“This Agreement and any dispute, controversy, proceeding or claim of any kind arising out of or in any way connected with this Agreement (including any non-contractual dispute or claim) shall be governed by and construed in accordance with English law.” A recent European Union regulation (Council Regulation (EC) No 864/2007 (Council Regulation (EC) No 864/2007, known as Rome II) allows parties to commercial contracts to choose the law that applies to certain non-contractual disputes between them. As part of a fundamental change in the way most EU Member States resolve non-contractual conflict-of-laws rules, the law applicable to most non-contractual disputes, if no choice of law is made, is now that of the country in which the damage occurs and no longer the law in which the act was committed. Basically, the questions posed in Jonathan Ang (and the assumptions on which they were based) were only relevant because Phang JCA continued to accept a central statement: that the illegality of foreign law excludes only contractual claims. However, this proposal is dubious; In Brooks Exim Pte Ltd v Bhagwandas Naraindas  1 SLR(R) 543, the Singapore Court of Appeal considered Foster in relation to a claim for “money it had and had received” and found it unenforceable solely because the parties did not intend to infringe foreign law (Brooks Exim, , ). Moreover, the rationale for limiting Foster`s rule to contractual claims remains unclear: in Jonathan Ang Phang, JCA cited the English High Court`s decision in Lilly Icos LLC v 8PM Chemists Ltd  FSR 4 for this, but here this thesis was simply accepted without argument (Lilly Icos, ). A possible justification could be that it is only in the case of contractual claims that the parties can evade the applicability of the (criminal) law of a foreign state objectively related to their relationship because of their ability to choose the applicable law. However, this would be a bad justification, as the parties have the option to choose the applicable law also for various non-contractual claims. For example, an expressly chosen right may govern not only the parties` contract, but also unjust enrichment claims arising from that contractual relationship based on a characterization sub-rule, and possibly also tort claims under an exception to the lex loci delicti rule (or, in the singapore context, the dual capacity rule). If there is a foreign legal offence that prevents the parties from circumventing the law of a State objectively related to their contractual relationship, it should exclude all claims arising from that contractual relationship that are subject to the law chosen by the parties, whether those claims are “contractual” or “non-contractual”. Lyu Yan wanted to transfer money from China to Singapore. Her bank in Singapore introduced her to Joseph Lim for help. Joseph suggested that Lyu Renminbi transfer from Lyu`s Chinese bank account to the Chinese bank accounts of two other people, Jonathan Ang and Derek Lim. Jonathan and Derek then transferred a corresponding amount in Singapore dollars from their bank accounts in Singapore to Lyu`s bank account in Singapore.
Lyu made the transfer to China, but received no money in Singapore. She then sued Joseph for breach of contract; and prosecuted Joseph, Jonathan and Derek for mischief and unjust enrichment. At first instance, the High Court of Singapore ruled against the three accused. Joseph did not appeal, but Jonathan and Derek argued, among other things, that Foster Lyus had ruled out non-contractual claims against them because Chinese law prohibited their transaction. However, Phang JCA`s comments were interesting: If Lyu had known that the transaction violated Chinese law, would their non-contractual claims be excluded? Foster is “not applicable to non-contractual claims” (). This contrasted with domestic legal infringement, in which an unlawful breach of contract could sometimes also exclude other non-contractual claims from the contractual relationship (-). In this case, Phang JCA referred to Ochroid Trading Ltd v Chua Siok Lui  1 SLR 363, where the Court of Appeal ruled that unjust (and possibly tortious) enrichment claims would be excluded from a contractual relationship if it crippled the policy underlying the law that rendered the contract unenforceable (Ochroid Trading -, ) Accordingly, companies and financial institutions, which carry out cross-border transactions in which a Union jurisdiction might have the opportunity to exercise its jurisdiction, should familiarise themselves with the new rules and negotiate a choice of law clause applicable to non-contractual and contractual obligations when concluding new contracts. If the event giving rise to the damage has already occurred, it is possible, under the new rules, for the parties to subsequently choose the law applicable to the dispute, provided that they are able to reach an agreement. .