It may seem curious and paradoxical for our municipal laws to point to the application of foreign laws. This is especially curious as the Philippines does not appear to be short on applicable laws on any given situation. If the municipal law of the forum has sufficient rules in place for the resolution of a dispute, why is there still a need to invoke the application of a foreign law? There are a few reasons for this.

First is the principle of personal law. The status, condition, and legal capacity of persons are governed by their national law. The idea that certain fundamental aspects of an individual's legal existence are governed by the law of their nationality stems from a recognition that these attributes are often conferred and defined by the state to which an individual owes allegiance. This ensures a degree of consistency and predictability in how a person is treated legally, regardless of their physical location. Thus, these aspects -- status, condition and legal capacity -- are traditionally viewed as beyond the powers of any state or any foreign court because an individual's national law personality and capacity have been granted upon him from the moment s/he is treated as a person by his/her own national law.

Being citizens of France, for example, Louise and Antoine are governed by French laws insofar as certain aspects of their persons are concerned. Their status, condition, and legal capacity are governed by French law wherever they may be found, be it in the Philippines, in the United States or elsewhere.

The above illustration is consistent with Philippine law. Article 15 of the Civil Code (Republic Act No. 386) states that laws relating to family rights and duties, or to the status, condition and legal capacity of persons, are binding upon citizens of the Philippines, even though living abroad. This provision embodies the principle of nationality in matters of personal law.

Imagine a Filipina residing in Canada who wishes to enter into a marriage. While the formalities of the marriage ceremony might need to comply with Canadian law (lex loci celebrationis), her capacity to marry – whether she is of legal age, not already married, and possesses the requisite consent – will be determined by Philippine law, her national law. This is because her status as a single individual capable of entering into marriage is a condition determined by her home state's laws. Similarly, matters of filiation, adoption, and even legal personality itself are often governed by the national law of the individual. The Philippine Supreme Court, in cases involving the recognition of foreign divorces obtained by Filipinos, has grappled with the nuances of Article 15, highlighting the enduring significance of national law in defining personal status, in relation to Article 26(b) of the Family Code (Executive Order No. 209). An example of this is the case of Republic v. Manalo (G.R. No. 221029, April 24, 2018; 831 Phil. 33 [En Banc, Per J. Peralta]).

Second is inherent complication brought about by the location of property. The principle of lex situs or lex rei sitae, the law of the place where the property is situated, addresses this. The rationale here is deeply pragmatic. The state where property is located has a paramount interest in regulating its ownership, possession, use, and transfer. These matters often intertwine with local economic policies, land registration systems, and public order considerations. It would be highly impractical and potentially disruptive for the laws of a foreign jurisdiction to dictate how property within a state's borders is managed or regulated.

Consider a piece of land located in Baguio City. If a dispute arises regarding its ownership, Philippine law, specifically the Civil Code provisions on property and relevant land registration laws, will govern the resolution. Even if the contending parties are foreign nationals, the Philippine court will apply Philippine law to determine who holds the rightful title thereto. The physical reality of the property's location within Philippine territory gives the Philippines the most direct and compelling interest in applying its own legal framework. This principle has been consistently upheld in Philippine jurisprudence concerning real property situated within the country. While foreign laws might be relevant in determining the validity of a contract of sale executed abroad concerning that Philippine property, the ultimate rights and obligations related to the property itself are determined by Philippine law.

Third is the expectation of the parties vis-à-vis the place of execution, perfection or performance of a contract. The principle of lex loci contractus (law of the place of contracting) and lex loci solutionis (law of the place of performance of a contract) may become relevant in the resolution of a case revolving around the intrinsic validity of a contract. It is natural to expect parties to anticipate the legal consequences of the performance of a contract and such expectation is sought to be protected by private international law principles.

On the other hand, as to extrinsic validity, the general rule that the form of a contract or other public instrument is governed by the law of the place of its execution -- lex loci celebrationis -- serves several practical purposes. It aligns with the reasonable expectations of the parties who would naturally look to the laws of the jurisdiction where they are transacting to ensure the validity of their actions. It also provides a clear and easily ascertainable rule, promoting certainty and predictability in cross-border transactions. Moreover, the state where the instrument is executed has an interest in ensuring compliance with its formal requirements to prevent fraud and facilitate the admissibility or enforceability of such documents in its own courts.

For example, if two Japanese citizens execute an instrument in Tokyo, the formal validity of that contract – whether it needs to be in writing, notarized, or witnessed – will generally be determined by Japanese law. If a dispute arising from that instrument is later brought before a Philippine court (perhaps due to the presence of assets in the Philippines), the Philippine court might need to look into Japanese law to determine if the contract was formally validly executed. However, as mentioned, the substantive aspects of the contract, such as the imposition of a certain rate of interest or the waiver of a right in favor of a concubine, might be governed by a different law based on applicable choice of law rules or other connecting factors.

In essence, the reason for municipal law's reference to foreign law is often the preservation of the "reasonable expectation of the parties" which is a crucial consideration in modern conflict of laws. The shift towards approaches like the "center of gravity" doctrine or the doctrine of "the state with the most significant relationship" doctrine reflects a move away from rigid territorial rules towards a more flexible analysis that considers the various connections a legal transaction has with different jurisdictions and seeks to apply the law of the state with the most substantial interest in the outcome of or with the most relevant connection with the case. In torts, the move from the strict rule of lex loci delicti commissii (law of the place where the tort was committed) to the doctrine of the "state with the most significant relationship" similarly acknowledges that the place of the wrong might be fortuitous and that other factors, such as the domicile and residence of the parties and the place where the relationship between them is centered, might be more relevant, convenient and equitable in determining the applicable law.

While the primary focus of a court is on the territorial effect of its own laws and judgments, the application of foreign law by domestic courts is not an anomaly but a necessary mechanism to address legal issues with cross-border elements. It is rooted in principles of comity, practicality, and the recognition that certain aspects of a legal relationship are more appropriately governed by the laws of a foreign jurisdiction due to the nature of the subject matter (like personal status or the location of property) or the circumstances of the transaction (like the place of contract execution). The evolution of private international law reflects a continuous effort to balance the territorial sovereignty of states with the increasing need for legal harmony and predictability in an interconnected world, often guided by the overarching principle of ensuring fairness and respecting the reasonable expectations of the parties involved.