Significant progress on the law applicable to international contracts

By Rosa Elena Di Martino, Berkemeyer Attorneys & Counselors

Paraguay, as a member of several international organizations is looking forward to ensure the proper development of private international law. Nevertheless, until now, the incorporation of most valuable international instruments issued by these organizations has been small. Therefore Law 5393/2015 on Applicable Law to International Contracts is doubly welcome and immensely useful in the ever challenging field of private relations with extra national elements incorporated.

The new law regulates the choice of law, applicable to international contracts where each party is acting in the exercise of their business or profession. Its provisions do not apply to consumer contracts, employment or franchise contracts, representation, agency and distribution.

To govern an agreement, the choice of a local or foreign law can be made or changed at any time. An election or modification made after the completion of the contract, should not affect its formal validity or the rights of others.

It is important to notice, that no link between the chosen law and the parties or the transaction is required. The law chosen by the parties shall govern the interpretation of the contract, the rights and obligations arising under it, its implementation, the consequences of breach, including the assessment of damages, and the different modes to extinguish obligations, prescription, expiration, validity, the consequences of nullity of the contract, the burden of proof of legal presumptions and pre-contractual obligations.

Finally, this law reaffirms that public policies are formed as a natural barrier against the application of foreign law.