Originally from The Impact of EU Law on Commercial Arbitration

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INTRODUCTION

The role overriding mandatory rules play in arbitration  has very significant practical implications, up to and including the survival of arbitration as an instrument for dispute settlement in international commercial relations. Indeed, a perception that such rules are not taken into due consideration by arbitrators could lead to a change in the liberal and positive attitude of States and their courts towards arbitration. As is well known, in the last decades States have accepted and even encouraged arbitration, manifesting a liberal attitude toward arbitrability and the review of awards at the setting aside and enforcement stages. Ever since the US Supreme Court’s decision in Mitsubishi v. Soler-Plymouth,  which for the first time accepted the arbitrability of overriding mandatory rules (in that case in the context of competition law), States have displayed confidence in arbitration, specifically trusting that arbitrators would apply overriding mandatory rules when the dispute brought to arbitration fell within their scope. At a time when the role of arbitration is increasingly under scrutiny, questioned, and partially misunderstood (most worryingly by the institutions of the EU), it is crucial that the role of overriding mandatory rules and the principles governing their proper application should be well understood.
The topic also raises interesting theoretical issues, because it requires an exploration of the mechanisms that preside over the application of substantive rules in international arbitration. Although much has been written on the subject,  several areas of uncertainty remain which warrant further investigation. 
This article will attempt to explore both the practical aspects and theoretical underpinnings of the subject by first reviewing the notion of overriding mandatory rules and their role in judicial proceedings. It will then assess the suitability of the ordinary methods of applying the rules governing the merits in arbitration, and, in particular, private international law. It will then examine the specific issues associated with mandatory rules in international arbitration; particularly the source of the power of the arbitrators to apply such rules, and the criteria for applying them in concrete situations. 
The conclusion will include a suggestion of a practical solution, which may provide a tool practitioners can use to address the issue, while at the same time reassuring those concerned that arbitration may be a mechanism to circumvent the application of mandatory rules that arbitral proceedings can actually ensure that such rules are properly applied.
The analysis will focus on the general problems of overriding mandatory rules, without a specific focus on the law of the European Union or on the overriding mandatory rules of EU law, since in 
the abstract, from the arbitrator’s point of view, those rules are like any other mandatory rules.  However, the entire discussion also applies to 
such rules.