Source: https://www.juridicainternational.eu/index.php?id=15568
Timestamp: 2019-04-19 12:57:55+00:00

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The article examines the role and employment of the public-policy exception in private international law from the perspective of the law applicable to contractual obligations. To begin with, prerequisites for recourse to the public-policy clause are investigated, to illustrate why this exceptional clause is likely to come into play rather infrequently, as indeed should be the case. The article then analyses the relativity of ordre public, exploring three dimensions to be considered in the courts’ use of the public-policy exception in a particular case. In summary, the author concludes that, notwithstanding its highly restrictive application criteria and, therefore, infrequent application, dispensing with the public-policy exception would be unthinkable even within the domain of international contracts. The regulation of public policy in the Rome I Regulation constitutes an abstract and flexible instrument, thereby allowing appropriate response to the issues of a changing society.
Recent developments in the EU’s second-generation regulations on the enforcement of judgements from other Member States seem to point to a certain decline in the importance of the public policy clause in private international law, by abolishing in part the public policy exception and the exequatur in general. *9 In addition, continuous harmonisation of substantive law related to the EU internal market indicates that the need for a public policy exception may be ostensibly diminishing. *10These trends constitute incentive to investigate whether the role of an overall public policy clause in matters of contractual obligations should be reconsidered as well, particularly as these are not as value-sensitive as other areas of civil law and in account also of the existence of special rules on overriding mandatory provisions in Rome I. What is more, the wording of the public policy exception in itself is vague, thereby complicating its application while simultaneously entailing broad judicial discretion.
This article explores the employment of the public policy exception from the perspective of Rome I, which determines the law applicable to contractual obligations for 27 European Union member states. *11 Only the substantive-law aspects and not the enforcement-stage protection of public policy shall therefore be the focus of this paper. The article starts by examining the preconditions for applying the public policy clause. It then analyses the relativity of ordre public, developing three dimensions to be considered in the courts’ use of the public policy exception in a particular case. In its conclusions, the article answers the question of why, notwithstanding its infrequent application, dispensing with the public policy exception would be unthinkable. Given that the essence of public policy differs from state to state, it should be stated here that the subsequent analysis and the examples provided are applicable in the context of Estonia’s legal order and based on its fundamental values.
Rome I, in its Article 21, uses the ‘standard’ wording of the public policy clause. Ever since the Hague Convention of 24 October 1956 on the law applicable to maintenance obligations toward children, *12 similar – if not quasi-identical – wording has been employed in numerous private international law cross-border instruments for the public policy clause, including other EU regulations, along with most Hague Conventions in this field. Because of the continuing need to formulate the preconditions for its application in a rather broad manner in order to preserve its universal character, the wording used by Rome I has remained unaltered in comparison to the predecessor of this provision – Article 16 of the former Rome Convention. According to the explicit stipulation of Article 21, the preconditions for recourse to the public policy clause are the application of a foreign law to the case and the manifest incompatibility of the result with the public policy of the forum.
The ‘safety net’ concept of the public policy exception in private international law (i.e., its aim of refraining from obliging the court to give effect to foreign-law provisions that are counter to the fundamental principles of the forum state) makes it clear that public policy constitutes reason for intervention only in cases wherein the law applicable to the contract (lex contractus) is not that of the forum (lex fori) but a foreign law. *13 Accordingly, whether the applicable law has been determined through a choice of law or by virtue of the general conflict rules makes no difference. Thus, in cases wherein a court has to apply its domestic law, EU law, or international treaties, it is not the public policy clause of Article 21 but the domestic law provisions that have to avoid possibly unfair results. *14 The public policy exception therefore applies only in cases in which the applicable law has been designated in accordance with the conflict rules in Rome I and it is not the lex fori that governs the case.
The formulation used in Rome I does not itself give much assistance as to its application in a given case, although the appending of ‘manifest’is supposed to impose a restrictive interpretation of the provision. *25 Indeed, when compared to an imaginable ‘simple’ incompatibility, its scope of application could theoretically be seen as somewhat more limited. *26 In practice, however, the provision does not provide any specific guidelines as to its application. In consequence, the interpretation of the criterion of manifest incompatibility remains subject to case-by-case analysis.
The forum proximity (räumlice Relativität or Inlandsbeziehung, as it is referred to in German legal writing) requirement follows already from the wording of Article 21, as the provision itself makes reference to the forum state. Therefore, only in cases wherein there is a sufficiently strong connection between the case and the forum’s legal order can it be justified that the private international law rules and private autonomy shall be set aside in favour of domestic fundamental principles.
