Lupofresh Limited v Sapporo Breweries Limited [2013] EWCA Civ 948
The Court of Appeal has considered whether contracts for the supply of hops by a Japanese company (Sapporo) to an English company (Lupofresh), which were subject to the EU Convention on the law applicable to contractual obligations (Rome Convention), were governed by English or Japanese law.
The parties originally concluded four contracts in 2005, which were subsequently renegotiated due to difficulties encountered by Sapporo in meeting its contractual obligations. The renegotiated contracts were on substantially less favourable terms for Lupofresh, which subsequently refused to pay amounts due. None of the contracts contained an express choice of law. Sapporo commenced proceedings, contending that the agreements were governed by Japanese law. Lupofresh counterclaimed for duress, contending that English law applied.
Bean J held that Japanese law applied and gave judgment for Sapporo. Lupofresh appealed.
The Court of Appeal turned down the appeal. It agreed that under the Rome Convention (which governed the law of contracts made before 17 Dec 2009) the place of "characteristic performance" governed and this was Japan. It rejected two "incidents" relied on by Lupofresh as demonstrating an implied choice of law, namely a ceremonial handshake in Kent and a reference in correspondence to the approach the English court would take on a particular issue. These factors "fell very far short" of demonstrating with reasonable certainty an implied choice of English law. The court also rejected Lupofresh's contention that the characteristic performance of two of the renegotiated contracts was the surrender of rights by Lupofresh. It was not appropriate to identify the characteristic performance of a contract by reference to features which were not immediately apparent from its terms. Any argument as to the effect of duress would be a matter for Japanese jaw.
Comment
The decision highlights the importance of making an express choice of law (or checking that the stated law is suitable), and illustrates the hurdles which a party may have to overcome in demonstrating an implied choice of law where no provision has been made.
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