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Execution of documents by an overseas company

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05/05/2015

We are often asked about execution formalities in English-law contracts involving one or more overseas parties.

The Court of Appeal decision in Integral Petroleum SA v Scu-Finanz AG [1] concerned a supply contract between two Swiss oil trading companies which was expressed to be subject to English law and the jurisdiction of the English courts.

Under Swiss law, the signature of two “prokurists” was required to bind the defendant – in fact, only one “prokurist” had signed. The dispute centred on whether a sole prokurist could bind the company.

The Rome I Regulation [2] provides that: “A contract concluded between persons who, or whose agents, are in the same country at the time of its conclusion is formally valid if it satisfies the formal requirements of the law which governs it … or the law of the country where it is concluded”. Accordingly, if Rome I applied the English law requirements would apply and a sole “prokurist” would be able to bind the company. However, the Court considered that this was not question of validity but rather authority to bind the company and therefore the Rome I Regulation did not apply. It also noted, in support of that approach, that Rome I excludes from its scope questions governed by company law, including legal capacity and whether an agent is able to bind a principal.

This meant that the question of authority to bind the company was governed by the law of the country where the company was incorporated. Therefore, the relevant law in this case was Swiss law and since Swiss law (in this instance) required more than one signatory to bind the company, the contract was not legally binding.

In passing (as they were not relevant to the outcome of the case), the Court referred to the UK’s Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009, which govern how overseas companies should execute contracts, deeds or other documents under English law. The 2009 Regulations state that a document (including a deed) can be validly executed under English law by an overseas company using either of the following methods:

  • by affixing its common seal
  • in any manner permitted by the laws of the territory in which the overseas company is incorporated for the execution of documents by that company.

Further, where a document is signed by a person who, in accordance with the laws of the territory in which an overseas company is incorporated, is acting under the authority (express or implied) of the company, and is expressed (in whatever form of words) to be executed by the company, has the same effect as if executed under the company’s common seal.

Walker Morris comment
One might have expected the Court to approach this matter as a question of valid execution, which would generally be governed by the law of the contract, which in this case would have been English law. The fact that the Court took a different approach, focusing on authority, shows just how difficult an area of law this can be.

The case highlights the importance, where a party is contracting with an overseas company, of getting a legal opinion from lawyers in the jurisdiction in which the overseas company is incorporated, confirming not only the validity of the method of execution employed by the overseas company under the applicable local law but also whether those signing have authority to bind the overseas company under the laws of the jurisdiction in which it is incorporated. It is also sensible to check whether there are any other formalities to be complied with under local law, which may be necessary to enforce the document in the company’s place of incorporation.

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[1] [2015] EWCA Civ 144
[2] EU Regulation 593/2008

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