exclusion of foreign law

CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

Project on:

Exclusion of foreign law

Private international law Ix semester

Submitted To: DR. P.P.Rao Faculty for Private International Law Submitted By: Saumya Suman Roll No. 963 5thyr

Acknowledgement I am feeling highly elated to work on the topic EXCLUSION OF FOREIGN LAW ” under the guidance of my faculty, Dr. P.P RAO. I am very grateful to him for his exemplary guidance. I would like to enlighten my readers regarding this topic and I hope I have tried my best to pave the way for bringing more luminosity to this topic. I also want to thank all of my friends, without whose co-operation this project would not have been possible. Apart from all these, I want to give special thanks to the librarian of my university who made every relevant materials regarding to my topic available to me at the time of my busy research work and gave me assistance. And at last I am very much obliged to the God who provided me the potential for the rigorous research work. At finally yet importantly I would like to thank my parents for the financial support.

CONTENTS

1. INTRODUCTION 2. PUBLIC POLICY 3. THE RECOGNITION AND ENFORCEMENT OF FOREIGN LAW: THE ANTE ANTE L LO OPE'S P E'S PENAL LAW EXCEPTION

4. (NON-)ENFORCEMENT OF FOREIGN REVENUE LAWS, IN INTERNATIONAL LAW AND PRACTICE 5. EXPROPRIATORY EXPROPRIATORY LEGISLATIONS 6. MANDATORY RULES 7. JUDICIAL INTERPRETATIONS 8. CONCLUSION

RESEARCH METHODOLOGY Aims and Objectives:

The aim of this research paper is to present a detailed study of areas of exclusion of foreign law and reason behind it. Hypothesis

The application of foreign law can offer a substantial opportunity to effectively prevent adverse effect on competition in interstate legal relations. Scope and Limitations:

The researcher has used the doctrinal method and has relied on the secondary sources for the content of the research paper. Sources of Data:

The researcher has relied on the following secondary sources of data: 

Articles



Books



Statutes



Journals



News paper reports

Method of Writing

The method of writing followed in this project is bo th analytical and descriptive. Mode of Citation

The researcher has followed a uniform mode of o f citation in this project.

CH – 1 INTRODUCTION Public policy plays a very important role in the internal law of any nation and it basically defines the way the legal system of a country works. The doctrine of Public Policy in its essence is a virtual repudiation of the Policy of International cooperation and a negation of private International Law. Public policy of private international law varies from one state to another. Private International Law of practically every country recognizes certain circumstances in which the applicable of the foreign law that would otherwise be applicable is excluded 1. The doctrine on the basis of which the otherwise applicable foreign law is excluded goes by the name of Ordre Public on the continental Europe and by the name of Public Policy in the common law countries including India. Most of the countries adhere to the doctrine. What precisely is the meaning and scope of the doctrine, there is no unanimity in the state practice or law. Thus, under the English and Indian private International laws, the application of otherwise applicable foreign law may be excluded under the following three heads: 1. Foreign law is against the public policy, 2 2. Foreign law is penal law, and 3. Foreign law is revenue law.

1

https://legal-dictionary.thefreedictionary.com/exclusion

2

https://law.stanford.edu/areas_of_interest/law-public-policy

CH-2 PUBLIC POLICY So far no attempt has been made for a precise definition of “public policy” and it is submitted that it is not possible to give any precise meaning to the term. Graveson says that “Public Policy is an indefinite concept which indicated those matters regarded by parliament or the court as clearly of Fundamental concern to the state and society at large.” Most large.” Most English authors do not attempt attem pt to give any definition to public policy and taking it for granted discusses the scope of its application.

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The English law relating to preclusion of foreign law by operation of doctrine of public policy is thus formulated by Dicey and Morris “The court will not enforce or recognize a right, power, capacity, disability, or legal relationship arising under the law of a foreign country if the enforcement or recognition of such right, power, capacity, disability or legal relationship would be inconsistent with the fundamental public policy of English.” 4 States have used the school of thought as a tool to underneath, otherwise applicable, foreign laws. The general public policy is employed as a sort of an excuse for the exclusion of applicable foreign law. The standard justification for the school of thought is that no country can offer impact to laws that square measure ‘repugnant to its concepts of social justice’. The western countries think about non-public possession as inviolate, whereas the communist countries could think about themselves to be committed to the socialization of suggests that of production. This conflict of values is well illustrated by cases relating to

