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Guarantee Follows Contract, Says High Court

22nd December, 2011

Much trade is multinational and it is normal for contracts to specify the legal jurisdiction under which any dispute will be resolved. EU legislation has ‘tie breakers’ to ascertain the applicable law when the contract fails to specify this clearly.

In a recent case, the question arose of what law would apply when a guarantee in relation to a contract was in dispute. The contract specified that English law should apply to it, but the guarantee was silent regarding the applicable law. The parties involved were companies registered in the Cayman Islands and Russia respectively.

The Cayman Islands company argued that English law should apply to the guarantee and the Russian company that the EU rules should determine the appropriate jurisdiction.

The High Court was swift to conclude that if the main contract specified that English law should apply to it then, by inference, English law should apply to the guarantee also.

For advice on all contractual matters please contact Nick Clarke in the Corporate and Commercial Department.

 

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