Originally from American Review of International Arbitration - ARIA

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In the good old days, arbitrators did not adjudicate issues of mandatory law.
These were within the exclusive jurisdiction of the competent public authorities.1

The first change came with Scherk v. Alberto Culver.2 This was an
international arbitration between a U.S. company and a Liechtenstein entity that
manufactured cosmetics. In this oft-quoted decision, Justice Stewart, in rejecting a
plea that U.S. securities law gave exclusive jurisdiction to U.S. courts, wrote for a
divided court that, in an international dispute, U.S. courts could not invariably
insist on application of U.S. mandatory law.3 In The Bremen v. Zapata Off-Shore
Co., the Supreme Court, per Chief Justice Burger, had earlier rendered a similar
ruling in regard to an exclusive choice of forum clause designating a forum that
was likely not to apply otherwise applicable mandatory U.S. law.4 Of course, in
international cases, there is, by definition, a competing foreign law that may be
non-mandatory and that, under applicable choice-of-law rules, may vie for
application.5 However, these Supreme Court rulings did not consider whether,
under applicable choice-of-law rules, foreign non-mandatory law could be argued
to be applicable.