3

https://law.stanford.edu/areas_of_interest/law-public-policy/

4

https://law.stanford.edu/areas_of_interest/law-public-policy

“Nationalization” or “Confiscation” of private property in the Soviet Union and in some other countries. At times country courts have given a really wide application to the belief be lief of public policy. In Kaufman v. Gerson, a husband of the defendant had taken some money entrusted to him from the complainant. The complainant threatened to prosecute defendant’s husband unless the defendant entered into a contract with the complainant that she would pay him the whole quantity of the embezzled cash by instalments.Misappropriation of funds bel however the contract was valid by the French law. Each the parties were French nationals domiciled in France. Misappropriation of funds occurre d in France. Plaintiff’s action within the English court for the recovery of the instalments due was unemployed on the bottom that “to enforce a contract thus procured proc ured would contravene, what by the law of this country is deemed, ‘an essential ethical interest’.” The illustrative cases of the latter tendency area unit, Santos v. Illidge, wherever a far off contract for the sale of slaves was given result to, at a time once English national policy was against slavery, Robinson v. Bland wherever a far off gambling contract was implemented at a time once domestic contracts of this nature were void; and Re Bonacina wherever a far off contract inconsiderately was given result to. 5 It is seen that the public policy polic y in terms of private international law can c an produce both negative and positive effects. Both these effects work in collaboration. In an implicit way, the law of the forum is applied only to the extent that the foreign law is in violation of the internal law and against its public policy. polic y. Also, in an explicit way, the law of the forum is enforced even in its substantiality to fill the gaps g aps left by the removal of the foreign law.

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CH-3 The Recognition and Enforcement of Foreign Law: The Antelope's Penal Penal Law Exception In 1825, Chief Justice Marshall held in The Antelope that "(t)he courts of no country execute the

penal laws of another."' Since then, United States Courts have painstakingly crafted a variety variet y of definitions of the word "penal" in order to help determine when and when not they should apply foreign laws or execute foreign judgments which conceivably might be characterized as "penal." Much of their hairsplitting analysis might have been avoided if American judges and commentators had looked behind Marshall's phrase to see its foundations in law and policy. After reviewing the accepted wisdom about The Antelope's penal Antelope's penal law exception, this article looks at the exception in context. Drawing upon the cases argued by counsel, the article argues that Marshall did not frame the exception with any unelaborated definition of "penal law" in mind. Rather, Marshall sought to restrain the courts from infringing upon another state's sovereign authority, especially when what was at issue was a state's right to benefit by the execution of its public law.6 American commentators have failed to alert the courts to the origins of The The Antelope's penal Antelope's penal law exception because they have assumed, incorrectly, that Marshall more or less plucked the term out of thin air. The academic error goes back to an otherwise commendable article by Professor Leflar. In fairness to Leflar, it must be noted that his article treated the origins of the rule only in scholarly dictum. dictum. Leflar's central aim was to make and substantiate his basic and often-cited proposition that it was a mistake for judges to extend Marshall's penal law exception to "new sets of facts to which the reason for the rule, assuming that there is a reason for it, has no relation."' Leflar willingly accepted the application of the rule to truly criminal laws, but one-by-one he showed how non-criminal extensions of the rule, e.g. to wrongful death acts, exemplary damages on tort claims, personal liability upon officers, directors and shareholders for corporate debts, usury laws, and tax claims, were not justified by what he thought the only two good justifications

