The parties of different jurisdictions often determine the governing laws for their contracts and select dispute forum through which their disputes are resolved. For example, a lending company in Japan lends money to a borrowing company in Cambodia; and they select laws of Cambodia, Japan or third party country such as Singapore to govern their contract and choose court or arbitration in Cambodia, Japan or in third country such as Singapore as dispute forum.
Whether or not such agreement on governing laws and dispute forum is valid and enforceable in Cambodia?
The principle of private autonomy in the Civil Code of Cambodia (Article 3) respects free intentions of private persons in their private relations. Accordingly, the agreement of parties on governing laws and dispute forum for their contracts and transactions are valid in Cambodia. Regarding the above example, the parties can set their loan contract to be governed by the laws and dispute forum as agreed by the parties. However, it is worth noting that if there is a need to create security rights (which is one of real rights) over the properties of the borrower which are located in Cambodia, the security contracts and registration of security must be governed by and in compliance with the laws of Cambodia. Article 131 of the Civil Code provides that no real right may be created except as for the types and contents permitted under the Civil Code or under any special law. Pursuant to Article 132 of the same Code, real rights that are established by the Civil Code include ownership, possession, usufructuary real rights, perpetual lease, usufruct, right of use/right of residence, easement and security rights (right of retention, statutory lien, pledge, hypothec and security as transfer).
If the parties choose the dispute forum other than the court or arbitration in Cambodia, the executions of the foreign judgment or arbitral awards in Cambodia are subject to conditions and requirements specified in the Code of Civil Procedure of Cambodia (See Article 199 and 352 for foreign judgments and Article 353 for foreign arbitral awards)