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When the laws of different countries that apply to a certain legal matter are different, this is called a “conflict of law.” In these situations, the parties have to determine a choice of law to figure out which law applies.
This happens when a financial transaction takes place across international borders. Then, the parties must agree on a law that will apply to the related financial agreement. Since there is no one international law that applies to all transnational relationships, the international contract will be governed by the national legal system chosen by the parties. In other words, the chosen law shows what the parties have decided should be the law that applies to their agreement. This choice of law is very important for the parties because it will affect how the clauses of the agreement are interpreted and what their rights and obligations are. In the same way, the parties will have to determine where any disputes will be settled if they come up.