6

http://www.commonlii.org/sg/journals/SGYrBkIntLaw/2005/11.pdf

for the penal law exception: local public policy and forum non conveniens. Fundamentally, Leflar preferred those decided cases which followed Huntington followed Huntington v. Atrill and restricted "the definition of 'penal' to the particular conflict of laws point in issue, and in effect says that the statute or other rule of law is 'penal in the international sense' only if it prescribes punishment at the instance of the state or its representatives for violation of the criminal law as such." ' Leflar's article is by now somewhat dated, not only by a new half century's case law, but also by his then justifiable assumption that states could not or would not provide for extraterritorial personal jurisdiction. Without longarm statutes, when foreign states refused to appl y a state's law in noncriminal cases, a potential defendant could avoid the application of a state's "penal" laws simply by leaving its territory. Extradition, available for criminal offenses, was of course then and now unavailable for the prosecution of civil cases. The penal law exception arose in The Antelope decision after Marshall had concluded that though slavery and the slave trade might violate the law of nature, they did not offend the positive law of nations.' Counsel for the United States had argued that Spain and Portugal were nations which had made formal declarations against the slave trade. Could the United States enforce a prohibition against the slave trade against nationals of countries on record as opposing that trade? Marshall answered no: '[als no nation can prescribe a rule for others, none can make a law of nations. There is, therefore, less difficulty than Leflar and others have supposed in reconciling The Antelope with the other principal United States case on the penal law exception to the recognition and enforcement of foreign public laws. Huntington v. Attrill,7 held that in English and American law "penal law" was meant only to encompass cases involving "punishment for an offense committed against the State, and which, by the English and American constitutions, the executive of the State Sta te has the power to pardon. ' Thus, -[t]he question whether a statute of one State, which in some aspects may be called penal, is a penal law in the international sense, so that it cannot be enforced in the courts of another State, depends upon the question whether its purpose is to punish an offense against the public justice of the State, or to afford a private remedy to a person injured by the wrongful act."

7

http://www.commonlii.org/sg/journals/SGYrBkIntLaw/2005/11.pdf

CH-4 (NON-)ENFORCEMENT OF FOREIGN REVENUE LAWS, IN INTERNATIONAL LAW AND PRACTICE "There is a well recognized rule, which has been enforced for at least two hundred years or thereabouts, under which these Courts will not collect the taxes of foreign States for the benefit of the sovereigns of those foreign States." So it was declared by Tomlin, J., in In re Visser, Queen of Holland v. Drukker, decided in 1928.1 And the following rule was stated in the fourth edition of Dicey, Conflict of Laws, Laws, by A. B. Keith: "The Court has no jurisdiction jurisdiction to entertain an action for the enforcement, either directly or indirectly, of a penal, revenue, or political law of a foreign state. The Courts, in refusing, as a matter of principle, to enforce any revenue legislation, may be deemed to be observing a doctrine of public importance." The question of "enforcement" of foreign "revenue" laws relates to several matters different one from another, in their legal nature. One main group is that of cases of private law relationships, between private persons, and of the effect, which, directly or indirectly, foreign revenue laws have on them." Another group is that of cases relating to the "enforcement" of tax claims of foreign states. The purpose of the following analysis is to review the actual practice of several nations, and to ascertain the legal basis of the same, in these different matters, which by courts and by writers were often treated as relating to one and the same rule of "nonenforcement of foreign revenue laws." The case, in which the rule concerning non-enforcement of foreign revenue laws is supposed to have been laid down, two hundred years ago, byLord Hardwicke, is that of Boucher v. Lawson.' It was a suit for breach of a contract made between Englishmen, to ship gold out of Portugal. A Portuguese law forbade export of gold8. The suit was upheld. The questions involved in the case were whether the prohibition in question was a good defense for nonperformance of the contract and whether a contract, the performance of which was to be made in violation of a foreign revenue law, should be enforced in England." No question of "application" or "enforcement" of any foreign laws-"revenue" or others-was present, and no enunciation of any rule relating to this question was made by Hardwicke. One hundred and eighty-five years later, a case arose, in which the question was again one of performance of a contract, this time, in a

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foreign state, and, this time, governed by the foreign lex loci solutionis. In this case the contract was to be performed, and the final payment to be made, in Spain. By a decree of Spain, enacted after the contract was made, the payment for services in question was not to exceed a certain sum in local currency. Owing to this decree, the actual payment made in Spain was less than the amount agreed upon in English sterling. It was a suit for the balance unpaid.' The claim was denied. The decree was held applicable and, in an obiter dictum, the court referred to the rule of non enforcement of foreign revenue laws and suggested that the same required reconsideration. It is submitted that, the performance of the contract being governed by the lex loci solutionis, the real problem in this case was that of "qualification" of the decree above: i. e., whether this decree was, or was not, part of the applicable Spanish law on performance of contracts. The decree, evidently, was promulgated for reasons of economic and currency policy of Spain, being a "fiscal" or "revenue" measure. But the sole fact that a foreign law had such fiscal or revenue aspects would seem to be of no importance, if the law was part of the foreign substantive law governing the given private law relationships before the court; such law would have to be applied. On the other hand such law would not be applied, for whatever reasons it may have been promulgated, if it were not part of the applicable foreign substantive law.

