“International trade historically has been subject to numerous domestic legal systems, mainly by virtue of the rules of private international law. ” Private international law, which is part of the national law, provides for a conflict of laws rules to address the growing complexities in the movement of things and persons, as well as in the increasing coverage of commercial transactions.
The phenomenal advances in the field of communication and transportation, the frequency and variety of events and transactions that cut across national and territorial boundaries, and the diversity of the legal systems prevailing in the world, has resulted in the emergence and necessity of conflict of laws rules. There would have been no problem if the world were only one state, governed by one set of rules and administered by one central government.
The division of the world into different state, coupled with the adoption and applications of the state of different set of laws together with the separate means of enforcing the same brought up the occasion for the subject of conflict of laws to arise and develop. The fact remains that all States of the world have diverse and separate systems of laws. To complicate the situation, there are some States, such as the United States and United Kingdom, where various territorial units are governed by different rules of law.
Any situation, event or transactions may give rise to a problem in Conflicts of Laws or Private International Law where persons or things may or are involved in any kind of international trade or intercourse. Hence, the conflicts problem thereby occurs. Conflicts of laws arise therefore due to the concurrence of two factors. First factor is the division of world into different States or territorial units, each state or unit having a different system or consist of various systems of laws.
The diversity of the laws brought about by this division is simply sown by an anthropological fact that people does not follow the same line of evolution. Each state or territorial units hats own rules dealing with the aspects of human existence – birth, personality, actions, business associations, inheritance, and so forth. These matters are usually dealt with differently in each legal system. Second factor is the presence of situation containing foreign element, that is to say, an event or transaction affected by the diverse laws of two or more states or territorial units.
A factual situation that cuts across territorial lines and is affected by the diverse laws of two or more states is said to contain “a foreign element”. The presence of a foreign element is inevitable since social and economic affairs of individuals and associations are rarely confined to the geographic limits of their birth or inception. This foreign element appears in many forms. The foreign element may simply consist in the fact that one of the parties to a contract is alien or has a foreign domicile, or that a contract between nationals of one state involves properties situated in another state.