International Business Law Sciences Po Paris Spring 2017 Limitations to the applicability of the chosen law Giuditta Cordero-Moss, Ph.D., Dr.Juris Professor, Oslo University

Party Autonomy and Overriding Interests Party Autonomy enhances predictability Party Autonomy assumes that conflicting laws are equivalent to each other Party Autonomy is restricted when other policies override predictability and equivalence is not true

Examples of overriding interests-I Protection of the weaker contractual party Commercial Agency Maritime Law Unfair Terms of Contracts Labour Law Competition Rules Insurance

Examples of overriding interests-II Protection of Third Parties Company Law Encumbrances Immovable property Intellectual Property Insolvency Product liability Legal capacity

Examples of overriding interests-III Regulation of National Economy Securities exchange Foreign Exchange Taxes and charges Import-export

Examples of overriding interests-IV Protection of Community’s Interests Expropriation Embargo Money Laundering Terrorism Freedom of speech

Choice of Law - Restrictions Party autonomy is not applicable in certain areas: Immovable Property Encumbrances Company Law Tort Insolvency Intellectual Property Product Liability Legal Capacity

Governing Law – Limitations I Rules of the Lex Causae assuming that the factual consequences of the foreign rule are taken into consideration Rules of the Lex Causae sanctioning the violation of foreign rules in certain areas Comity of Nations Good faith

Governing Law – Limitations II Overriding mandatory rules (e.g. Art.7 Rome Convention/art. 9 Rome I) Not all mandatory rules are overriding Balancing of interests – predictability vs overriding interests

Overriding Mandatory Rules Of the lex fori: Art. 7.2 Rome Convention/Art. 9.1 Rome I Of a third country: Art. 7.1Rome Convention Close connection Regard to the rules’ nature and purpose Regard to the consequences of application Of a third country: Art. 9.3 Rome I Place of performance In case of unlawfulness

Governing Law – Limitations III Ordre Public Application of a foreign rule is Manifestly Incompatible with public policy of the forum

Ordre Public Truly international public policy Public policy (negative/international) Overriding mandatory rules (positive/domestic public policy) Mandatory rules Non mandatory rules

Disregard of mandatory rules on agency Applicable rule: compensation equal to one year of provisions, calculated on the average of the last 5 years of exercise C-381/98 (Ingmar) Alt 1.: compensation equal to six months of provisions – probably not against OP Alt 2.: compensation equal to one day of provision – probably against OP

Typical examples where ordre public clause is applicable Bribery Drugs Traffic Discrimination Confiscation without Indemnity

Typical examples where ordre public clause is applicable - I Measures essential to the accomplishment of the tasks entrusted to the European Community: Competition law (Eco Swiss, C-126/97) Protection of the agent (Ingmar, C-381/98 (?)) Consumer protection (Claro, C-168/05)

Typical examples where ordre public clause is applicable - II Company Law OAO Telecominvest, Sonera Holding B.V., Telia International AB, Avenue Ltd, Santel Ltd, Janao Properties Ltd, and IPOC International Growth Fund Ltd, Federal Commercial Court of West Siberia, 31 December 2006

Typical examples where ordre public clause is applicable - III Insolvency (French Supreme Court, 6.5.2009 09-10.281, Salen Dry Cargo AB v. Victrix Streamship Co, C.A., 2nd Circ., August 5, 1987)

Disregard of OMR Not enforceable OMR Enforceable ** Legal capacity Agency * Competition Company Insolvency Security Exch Foreign Exch Import-export Embargo

International Contracts and National Law It is not in the power of the parties to exclude applicability of national overriding mandatory rules or of ordre public In some cases: the parties can allocate the risk (e.g.: INCOTERMS, Force Majeure clause) Choice of arbitration to solve disputes: does it really permit to disregard national rules?