We are a Chinese developer considering a JV opportunity on a sizeable ground up project in Chicago and were a bit surprised when the choice of law provision for disputes was not Illinois. We had assumed that the choice of law provision would always be where the project is located. Now that we are aware that there is flexibility with regard to this provision, we would like to know which states might offer us the most protection and which states might offer us the least protection? What else should we consider in regard to this issue?
Answers
From a non-legal opinion, I don’t think you want it to be. Many investments are actually domiciled in more favorable jurisdictions such as Nevada or Delaware. Delaware has the longest history of the most favorable business case law and is influential nationwide because of that history.
It is hard to respond without specifics. As a general matter, where property is in a particular state, the "in rem" laws of that state will govern foreclosure and taxes. Lawyers will use a different state for choice of law purposes, most often looking to NY law for financial transactions. A company which is domiciled in another state may feel most comfortable using the law of the state of its domicile. I always set up limited liability companies under Delaware law, as it is considered the most favorable state for corporate formation.
The way to be best informed is to hire knowledgeable advisors. There is no one answer to your question.