Choice of law is a procedural stage in a litigation which refers to what jurisdiction’s law is to be applied in a matter. Choice of law refers to the area of law, in which, the court determines whether to apply the forum state law or apply the law applicable in another jurisdiction which has an interest in the controversy.
Courts faced with a choice of law issue generally choose between the laws of the state where the lawsuit was brought and laws of the state where the cause of action arose. Usually a law of state where the lawsuit was brought is chosen for procedural matters. The law of the state where the cause of action arose is usually chosen to decide substantive matters. The fourteenth amendment lays down constitutional limitations to choice of law. When a dispute has no connection to a given state, it is unconstitutional to apply the law of that state. However, the requirement of connection between the dispute or the parties and the state is minimal, and it does not matter that there is another state with comparatively greater contacts.
There are three basic types of approaches to choice of law:
- The traditional “vested rights” doctrine: This doctrine is based on the notion that a state has the power to prescribe the rules of conduct for transactions or occurrences that takes place on its own territory. Once the “last event” of the transaction or occurrence takes place on the territory of that state, the parties to it acquire “vested right” under the law of that jurisdiction.
- The various “interest” and “policy” analysis approach: The interest of the forum state is the factor to be considered here. Thus, this theory seeks to increase the number of occasions when a forum court will apply its own law. An interest analysis approach attempts to weigh the interest of the various states involved. This is done by applying the “comparative impairment” test, under which a court will compare the extent of damage that application of one or the other legal rule to the case would inflict on the competing states interest. The court should in such cases choose the rule that causes the lesser degree of impairment.
- The “most significant relationship” theory of the Second Restatement: This theory attempts to determine which state has the “most significant relationship” to the case. To determine whether a more significant relationship exist, various aspects like, place of injury, place of the conduct causing injury, residence or place of business of the parties, and the place where any relationship between the parties is centered is taken into consideration.