CH-5 EXPROPRIATORY LEGISLATIONS Introduction

It is a well recognised rule in international law that the property of aliens cannot be taken, whether for public purposes or not, without adequate compensation. Two decades ago, the disputes before the courts and the discussions in academic literature focused mainly on the standard of compensation and measuring of expropriated value. The divergent views1 of the developed and developing countries raised issues regarding the formation and evolution of customary law. Today, the more positive attitude of countries around the world toward foreign investment and the proliferation of bilateral treaties and other investment agreements requiring prompt, adequate and effective compensation for expropriation of foreign investments have largely deprived that debate of practical significance for foreign investors.9 Disputes on direct expropriation – expropriation – mainly mainly related to nationalisation that marked the 70s and 80s -have been replaced by disputes related to foreign investment regulation and "indirect expropriation". Largely prompted by the first cases brought under NAFTA, there is increasing concern that concepts such as indirect expropriation may be applicable to regulatory measures aimed at protecting the environment, health h ealth and other welfare interests of society. The question that arises is to what extent a government may affect the value of property by regulation, either general in nature or by specific actions in the context of general regulations, for a legitimate public purpose without effecting a “taking” and having to compensate for this act. One leading commentator suggests that the issue of definition of expropriation in this context may become the dominant issue in international investment law. Despite a number of decisions of international tribunals, the line between the concept of indirect expropriation and governmental regulatory measures not requiring compensation has not been clearly articulated and depends on the specific facts and circumstances of the case. However, while case-by case consideration remains necessary, there are some criteria emerging from the examination of some international agreements and arbitral

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decisions for determining whether an indirect expropriation requiring compensation has occurred.10 The present survey provides factual elements of information on jurisprudence, state practice and literature on this matter. It presents the issues at stake and describes the basic concepts of the obligation to compensate for indirect expropriation (Part I), reviews whether and how legal instruments and other texts articulate the difference between indirect expropriation and the right of the governments to regulate without compensation (Part II) and attempts to identify a number of criteria which emerge from jurisprudence and state practice for determining whether an indirect expropriation has occurred (Part III). I. Basic concepts of the obligation to compensate for indirect expropriation

Customary international law does not preclude host states from expropriating foreign investments provided certain conditions are met. These conditions are: the taking of the investment for a public purpose, as provided by law, in a non-discriminatory manner and with compensation. Expropr iation iation or “wealth deprivation” could take different forms: it could be direct where an investment is nationalised or otherwise directly expropriated4 through formal transfer of title or outright physical seizure. In addition to the term expropriation, terms such as “dispossession”, “taking”, “deprivation” or “privation” are also used. used. International law is clear that a seizure of legal title of property constitutes a compen sable expropriation. Expropriation or deprivation of property6 could also occur through interference by a state in the use of that property or with the enjoyment of the benefits even where the property is not seized and thelegal title to the property is not affected. The measures taken by the State have a similar effect to expropriation or nationalisation and are generally termed “indirect”, “creeping”, or “de facto”

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CH-6 MANDATORY RULES The doctrine of overriding mandatory rules can be traced back to German jurist Friedrich Carl von Savigny (1779-1861). In the 19th century, he developed a new approach to determine the applicable law in an international situation.11 Instead of unilateral rules that determined the scope of application of a national rule but remain silent on the applicability of foreign law, he introduced multilateral COL rules. According to von Savigny, legal relationships must be allocated to a legal system, which can be the legal system of the forum country but can also be a foreign one. He established categories of legal relationships, such as obligations and property, and designed COL rules that link these categories to a particular jurisdiction through objective connecting factors, such as the location of the property or the place of performance of a contractual obligation. Though decisional harmony and neutralism were at the heart of his theory, von Savigny allowed a limited exception in favour of unilateralism, by means of the application of ‘strictly positive mandatory rules’ of the lex fori, but at the same time argued that this exception would eventually disappear. at Nevertheless, together with the public policy exception, the doctrine of overriding mandatory provisions has retained its function as a general correction mechanism in contemporary European COL. In the Rome I Regulation, overriding mandatory rules are regulated in Art. 9. Contrary to Art.7 of its predecessor, the Rome Convention, Art. 9(1) of the Rome I Regulation provides for a definition: Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation.12 This description aligns with the meaning given b y the Court of Justice in the Arblade the Arblade case. case.13. The court states: ‘[…] that term must be understood as applying to national provisions compliance with which has been deemed to be so crucial for the protection of the political, social or 11 8

