Mandatory Rules of Law in International Arbitration - European International Arbitration Review (EIAR) - Volume 7 - Issue 1
Originally from European International Arbitration Review
The notion of mandatory rules of law occupies a central place in the world of private international law, chiefly as a limitation on party autonomy. Due to the centrality of party autonomy to international commercial arbitration, it has understandably achieved prominence in that world as well. The notion of mandatory rules of law is not, however, without ambiguity; the meaning and effect attributable to them are subject to discussion.
II. The Double Meaning of “Mandatory”
In many contexts, a norm or rule of law is described as “mandatory” if it cannot be derogated from by private parties in their exercise of party autonomy. A mandatory rule, in other words, is one that the parties cannot, as the saying goes, “contract around.” Presumably a powerful public interest (including the need to protect weaker parties) justifies barring parties from ordering their affairs in a fashion contrary to the mandatory norm.
In other circumstances, a norm is considered mandatory in the sense that a court must apply that norm, even if the court, under the usual operation of its conflict of law rules, would ordinarily apply some other body of law (often referred to casually as “the otherwise applicable law”). The notion that a legal principle is so important as to displace the otherwise applicable law is often captured by the terms – such as the term loi de police in French – used to denote rules that are mandatory in this sense.
The close connection between these two usages of the term “mandatory” is easily understood. In international arbitration, as in private international law generally, the parties may by contract have designated a choice of law to govern disputes arising out of or related to that contract. The inclusion of a choice of law clause in a contract is very much an exercise of party autonomy. Since under virtually all jurisdictions’ conflict of law rules, courts are presumptively bound to respect an expression of party autonomy in the form of a choice of law clause, the law chosen by the parties is indeed “the otherwise applicable law.”