Public policy and mandatory rules: Limitations on party autonomy
Public policy and mandatory rules
Limitations on party autonomy
Chapter 6 considers when the validity of a jurisdiction or arbitration agreement is restricted by the substantive applicable law of the forum, including overriding mandatory rales. The chapter focuses on the limitations to the chosen jurisdiction or arbitration clauses by PIL national rales applied to a cargo dispute. These rales are part of the positive national law that a judge analyses in a case with foreign connections to determine the specific national law that applies to that case.
The main issue at stake is how the mandatory provisions applicable to the B/L, public policy, or the overriding mandatory rales of the forum may deprive parties of settling their dispute in the chosen forum or arbitral tribunal. The subjective characterisation of the parties may constitute a limitation on party autonomy.
The particular nature of the contract of affreightment is regarded under the scope of different legal frameworks. Each country’s national laws or judicial interpretations include mandatory rales, overriding mandatory provisions and normative values that constitute their public policy or ordre public international. Indeed, the nature of the contract represents a symbiosis between the special namre of the maritime agreement and the application of the conflict rale.[1]
In some countries, arbitration and jurisdiction clauses are frequently linked to choice of law clauses in a way that contradicts the fundamental policies of the place where the contract is performed. The problems that may develop during litigation must be kept in mind when copying a dispute resolution clause that was good for one contract but may mean disaster for another contract - and a malpractice action for a lawyer. As Guerra and others point out: a contract of affreightment
normally includes liability clauses in the charterparties where the parties designate the applicable rules to the liability of the carrier. Placing the conflict of laws methods at the heart of the contract sets a link between its original nature and the applicable law to the dispute.
A distinction between jurisdiction and applicable law has to be drawn. First, the mandatory rales, public policy and overriding mandatory rales are introduced. The applicable law analysis falls outside the scope of this work, but is necessary in order to introduce the limitations on jurisdiction and arbitration agreements. Second, choice of forum clauses are analysed by revisiting the Brussels I Regulation (recast). An analysis of the intra- and extra-EU Member State courts submissions follows. Last, but not least, we consider the public policy limitations on arbitration agreements.
Mandatory rules, public policy and overriding mandatory rules
The unfettered freedom of choice of law of the parties engaged in commercial contracts is found in Article 3 of the Rome I Regulation.[2] However, such contractual freedom is subject to certain limitations. The litigants to a cargo claim cannot disregard the application of national mandatory rules, the fundamental principles of public policy (ordre public international) and overriding mandatory rules.
Mandatory rules are different from the overriding mandatory rules. Neumayer distinguishes between the non-derogable rales - mandatory rales - and overriding mandatory rales. Mandatory rales protect private interests, providing the backbone of the contract in case of national (without foreign elements) or foreign choice of law. Rome I Regulation’s protective provisions regarding the contractually weaker party shall be obseived considering the mandatory rales recognising that party autonomy has some limitations. However, it can be said that party autonomy has been expanded in the Rotterdam Rules (that allow exclusive jurisdiction agreements for volume contracts) from that in the Hamburg Rules.
Depending on the circumstances, certain foreign mandatory national rales can be excluded by the parties. Such rales can be related to different sets of national legislation, such as consumer, labour, insurance or agency law. Mandatory rales can be domestic, regional (such as EU legislation), international (treaties) or transnational (e.g., the UNIDROIT international principles of commercial contracts of 2016).
Mandatory rales contained in Articles 3(3) and 7 of the Rome I Regulation should be distinguished from those contained in Article 9, which are understood to be overriding mandatory provisions. Article 3(3) of the Rome I Regulation (Article 14(2) of the Rome II Regulation is in similar terms for the event giving rise to the damage) states that domestic contracts having a foreign choice of law do not prejudice the application of the law of the country where all other elements relevant to the situation at the time of the choice are located, and that cannot be derogated from by agreement:[3]
Where all other elements relevant to the situation at the tune of the choice are located in a country other than the country whose law has been chosen, the choice of the parties shall not prejudice the application of provisions of the law of that other country which cannot be derogated from by agreement.
The Article applies to situations where all elements point to one EU Member State when parties have chosen the law of a third state (whether or not an EU Member State). The Article can also apply to non-Member States. The parties cannot derogate from the mandatory rules of the EU Member State or non-EU state where all the elements are closely connected to that state. The choice of law is a factor, unlike the choice of jurisdiction alone, according to Recital 15 of the Rome I Regulation. The judge may enforce domestic laws in order not to apply a foreign choice of law selected inter partes that lessens their responsibility.