12

xF.C. von Savigny, System des heutigen römischen Rechts, Band VIII , Berlin (1849). https://law.stanford.edu/areas_of_interest/law-public-policy

13 10

xJoined Cases C-396/96 and C-376/96, Arblade [1999] ECR I, at 8453, Rec. 30

economic order in the Member State concerned as to require compliance there with by all persons present on the national territory of that Member State and all legal relationships within that State’. This decision can in its turn be viewed as an affirmation affirmation of the definition by Francescakis;14. What becomes clear from the definition is that overriding mandatory provisions are not just mandatory provisions. Unlike ‘ordinary’ mandatory provisions, their application cannot be circumvented by a choice for the law of another country.15 In other words, these provisions are internationally binding. They are also to be distinguished from the ‘provisions that cannot be derogated from by agreement’, as mentioned in Arts. 3(3) and (4) as well as in 6(2) and 8(1) of the Rome I Regulation. Not only are overriding mandatory rules enforceable irrespective of a choice of law by the parties; they also supersede the law applicable on the basis of the objective COL rules of the Regulation. After all, their application is dependent solely on the question of whether or not the situation falls within the scope of the provision. The definition given in Art. 9(1) does not resolve all uncertainties that have arisen under Art. 7 of the Rome Convention. With regard to the provision, provision, the article states: ‘the respect for which is regarded as crucial by a country for safeguarding its public interests.’ This raises several questions. For instance, what is meant by ‘crucial’? How should this be determined? The European legislature seems to afford a wide margin of appreciation to the courts.16. In addition, it is not entirely clear what kinds of public interests are being targeted. The article itself mentions the state’s political, social, or economic organisation, but this list is not exhaustive, since the European legislature included the words ‘such as’. Controversy has existed for some time regarding the matter of how ‘public interest’ should be interpreted.

14

Ph. Francescakis, Répertoire de droit international 1 (1968), at 480

15

16


See also J.J. Kuipers, EU Law and Private International Law. The Interrelationship in Contractual Obligations (2012), at 71

CH-7 JUDICIAL INTERPRETATIONS Government of India v Taylor [1955]

English court rejected the Indian government's attempt to claim capital gains tax from a liquidated company in England Metal Industries (Salvage) Ltd

French govt tried to collect social security arrears from owners of a ship in Scotland - held to be a tax claim so not enforced by Scots court Peter Buchanan v McVey [1955]

Scottish liquidator raised a claim against liquidated one man company in Ireland, but the only debt was against the inland revenue - Irish court refused to accept the claim because it was an indirect revenue claim. AG for Canada v Schulze & Co

Canadian authorities sought litigation expenses from a man who had moved to Scotland. Since the expenses related to a revenue case the Scots court refused to accept the claim, since it was an indirect revenue claim. SNO v Thomson's Executor

Indirect revenue claim by Sweden was allowed so as to give effect to Mrs Thomson's will. Re State of Norway's Applications

Tax claim in Norway required expert witnesses to be examined in English courts - the English courts allowed this because it was simply about providing evidence (not giving effect to a tax claim). Huntington v Attrill

Ostensibly foreign penal law allowed because it layed do wn rules in respect of private law. USA v Inkley

Man made 'appearance bond' but refused to appear in court in USA, fleeing to England. USA asked England to order the man to pay the bond - the English court refused because it was so wrapped up in criminal proceedings Raulin v Fischer

Civil remedies given in the course of criminal trials CAN be enforced by foreign courts. Regazzoni v Sethia

Contract contrary to Indian law due to SA apartheid was unenforceable by the English courts. Oppenheimer v Cattermole

English court refused to recognise a Jewish man's nationality being revoked by Nazi regime re gime Winkworth v Christie

Italian art theft - there was no public policy p olicy exception so the contract was enforced. e nforced. English v Donnelly

Statute gave certain rights to consumer in higher purchase which could not be contract out of. For a hire purchase agreement by a Scottish consumer which was supposed to be governed by English law, the English law was only effective so far as it complied with the Scottish statute. Brodin v A/R Seljan

Scots court would not give effect to Norwegian law concerning an employment contract to the extent it was incompatible with a UK state which couldn't be contracted out of. Banco di Viscaya v Don Alfonso De Borbon

The defendant was the former King of Spain and the plaintiff was a bank which was under instructions from the new Spanish Government. Previously the Spanish King had deposited property in a bank in England. The new Spanish government declared the King to be a traitor and stated that all of his property now belonged to the Spanish state. Ultimately, the English courts refused toorder the transfer of the property from the English bank to the Spanish state because it was not a question of a commercial or civil law claim, it was simply the exercise of public authority by the state.