The proximity requirement is supplemented by temporal and material considerations that are also intrinsic to public policy.
It follows from the above analyses that, in consequence of imposing a high substantive threshold, Article 21 of Rome I is likely to come into play rather infrequently, as should be the case. Accordingly, it is submitted that the public policy clause continues to function more as a safety net for general conflict rules, also referred to as a relief valve *53 or even as an emergency brake before an excursus into the depths of a foreign law, *54 rather than a frequently invoked necessity. Nevertheless, on account of the continuous changes in society, this exceptional clause is expected to maintain its importance even within the domain of international contracts. It can therefore be predicted that the public policy exception will, no matter its very restrictive application criteria, retain its scope of application for matters of contractual obligations.
*1 This article was published with support from ESF Grant No. 9209.
*2 Contracts in favour of passengers, consumers, insurance contracts’ policy-holders, and employees – see Articles 5, 6, 7, and 8 of Rome I, respectively.
*3 Contracts pertaining to situations wherein all elements relevant to the situation are located in one country – see Article 3 (3) and (4) of Rome I.
*4 Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I). – OJ L 177, 4.7.2008, p. 6 ff. It replaces the Rome Convention on the law applicable to contractual obligations of June 1980. The consolidated text of that convention is found in OJ C 334, 30.12.2005, p. 1 ff.
*5 Article 21 of Rome I. In this paper, the notions of public policy and ordre public are used in parallel in denotation of the public policy clause of Article 21.
*6 Provisions of the forum state that are to be applied to the contract irrespective of the law otherwise applicable to the contract – see Article 9 (1) and (2) of Rome I.
*7 For in-depth analysis of the concept of overriding mandatory provisions, see, for example, R. Piir. Eingreiffen oder nicht eingreiffen, das ist hier die Frage. Die Problematik der Bestimmung und des Anwendungbereichs der Eingriffsnormen im internationalen Privatrecht. – Juridica International 2010/XVII, p. 199 ff.
*8 More on the distinction between positive and negative functions can be found in such works as R. Hausmann. Art. 21 Rome I. – U. Magnus (ed.). J. Von Staudingers Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen. Einführungsgesetz zum BGB/IPR. Art 11-29 Rom I-VO; Art 46b, c EGBGB (Internationales Vertragsrecht 2). Berlin: Sellier 2011 (in later notes, ‘Staudinger/Hausmann’), paragraph 2; D. Martiny. Art. 21 Rom I. – J. von Hein (ed.). Münchener Kommentar zum Bürgerlichen Gesetzbuch. Band 10. Internationales Privatrecht I. Europäisches Kollisionsrecht. Ein­führungsgesetz zum Bürgerlichen Gesetzbuche (Art. 1-24). Munich: C. H. Beck 2015 (in later notes, ‘Münchener Kommentar / Martiny’), paragraph 7.
*9 See J. Kramberger Škerl. European public policy (with an emphasis on exequatur proceedings). – Journal of Private International Law 2011/7, p. 482. For a more in-depth analysis of the abolition of exequatur in the second-generation regulationsin general, see, for example, S. Pabst. A.I.3 EG-Vollstreckungstitelverordnung. Einleitung. – T. Rauscher (ed.). Europäisches Zivilprozess- und Kollisionsrecht EuZPR/EuIPR. Cologne: Verlag Otto Schmidt 2015, paragraph 12; M. Torga. Brüsseli I (uuesti sõnastatud) määrus: kas põhjalik muutus Eesti rahvusvahelises tsiviilkohtumenetluses? (‘The Brussels I Regulation (recast): A thorough change in the Estonian Civil Procedure?’). – Juridica 2014/4, p. 311 (in Estonian). The term ‘second-generation regulations’ is used here to indicate Regulation (EC) No. 805/2004 creating a European enforcement order for uncontested claims. – OJ L 143, 21.4.2004, p. 15 ff.; Regulation (EC) No. 861/2007 establishing a European small claims procedure. – OJ L 199, 31.7.2007, p. 1 ff.; Regulation (EC) No. 1896/2006 creating a European order for payment procedure. – OJ L 399, 30.12.2006, p. 1 ff.; Regulation (EC) No. 4/2009 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations. – OJ L 7, 10.1.2009, p. 1 ff.; and Regulation (EC) No. 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast). – OJ L 351, 20.12.2012, p. 1 ff. These are not considered in this article.
