conflicts of law: an overview
The question to be asked by one concerned with conflict of laws is: “what law should be applied to the case at hand?” The process by which a court determines what law to apply is sometimes referred to as “characterization”, or “classification.” This determination must be made in accordance with the law of the forum. A federal court in a case before it based on diversity of citizenship, for example, determines the conflict of law issue as if it were the highest court in the state in which it is sitting.
Courts faced with a choice of law issue generally have two choices: A court can apply the law of the forum (lex fori)– which is usually the result when the question of what law to apply is procedural, or the court can apply the law of the site of the transaction, or occurrence that gave rise to the litigation in the first place (lex loci)– this is usually the controlling law selected when the matter is substantive.
Federal courts play by different rules than state courts because federal jurisdiction is limited to what has been enumerated in the Constitution (http://www.law.cornell.edu/constitution/index.html). The rules that federal courts must obey regarding which laws to apply are extremely complex and are embodied in the Federal Rules of Civil Procedure (http://www.law.cornell.edu/rules/frcp/).