EU Overriding Mandatory Provisions and the Law Applicable to the Merits - Chapter 10 - The Impact of EU Law on International Commercial Arbitration
Originally from The Impact of EU Law on Commercial Arbitration
Overriding mandatory rules, also known as lois de police or directly applicable rules, are mandatory rules that require application even though they do not belong to the law applicable to the merits of the dispute. As the name suggests, these rules override the choice of law that was made by the parties or that followed the application of the conflict rules that had identified the law governing the legal relationship.
Mostly, overriding mandatory rules aim to protect public interests, such as the proper functioning of securities markets. However, it is not only regulatory norms of a public law nature that may qualify as overriding mandatory rules. Private law rules may also do so. For example, in the EU the rules protecting commercial agents, contained in the law of the country where the agency is carried out, are deemed to apply even though the agency contract is subject to a different law. In EU law, the applicability of overriding mandatory rules is regulated in article 9 of the Rome I Regulation on the law applicable to contractual obligations, and in article 16 of the Rome II Regulation on the law applicable to non-contractual obligations.
While the notion of overriding mandatory rules is well known in the context of private international law and application of the law by the courts, there may still be unclear aspects regarding its relevance in the context of international arbitration. This is mainly due to the widespread (though not uncontroversial, and not supported here) opinion that international arbitration, unlike national courts, is not subject to rules of private international law. As the applicability of overriding mandatory rules is usually explained in terms of private international law, negating the relevance of private international law necessitates development of alternative bases for justifying the applicability of these rules in arbitration, including the conditions for applicability and its limitations. Recognising the relevance of private international law to arbitration, to the contrary, permits reliance on known concepts to explain the relationship between the choice of law made by the parties and the powers of an arbitrator with regard to the applicable law. While this latter approach may seem old fashioned, it permits a more predictable or, at least, a less unpredictable, regime.