*10 M. Stürner. Europäisierung des (Kollisions-)Rechts und nationaler ordre public. – Grenzen überwinden – Prinzipien bewahren. Festschrift für Berndt von Hoffmann. Bielefeld, Germany: Verlag Ernst und Werner Gieseking 2011, p. 482.
*11 Denmark, having an opt-out from implementing regulations under the area of freedom, security, and justice, still adheres to the Rome Convention, which was replaced by Rome I in 2009 and which provided almost the same rules on party autonomy as does Rome I.
*12 Convention of 24 October 1956 on the law applicable to maintenance obligations towards children, Article 4. Available at http://www.hcch.net/index_en.php?act=conventions.text&cid=37 (most recently accessed on 25 March 2015).
*13 P. Kaye. The New Private International Law of Contract of the European Community. Aldershot 1993, p. 345; A. Chong. The public policy and mandatory rules of third countries in international contracts. – Journal of Private International Law 2006/2, p. 30.
*14 J. von Hein. Art. 6 EGBGB. – J. von Hein (ed.). Münchener Kommentar zum Bürgerlichen Gesetzbuch. Band 10. Inter­nationales Privatrecht I. Europäisches Kollisionsrecht. Einführungsgesetz zum Bürgerlichen Gesetzbuche (Art. 1-24). Munich: C. H. Beck 2015 (in later notes, ‘Münchener Kommentar / von Hein’), paragraph 123.
*15 Doctrinal literature points out that only foreign laws violating the core content of public policy – e.g., universally recognised human rights and the international ius cogens – should be held inapplicable regardless of the circumstances and results of their application. See C. Renner. Art. 21 Rome I. – G.-P. Calliess (ed.). Rome Regulations: Commentary on the European Rules of the Conflict of Laws. The Netherlands: Kluwer Law International BV 2011 (in later notes, ‘Calliess/Renner’), p. 320, paragraph 10; D. Bureau, H. Muir Watt. Droit international privé/I, 3rd edition. Paris: Presses Universitaires de France 2014, p. 535.
*16 K. Thorn. Art. 6 EGBGB. – P. Bassenge, U. Diederichsen (eds.). Palandt Bürgerliches Gesetzbuch. Munich 2009 (in later notes, ‘Palandt/Thorn’), paragraph 5. See also R. Jankelevitš. Avalik kord ja imperatiivsed sätted rahvusvahelises eraõiguses (Public policy and imperative norms in private international law). – Juridica 2002/7, p. 481 (in Estonian).
*17 Münchener Kommentar / von Hein (see Note 14), paragraph 118.
*18 D. Bureau, H. Muir Watt (see Note 15), p. 533. D. Bureau and H. Muir Watt divide the application of the public policy into three phases – namely, examination, confrontation, and decision phases (phases d’examen, de confrontation et de décision), and the examination phase into preliminary and thorough examination phases.
*19 See also Münchener Kommentar / von Hein (see Note 14), paragraph 118 ff.; G. Kegel, K. Schurig. Internationales Privat­recht. Ein Studienbuch. Munich: C. H. Beck 2004, section 16 II; P. Kaye (see Note 13), p. 347; Calliess/Renner (see Note 15), p. 320, paragraph 11.
*20 M. Voltz. Art. 6. – D. Heinrich (ed.). J. Von Staudingers Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen. Einführungsgesetz zum BGB/IPR. Art 3-6 EGBGB (IPR – Allgemeiner Teil). Berlin: Sellier 2013 (in later notes, ‘Staudinger/Voltz’), paragraph 125.
*21 See B. Audit. Droit International Privé, 4th edition. Paris 2006, paragraph 838; Calliess/Renner (see Note 15), p. 321, paragraph 11. See also M. Giuliano, P. Lagarde. Report on the Convention on the law applicable to contractual obligations. – OJ C 282, 31.10.1980, p. 1 ff., Article 16.
*22 D. Bureau, H. Muir Watt (see Note 15), p. 535.
*23 Palandt/Thorn (see Note 16), paragraph 47 ff.; Münchener Kommentar / von Hein (see Note 14), paragraph 120.
*24 M. Giuliano, P. Lagarde (see Note 21), Article 16.
*25 See, in this sense, the reasoning in the legislative proposal of the German Introductory Act to the Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuche). – BT-Drucks, 10/504, p. 42. See also Staudinger/Voltz (see Note 20), paragraph 128 ff.
*26 Nevertheless, in spite of it referring to manifestincompatibility, it has been called a largely declaratory statement. See R. Plender, M. Wilderspin. The European Private International Law of Obligations. Sweet & Maxwell 2009, paragraph 12-057; Calliess/Renner (see Note 15), p. 328, paragraph 36.
