What is "depecage"

In law, dépeçage is a conflict of laws where different issues within a case may be governed by the laws of different states. In common law countries dépeçage usually means a single contract which provides that different parts of the contract shall be governed by different laws. In the United States, "depecage choice of law theory" is where the court considers disagreement among states over which rule of law is applicable to each issue.

The concept originated in civil law countries, but has also been adopted in common law countries such as the United Kingdom and Ireland pursuant to the Rome Convention on the law applicable to contractual obligations (Article 3(1)).

In practice, it is relatively rare for a contract to have more than one expressly chosen governing law. However, there are now three examples where this may occur:

• In derivatives transactions governed by ISDA standard documentation, it is not uncommon for the ISDA Master Agreement to be governed by the laws of New York state, and for the Credit Support Annexe to be governed by English law. This is because the provisions of English law relating to title transfer under the Credit Support Annexe are thought to be more favourable to the secured party than New York law under the equivalent Credit Support Annexe published by ISDA. In reality however, although the Annex is described as forming part of the same agreement as the Master Agreement, physically as well as conceptually, they are really two separate documents.
• In ship financing transactions, it is quite common for a statutory ship mortgage to be taken over the vessel which will be governed by the laws of the state in which the ship is registered (which will often be an Offshore Financial Centre or jurisdiction which provides for flags of convenience), however, such mortgages are usually supplemented by a separate deed of covenants, and these will normally be governed by the law which governs the primary financial documentation.
• Following a number of cases in which courts held Capital One to Virginia's three year statute of limitations in its efforts to enforce its credit card agreement against defaulting cardholders, changes were made to their cardholder agreement. Now their agreement says you waive the statute of limitations if it can be waived in your state, and also that if it's not waived it will be the longer of Virginia's or your state's.