Substance and Procedure

One of the eternal truths of every system of private international law is that a distinction must be
made between substance and procedure, between right and remedy.

The substance rights of the parties to an action may be governed by a foreign law, but all matters
pertaining to procedure are governed exclusively by the law of the forum. (British Linen Co v.
Drummond (1830), De la Vega v. Vianna(1830) ) .

The field of procedure constitutes perhaps the most technical part of any legal system, and it
comprises many rules that would be unintelligible to a foreign judge and certainly unworkable
by machinery designed on different lines. A party to litigation in England must take the law of
procedure as he finds it. He cannot by virtue of some rule in his own country enjoy greater
advantages than other parties here ; neither must he be deprived of any advantages that English
law may confer upon a litigant is the particular form of action (De la Vega v Vianna 1830).

Importance of distinction between substance and procedure

Although the principle is certain and universal, its application can give rise to considerate
difficulty, especially when trying to establish a test by which procedural rule can be
distinguished from a substantive one. Unless the distinction is made with clear regard to the
underlying purpose of private international law, the inevitable result will be to defeat that
purpose. So intimate is the connection between substance and procedure that to treat an English
ruler as procedural may defeat the policy which demands the application of a foreign substantive
law. A glaring example to this is afforded by section 4 of the statute of Frauds, which formerly
provided that no action should be brought on certain unless there were evidenced by a note or
memorandum signed by the party to be charged or by his lawfully authorized agent.

Leroux v. Brown (1852)

It was held that the provisions of the statute are procedural and, therefore, applicable to contracts
governed by foreign law. The case concerned an oral contract of employment, concluded in
France between an English employer and a French employee, whose employment was to be in
France. This oral contract was formally valid by French law. When the employee sued to enforce
the contract in the English court, the employer relied on section 4 of the statute of Frauds, under
which, because the employment was to last more than a year, “no action shall be brought upon
any agreement…unless the agreement…or some memorandum or note thereof, shall be in
writing, and signed by the party to be charged therewith”.

• If this statutory provision had been regarded as a rule of formal validity, it would not
have been applicable because the formal validity of the contract was governed by French
law.

Although this decision might, possibly, be based on an intelligible principle of domestic law,
it is repugnant to the principles on which English private international law is founded. That
law exists to fulfil foreign rights, not to destroy them. Willes J attacked the decision in two
later cases C Williams v. Wheeler 1860, Gibson v. Holland 1865, and evidently thought that
in the circumstances the statutory rule should not have been treated as procedural.

The Court of Procedure took a somewhat different approach in Monterosso Shipping Co.
Ltd. v. International Transport Workers’ Federation. Lord Denning MR observed that:

“ It seems to me that the true distinction is between the existence of a contract (which is
substantive law) and the remedies for the breach of it (which is procedural law). The right
course is to analyse the statute and see whether it negates the existence of a contract or not.
If there is no contract, but the statute says it cannot be enforced (except in writing or within a
stipulated period), that is procedural law. It is governed by lex fori. It should be borne in
mind that the issue whether a rule is one of substance or procedure may arise in more than
one context. The most common context, as illustrated by Leroux v. Brown, is the
determination of the nature of a rule of English law in circumstances where the governing
law is foreign. If the English rule is procedural, it is applied nothwithstanding the foreign
governing law. If the English rule is substantive, it is ignored and the foreign law applied.
The problems can, however, arise in circumstances where, although the applicable law is
foreign, there is some doubt as to whether the rules of that country’s law are procedural (and
to be ignored in England) or substantive (and to be applied in England) (eg. Harding v.
Wealands [2007] 2 AC 1).

Chase Manhattan BANK NA v. Israel- British Bank (London) Ltd (1981) Ch 105
The plaintiff, a New York bank, sought to trace and recover in equity 2 Million pounds, paid by
mistake to the account of the defendant bank. The issue was whether the plaintiff bank was
entitled to trace the proceeds. Although the court held that there was no significant difference
between the two relevant laws, English and New York Law, on the to trace, Goulding J asked
the question- “ Whether the equitable right of a person who pays money by mistake to trace and
claim such money under the law of New York is conferred by substantive law or is of a merely
procedural character. He concluded that the view of an English Court. Would be that the New
York Bank had, under the New York law, an equitable interest as a Cestue Que trust which was
substantive in nature.

• Why did the judge ask the question as to the nature of the equitable right to trace?
Presumably, because if he had found the New York rule to be procedural, he would have
been unwilling to apply it is England.