitting parties to choose the governing law that best fits their transactions and future private disputes can enhance jurisdictional competition and help restore predictability to the conflict of laws problem. JEL classification: K33