Seawinds, a shipping company, was incorporated in Hong Kong with its principal place of business in California. It contracted with Nedlloyd Lines, a shipping company in the Netherlands, to "establish a joint venture company to carry on a transportation operation." The agreement had the following choice-of-law provision:
This agreement shall be governed by and construed in accordance with Hong Kong law, and each party hereby irrevocably submits to the non-exclusive jurisdiction and service of process of the Hong Kong courts.
Later, Seawinds sued in California state court, asserting that Nedlloyd had breached its duties under the contract by engaging in activities that led to the cancellation of charter hires essential to the joint venture's business and by making and then reneging on commitments to contribute additional capital. Nedlloyd responded that Seawinds failed to state causes of action because Hong Kong law was to be applied.
If the case is brought in California court, which law should be applied? The law of Hong Kong or of California? Does California have a substantial relationship to the parties or their transaction? Is there a reasonable basis for the selection of Hong Kong law by the parties in their original agreement? [Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148, Sup. Ct., Cal. (1992)]