CH-8 CONCLUSION Public policy and ordre public are judicially administered exceptions to the usual commitment of individual nations to recognize and give effect to foreign law in circumstances deemed appropriate by the forum. Cases involving foreign facts may have legal repercussions in more than one country and nations have evolved rules to determine, in cases of conflicting law, which law is to govern. This world-wide process of analysis and resolution is the substance of private international law.1 The commitment to enforce duly acquired foreign rights is subject everywhere, however, to a reserved power of the forum to reject application of laws perceived to be injurious or harmful. The extent to which this reservation has been employed and the principal functions it performs are the subject of this Note. Formal definition of public policy is elusive, which has led to occasional misapplications of public policy as a ground of decision. However, courts generally are indisposed to reliance on public policy and eschew its frequent use. The common law history of public policy is to be contrasted with the statutory origin of ordre public, although both doctrines serve similar purposes, i.e., to prevent vindication in the forum of rights secured under invidious foreign edicts. Following a discussion of the origins of public policy and ordre public, traditional applications of the doctrines are discussed in the context of exclusion of repugnant foreign law, justice in individual cases, and choice of law.

BIBLIOGRAPHY BOOKS:

1.

Bogdan M (2011) Private international law as component of the law of the forum: general course

on private international law. Recueil des Cours 348 2.

Bonomi A (1999) Mandatory rules in private international law: the quest for uniformity uniformit y of

decisions in a global environment. Yearb Private Int Law 1:215 – 1:215 – 247 247 3.

“Cheshire, North & Fawcett,” “Private international law”, Oxford University Press, Oxford,

Fourteenth Edition (2008). 4

Clarkson CMV, Hill J (2011) The conflict of laws. Oxford University Press, Oxford

WEBSITES: 1. basilnet.awardspace.com/Legal%20Files/.../connecting%20factors.doc

2. http://www.justice.gc http://www.justice.gc.ca/eng .ca/eng/rp-pr/fl-lf/divorce /rp-pr/fl-lf/divorce/rhro_cl/pdf/rhro_ /rhro_cl/pdf/rhro_cl.pdf cl.pdf

CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

Project on:

Public policy in the conflict of laws

Private international law Ix semester

Submitted To: DR. P.P.Rao Faculty for Private International Law Submitted By: Inzmamul Haque Roll No. 933 5thyr

Acknowledgement I am feeling highly elated to work on the topic PUBLIC POLICY IN THE CONFLICT OF LAWS” under the guidance of my faculty, Dr. P.P RAO . I am very grateful to him for his exemplary guidance. I would like to enlighten my readers regarding this topic and I hope I have tried my best to pave the way for bringing more luminosity to this topic. I also want to thank all of my friends, without whose co-operation this project would not have been possible. Apart from all these, I want to give special thanks to the librarian of my university who made every relevant materials regarding to my topic available to me at the time of my busy research work and gave me assistance. And at last I am very much obliged to the God who provided me the potential for the rigorous research work. At finally yet importantly I would like to thank my parents for the financial support.

CONTENTS

CH- 1 INTRODUCTION CH – 2 2 ORIGINS OF PUBLIC POLICY AND ORDRE PUBLIC CH – 3 3 PUBLIC POLICY AND THE SOURCES OF PRIVATE INTERNATIONAL LAW CH – 4 4 DISGUISED USES OF PUBLIC POLICY CH – 5 5 FUNCTIONS OF PUBLIC POLICY IN PRIVATE INTERNATIONAL LAW CH – 6 6 SUMMARY AND CONCLUSION BIBLIOGRAPHY

RESEARCH METHODOLOGY Aims and Objectives:

The aim of this research paper is to present a detailed study of public policy and its application in private international law. Hypothesis

Why the court of one country should recognize or give effect to laws made elsewhere has intrigued and confounded jurists and jurisprudes for more than four centuries Scope and Limitations:

The researcher has used the doctrinal method and has relied on the secondary sources for the content of the research paper. Sources of Data:

The researcher has relied on the following secondary sources of data: 

Articles



Books



Statutes



Journals



News paper reports

Method of Writing

The method of writing followed in this project is both analytical and descriptive. Mode of Citation

The researcher has followed a uniform mode of o f citation in this project.

