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.
What states have favorable laws for international investors?
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?
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.
Choice of Law is an important Contract issue especially for developers considering JV opportunities. You are correct. Usually, the choice of law is where the project is located ( and Chicago/Illinois is good), but this is a heavily negotiated provision depending on which forum is most favorable to the parties.
JVs organized as a Delaware LLC will often try to have Delaware law control because it tends to be more favorable for the manager than for the investor. Illinois law is more balanced in that regard. Also, the choice of law provision can be modified by having the agreement recite certain protections in favor of the investor. You cannot arbitrarily pick as governing law a jurisdiction which has no connection with the parties or the project.