Overriding mandatory provisions are more restrictive provisions that cannot be derogated by agreement, even in international cases. These must be construed more restrictively and codify some CJEU decisions from the 1990s and early 2000s. Article 9(1) of the Rome I Regulation defines overriding mandatory provisions as
provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under the Rome I Regulation.
Overriding mandatory rules protect and defend public or collective interests and apply to any international contract regardless of the law chosen by the parties. Overriding mandatory rules cannot be derogated by agreement. The power to choose the applicable law to the contract derives from the law of the lex fori, which draws the limits of conflictual party autonomy. Thus, the parties’ free will faces limitations from the Hague Rules to the
Hague-Visby, Hamburg and Rotterdam Rules. These conventions presume no full party autonomy.
Overriding mandatory rules may constrain party autonomy in related cargo claim proceedings and may limit the choice of non-EU law provisions against the law of the forum as will be discussed in relation to The Morviken. The enforcement of overriding mandatory provisions of the ordre public international where the choice of forum agreement is sought to be recognised can be considered as pertaining to form or to substance.[4] Article 21 of the Rome I Regulation (and Article 26 of the Rome II Regulation in similar terms) allows the application of a foreign law to be refused ‘if such application is manifestly incompatible with the public policy (ordrepublic international) of the forum'. Article 23 lays down the relationship with other provisions of EU Law, while Article 25 deals with the conflict of laws mies in relation to existing international conventions.
The mandatory overriding provisions of the law of the forum apply and stress that the choice of the forum or arbitral seat is paramount. The mandatory rales of the forum related to a B/L can affect jurisdiction or arbitration clauses when the parties have chosen a different jurisdiction or arbitral seat with the intention of applying a concrete set of rales that could be more favourable to the shipper. Article 9( 1 ) of the Rome I Regulation (and Article 16 of the Rome II Regulation) restricts its scope of application to the Taw of the forum in a situation where they are mandatory irrespective of the law otheiwise applicable’ to contractual or non-contractual obligations. Mandatory overriding provisions constitute a general correction mechanism in conflict of laws that circumvents the parties’ choice of foreign law under Articles 9( 1 ) of the Rome I Regulation and Article 7 of the Rome Convention. Such mandatory overriding provisions may lead to the application of the Hague, Hague-Visby or Hamburg Rules to a B/L when they constitute the law of the forum. However, a choice of English law does not automatically imply the application of the Hague-Visby Rules. Even if such rales are voluntarily incorporated under a charterparty, they may not apply if they reduce the responsibility of any of the parties.
Furthermore, Article 9(2) of the Rome I Regulation provides that ‘nothing’ in the Rome I Regulation ‘restricts the application of the overriding mandatory provisions of the law of the forum’, although some limits exist. Article 9(2) of the Rome I Regulation restricts the application of the Hague-Visby Rules to a contract, for instance, but not when they are applied mandatorily. The preliminary ruling of the CJEU in Unamar determined that the parties could choose Bulgarian law to be applicable to a commercial agency contract subject to arbitration. However, Belgian laws provided a greater level of protection to commercial agents, including laws related to shipping sendees during the transposition of the Commercial Agents Directive. Nevertheless, when applying the current Article 9(2) of the Rome I Regulation, Belgian courts may declare themselves competent by considering their national laws as mandatory provisions.
Considering the current analysis under English, Spanish and EU law, two different situations must be distinguished concerning the mandatory rules applicable to dispute resolution clauses contained in or incorporated into a contract for carriage of goods by sea: (i) the incompatibility of an imperative norm with the choice of forum; and (ii) the incompatibility of a choice of law agreement affecting the substantive validity of that clause under the Rome I Regulation?0 The application of public policy and overriding mandatory provisions in non-EU jurisdictions can also make the law chosen by the parties inapplicable to contracts of affreightment, depriving the parties of the ability to resolve their cargo claim disputes in their selected forum or ADR venue.
- [1] Miranda Guerra and Frank Nectali, ‘Le conflit de lois en droit des transports de marchandises par mer’ (University of Bourgogne 2013) 21-22. 2 See William W Park, Arbitration of International Business Disputes: Studies in Law and Practice (2nd edn, OUP 2012) 759-771. 3 Guerra and Nectali (n 1).
