depecage

A dépeçage takes place when the laws of different countries or territories apply to the separate, severable and distinguishable provisions of a contract. Contracts are typically governed by one system of law, technically known as the lex contractus. Basically, depecage is the equivilent of having multiple choice of law clauses designating different systems of law in an international contract - the contract is giverned by multiple systems of law.

However in contracts incorporating an international dimension, the parties may wish to provide that certain parts of the contract are governed by one system of law, and further provide that another system of law governs other, notionally distinct and severable parts of the contract.

Principles of private international law in respect to business contracts permit the parties to do so, to better suit the wishes of the contracting parties, and thus minimise or avoid disputes arising from or connected with the contract.

Example of depecage

For example, a contract for the sale of goods may (say) be governed by the laws of England. The contract may utilise finance sourced from the United States, and incorporate security in the United States and payment provisions centred in New York. The parties may elect to choose that the law of the contract will be the laws of England, with the exception of matters relating to payment and the security taken under the Agreement. In this way, the parties have delineated different systems of law to different parts of the contract. This is depecage.

Equally, where the parties to contract do not expressly select the system of law to apply to a contract, principles of dépeçage may determine a similar result as the foregoing in an appropriate case. These principles originally formed part of the common law in England in conflict of law and choice of law principles, and enjoy an extended life in the Rome Conventions.