CH- 1 INTRODUCTION Public policy and ordre public are judicially administered exceptions to the usual commitment of individual nations to recognize and give effect to foreign law in circumstances deemed appropriate by the forum. Cases involving foreign facts may have legal repercussions in more than one country and nations have evolved rules to determine, in cases of conflicting law, which law is to govern. This world-wide process of analysis and resolution is the substance of private international law.17 The commitment to enforce duly acquired foreign rights is subject everywhere, however, to a reserved power of the forum to reject application of laws perceived to be injurious or harmful. The extent to which this reservation has been employed and the principal functions it performs are the subject of this Note. Formal definition of public policy is elusive, which has led to occasional misapplications of public policy as a ground of decision. However, courts generally are indisposed to reliance on public policy and eschew its frequent use. The common law history of public policy is to be contrasted with the statutory origin of ordre public, although both doctrines serve similar purposes, i.e., to prevent vindication in the forum of rights secured under invidious foreign edicts. Following a discussion of the origins of public policy and ordre public, traditional applications of the doctrines are discussed in the context of exclusion of repugnant foreign law, justice in individual cases, and choice of law.

17

* Professor of Law at Duke University School of Law and currently Visiting Professor and Research Fellow at the Program in Law and Public Affairs, Princeton University.. ∗∗ Professor of International Economic Law and WTO Law at the Graduate Institute of International Studies in Geneva, Switzerland and Director of its Centre for Trade and Economic Integration

CH – 2 2 ORIGINS OF PUBLIC POLICY AND ORDRE PUBLIC The conflict of laws doctrines of public policy and ordre public are mandated by exigent forces of local morality and social order. In practice, public policy reflects a common law origin whereas ordre public is identified with civil law and has a statutory source. The concept of public policy was recognized in English law as early as the fifteenth century.

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By the eighteenth

century, public policy was employed in the manner it is meant today: to denote the reserved power of a court to refuse a claim or cause of action in the absence of precedent or statute.' Initial definitions of public policy focused on rejection of acts or causes of action held "immoral or illegal," "injurious to the interests of the public," or "productive of evil to the church and the community."' Subsequent attempts to delineate the bounds of public policy were equally imprecise.' The legal realists have in the end prevailed and it is now generally accepted that public policy is defined by the th e use courts find for it.' The amorphous quality of public pub lic policy and its potential for abuse by result-oriented courts have long been recognized by the judiciary,' which has urged caution in deciding cases upon public policy grounds. Judge Burrough's remarks in 1824 are famous on that account. "I protest arguing too strongly upon public policy. It is a very unruly.horse and once you get astride it, you never know where it will carry you." Similar exhortations to temperance are found throughout Anglo-American legal literature." Not all judges were alarmed at the unruliness of the public policy doctrine, however, and there gradually accrued a diverse body of fact situations subject to the public policy exception. In the early twentieth century, the sentiment was expressed among English judges that expansion of the heads of public policy should be halted.19 The duty of a court was said to be to "expound but not to expand" this area of the law." Expansion of domestic public policy did not cease en tirely thereafter, but an evident result is the significant jurisdictic review usually accorded public 18

International Law Commission (ILC), ‘Fragmentation of International International Law: Difficulties Arising from the Diversification and Expansion of International Law, in Report of the International Law Commission, 58th Session (2006)’ UN Doc A/61/10 (2006), ch. XII, paras 233-51 233 -51 (pp 400-23) (ILC Fragmentation Report); see also ‘Conclusions of the Study Group’ ibid para 251 (conclusion no 1) (p 407). 19 ILC, ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion International Law. Report of the Study Group of the International Law Commission. Finalized by Martti Koskenniemi’ UN Doc A/CN.4/L.682 (13 April 2006), para 15 (p 14) (Koskenniemi Report).

