In deciding whether to assist in the enforcement of an agreement involving breach of foreign law, a two-fold test is applied: First, whether it would be unlawful under the law of the place of performance and secondly, whether the person seeking the enforcement had at the time of making the contract knowledge that foreign law would be breached by performance of the contract.
There are some cases where the courts have refused to assist the parties because the transaction contravenes foreign law, despite the fact that it may be perfectly legal. For example, if a party to a contract engages in an illegal adventure to get goods into a foreign country in breach of the laws of that country, the court may not assist the parties to settle any dispute arising out of the contract.
In one English case, the parties in dispute imported whisky into the United States of America, an act which was then prohibited by the law of the United States of America. The court in England decided that the contract was unenforceable on grounds of illegality.
In another case, the law in India prohibited the taking out of British India goods which were destined for South Africa. The buyer agreed to purchase a quantity of jute bags to be shipped from India to South Africa. The contract stated that English law was to be applied. The buyer sued for non-delivery. The court in England decided that the contract was unenforceable, because its performance would have involved doing an act which would have violated a law of India.
Revenue collection cases
Traditionally, a court of law does not collect taxes for another country . The court does not take notice of the revenue laws of a foreign State. The rationale is that the court does not assist another country to collect taxes. Therefore, the courts in Singapore will generally ignore a defendant's allegations that a transaction had contravened the tax, revenue or exchange control laws of another country.
Future trends
In more recent times, however, the courts have, as perhaps required by comity of nations, shown a more moderate approach of accommodation with the laws of friendly countries. In appropriate circumstances where there is sufficient connection between a contract and illegal acts under the foreign law, the contract may be rendered unenforceable on the grounds that it is tainted with illegality, even though it is valid by its proper law and the law of the place of performance.
They are less likely to assist in the enforcement of contracts which are legal in Singapore but illegal under foreign law, especially when the parties knew of the illegality but chose to proceed with the transaction. If so, the tainted parties will be unable to seek a remedy in court or to recover their loss.
Raffleslaw.com