*27 Ibid.; P. Kaye (see Note 13), p. 348.
*28 Bundesgerichtshof, 28.01.2014. – III ZB 40/13, Rn. 3 und 4.
*29 Judgment of the Court of Justice of the European Communities of 28 March 2000, Case C-7/98, D. Krombach v. A. Bamberski, paragraph 37. – ECR 2000, I‑1935, although given in the context of international civil procedure.
*30 See also Münchener Kommentar / Martiny (see Note 8), paragraph 2.
*31 See, with this sense, also Münchener Kommentar / von Hein (see Note 14), paragraph 135.
*32 Staudinger/Hausmann (see Note 8), paragraph 25.
*34 Calliess/Renner (see Note 15), p. 323, paragraph 20, with further references.
*35 European Max Planck Group (editor: P. Torremans). Conflict of Laws in Intellectual Property: The CLIP Principles and Commentary. Oxford University Press 2013, paragraph 3:902.C03.
*36 See, for example, G. Kegel, K. Schurig (see Note 19), section 16 V; Palandt/Thorn (see Note 16), paragraph 4; D. Bureau, H. Muir Watt (see Note 15), p. 543; Staudinger/Voltz (see Note 20), paragraph 144.
*37 C.K. Allen. Law in the Making, 7th edition. Oxford University Press 1964, p. 155.
*38 Staudinger/Voltz (see Note 20), paragraph 146.
*39 For the division of phases, see Note 15.
*40 Staudinger/Voltz (see Note 20), paragraph 155. In some doctrines, the concept of relativity has been divided into relativity in a narrower sense, proximity, and seriousness of the breach – see, for instance, A. Mills. The dimensions of public policy in private international law. – Journal of Private International Law 2008/4, p. 210 ff.
*41 A specific proximity requirement can, for instance, be found expressis verbis in the Belgian Code of Private International Law, according to which, in determination of any incompatibility with public policy, special consideration is given to the degree to which the situation is connected with the domestic legal order and to the significance of the consequences produced by the application of the foreign law. – Code de droit international privé du 16 juillet 2004 (Belgian Code of Private International Law of 16 July 2004), Article 21, II. English text available at http://www.ipr.be/data/B.WbIPR%5BEN%5D.pdf (most recently accessed on 25 March 2015).
*42 For in-depth analysis of the proximity requirement for overriding mandatory provisions, see R. Piir (see Note 7), paragraphs 3.1 and 3.2.2.
*43 Even though nationality as a determinant of the applicable law is losing its importance in the course of harmonisation of private international law in the EU, it could certainly be considered an important factor in establishment of the proximity requirement, given that the national has preserved connections to the state of his nationality.
*44 For more details, see Münchener Kommentar / von Hein (see Note 14), paragraph 186 ff.; Staudinger/Voltz (see Note 20), paragraph 158 ff.
*45 Calliess/Renner (see Note 15), p. 329, paragraph 38; Staudinger/Voltz (see Note 20), paragraph 155.
*46 Münchener Kommentar / von Hein (see Note 14), paragraph 190; G. Kegel, K. Schurig (see Note 19),section 16 II.
*47 A. Mills (see Note 40), p. 211; Palandt/Thorn (see Note 16), paragraph 6. For similar reasoning in German jurisprudence, see, for instance, this ruling of the German Federal Court of Justice, or Bundesgerichtshof: 4.06.1992. – BGHZ 118, 312/349.
*48 M. Stürner (see Note 10), p. 481; see also Münchener Kommentar / von Hein (see Note 14), paragraph 193; Staudinger/Voltz (see Note 20), paragraph 160.
*49 Staudinger/Voltz (see Note 20), paragraph 165; Münchener Kommentar / von Hein (see Note 14), paragraph 202 ff.
*50 G. Kegel, K. Schurig (see Note 19), section 16 V.
*51 Münchener Kommentar / von Hein (see Note 14), paragraph 191.
*52 Staudinger/Voltz (see Note 20), paragraph 166.
*53 C. von Bar, P. Mankowski. Internationales Privatrecht, 1, 2nd edition. Munich: C. H. Beck 2003, p. 714.
*54 K. Siehr. Internationales Privatrecht. Heidelberg, Germany: C. F. Müller Verlag 2001, p. 490.
*55 M.S. Abdel Wahab. The law applicable to technology transfer contracts - Egypt. – Yearbook of Private International Law 2010/12, p. 467 DOI: http://dx.doi.org/10.1515/9783866539488.457.

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