UK: Execution Of Contracts: Overseas Companies And Conflicts Of Laws

A recent Court of Appeal decision is a good reminder that the issue of who can bind an overseas company that is party to an English law contract is governed by the law of the place where the company is incorporated.

Background

The case concerned a supply contract between two Swiss oil trading companies written under English law and subject to English jurisdiction. The claimant alleged that SCU-Finanz AG, the defendant, had agreed to supply it with oil under the contract, but had failed to do so. The defendant contended the contract was not binding on it because it had two prokurists (representatives) and only one of them had signed the contract. Under Swiss law when the general power to represent a company is given to more than one prokurist, as in the defendant's case, all must sign to bind the company.

Decision

The key question before the court was how to characterise the issue of who should sign. Was it an issue about the formal validity of the contract or was it a question about who had authority to bind the company? The Court of Appeal held it was the latter. This meant that English common law conflicts rules were relevant for deciding the issue. These rules apply the law of incorporation to issues of a company's capacity and internal management, including who has authority to act on the company's behalf. In this case, therefore, Swiss law governed who should sign for the defendant. Given the evidence that under Swiss law both prokurists needed to sign for the defendant, the Court of Appeal agreed with the trial judge that the defence would succeed and dismissed the appeal.

Comment

Although the question of who has authority to sign for an overseas company is a matter for the law of its place of incorporation, the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009 set out the relevant execution formalities for an overseas company where the contract or document is under English law. It is important to consider both aspects when considering who has authority to bind an overseas company and whether they have executed the contract or other document correctly.  

Integral Petroleum S.A. v. SCU-Finanz AG  [2015] EWCA Civ 144

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