- [2] Article 3, paras 1 and 2 state: 1. A contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or to part only of the contract. 2. The parties may at any time agree to subject the contract to a law other than that which previously governed it, whether as a result of an earlier choice made under this Article or of other provisions of this Regulation. Any change in the law to be applied that is made after the conclusion of the contract shall not prejudice its formal validity under Article 11 or adversely affect the rights of third parties. 2 Giuditta Cordero Moss, International Commercial Arbitration: Party Autonomy and Mandatory Rules (Tano Aschehoug 1999) 53. 3 Karl H Neumayer, ‘Autonomie de la volonté et dispositions imperatives en droit international privé des obligations’ (1957) 4 Reine Critique de Droit International Privé 579. 4 Alfonso-Luis Calvo Caravaca and Javier Carrascosa González (eds), Derecho Internacional Privado: Vol II (Comares 2016) 901-905; Javier Carrascosa González, La Ley aplicable a los contratos internacionales: el reglamento Roma I (Colex 2009) 117-124. 5 ‘UNIDROIT is an mdependent intergovernmental organisation ... Its purpose is to study' needs and methods for modernising, harmonising and co-ordinating private and in particular commercial law as between states and groups of states and to formulate uniform law instruments, principles and ivies to achieve those objectives’. UNIDROIT, ‘History' and Overview’ (UNIDROIT, 28 January 2020)
- [3] 2 Geert Van Calster, European Private International Law (Bloomsbury 2016) 225-226; Baatz, ‘The Conflict of Laws’ (n 9) 61-63. 3 Baatz, ‘The Conflict of Laws’ (n 9) 61-63. 4 For instance, in the joined Cases C-369/96 and C-376/96 Arblade and Others (Criminal proceedings against Jean-Claude Arblade and Arblade & Fils SARL) v. Bernard Leloup, Serge Leloup and Sofi age SARL [1999] ECR1-8453; Catherine Kessedjian, ‘ Manda tory Rules of Law in International Arbitration: What Are Mandatory Rules?’(2007) 18(1-2) Am Rev Inti Arb 147. 5 See Stefan Leíble, ‘La unportancia de la autonomía conflictual para el futuro del Derecho de los contratos internacionales’ (2011) 3(1) Cuadernos de Derecho Transnacional 214,217; Leo Raape, Internationales Privatrecht (5th edn, Franz Vahlen 1961) 457; Kurt Siehr, ‘Die Parteiautonomie im Internationalen Privatrecht’ in Peter Forstmoser and others (eds), Festschrift für Max Keller (Schulthess 1989) 486; Frank Vischer, Internationales Vertragsrecht: Die Kollisionsrechtlichen Regeln der Anknüpfung bei Internationalen Verträgen (Stämpfli 1962) 24; Pierre Mayer and Vincent Heuzé, Droit international privé (8th edn, Montchrestien 2004) 514-519; Caravaca and González, Derecho Internacional Privado (n 7) 901-905; Carrascosa González (n 7) 117-124.
- [4] Jurgen Basedow, ‘Exclusive Choice-of-Court Agreements as a Derogation from Imperative Norms’, in Patrik Lmdskoug and others (eds), Essays in Honour of Michael Bogdan, Juristforlaget i Lund (2013) 15-31. 2 Baatz, ‘The Conflict of Laws’ (n 9). 3 Convention on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980 OJ 1980 L 266/1, consolidated version OJ 1998 C 27/34 (Rome Convention). 4 TrafiguraBeheer BVv. Mediterranean Shipping Co SA (The MSC Amsterdam) [2007] EWCACiv794: the B/L expressly provided for English law but the Court of Appeal held that the Hague-Visby Rules did not apply because the B/L was not issued in a contracting state, was not from a contracting state, and did not provide for the Hague-Visby Rules or the ability to give them effect from Article X. 5 Case C-184/12 United Antwerp Mail time Agencies (Unamar) NV v. Navigation Maritime Bulgare EU:C:2013:663, [2014] 1 Lloyd’s Rep 161. In this case, the national legislation’s scope of protection for self-employed commercial agents surpassed the minimum requirements of the EU Directive. 6 ibid.