policy decisions. Public policy in modern English law is employed differently in domestic as compared to conflicts cases." In cases with litigants or facts involving foreign legal systems, invocation of public policy is not limited to purposes established by precedent as it is domestically. Public policy's international form consists of the forum's reserved right to set aside conflicts rules in order-to reach a decision more compatible with justice or morality as locally conceived. In domestic cases, there is no conflict of laws to be resolved, but merely a discrepancy between the current state of the municipal law and the perception of the court of what the law ought to be. This important difference sharply divides the two forms of public policy." The clash in an international context co ntext is between the social policy of the forum and the agreement made binding upon a party as a result of a private transaction under foreign law. Where the foreign law creates an obligation repugnant or pernicious to local policy, the court in its discretion may choose to reject it despite forum conflicts rules. Nevertheless, the forum's conflicts rules calling for application of foreign law are not to be cast aside simply because the agreement, if made in the forum, would be unenforceable.'" For example, a contract is not valid in English domestic law without considetation, but a contract without consideration is valid and enforceable in England if governed by Italian law, which it would be if the contract were made in Italy."20 In the United States, public policy can serve as the basis for judicial decision in intrastate, interstate, and international contexts." Intrastate public policy is analogous to English domestic public policy and concerns the use of the doctrine in a unified legal system where conflicts do not occur. Courts have invoked interstate public policy to refuse r efuse vindication of rights acquired in sister states as if those rights were based on foreign country rules. 8 However, analytically these applications of public policy are not identical. Interstate and international cases are distinguishable in that all states of the United States share a constitutional and political heritage immeasurably stronger than between any two countries.21 Due to the full faith and credit clause," American courts are compelled to treat sister state conflicts more like domestic cases than international cases and on the whole have less discretion to exclude sister state law where the federal framework intervenes. The combination of a federal constitutional system and a growing trend of state coordination through model codes and uniform acts make a court's analysis of an interstate conflicts decision less useful in an international context than in the past.' 20

Tomer Broude and Yuval Shany, 'Introduction: The International Law and Policy Governing MultiSourced Equivalent Norms,' in this volume 21 Wilfr ed ed Jenks, ‘The Conflict of LawLaw -Making Treaties’ (1953) 30 British Yearbook of International Law 401,

Despite the structural complexity of American conflicts law, United States courts are reluctant to rely on public policy and like their English counterparts are not disposed to its free or unfettered use. The characteristic feature of public policy in Anglo-American conflicts law is the restraint with which it is employed. ' Public policy occupies a unique position in the law as a vague body of moral and legal precepts, which have successfully resisted statutory formulation or judicial definition.

22

The indefiniteness and flexibility of public policy contributes to a tension between

its role as a ground of last resort for decisions, and the demands for a regularized common law conflicts jurisprudence, which is just and predictable in its disposition of inter jurisdictional disputes.

22

ILC, ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion International Law. Report of the Study Group of the International Law Commission. Finalized by Martti Koskenniemi’ UN Doc A/CN.4/L.682 (13 April 2006), para 15 (p 14) (Koskenniemi Report).

CH – 3 3 PUBLIC POLICY AND THE SOURCES OF PRIVATE INTERNATIONAL LAW Although court decisions involving public policy are relatively rare,23 especially in countries with legal systems following AngloAmerican or German lines, conflicts of law do arise and public policy does frustrate the smooth functioning of private international law. Every nation participating in international commerce admits to its courts some foreign based claims and rejects others.24 The question of why the courts of one country should recognize or give effect to laws made elsewhere has intrigued and confounded jurists and jurisprudes for more than four centuries., Unfortunately, the answer is not much clearer now than when the ancient Romans demonstrated their disrespect for foreign laws by ignoring conflicts and declaring that only Roman law was applicable to Roman citizens." Roman arrogance declined with the empire and when modern sovereign nations arose the relations of trade and commerce among them inevitably generated conflicts of law. To regularize and perhaps eventually to unify contradictory laws, a European university-based legal community sought to establish the true governing principles of private international law more than 500 years ago. These scholars did not look to the decisions of courts, but instead proposed to derive by inference and induction the principles of international law from pure scholastic inquiry.- The statutists are now understood to have failed in their endeavor because individual judges do not allude to academic pronouncement when resolving conflicts cases.' Modern conflicts analysis begins in the nineteenth century when Story, Savigny, and Mancini sought to clarify the principles of operation of private international law. Public policy has persisted as an element of private international law despite juristic objections to its illogical qualities, which interrupt the uniform functioning of rules of international conflicts resolution.25 There is a consensus among legal writers that national 23

Tomer Broude and Yuval Shany, 'Introduction: The International Law and Policy Governing MultiSourced Equivalent Norms,' in this volume 24 * Professor of Law at Duke University School of Law and currently Visiting Professor and Research Fellow at the Program in Law and Public Affairs, Princeton University.. ∗∗ Professor of International Economic Law and WTO Law at the Graduate Institute of International Studies in Geneva, Switzerland and Director of its Centre for Trade and Economic Integration 25 International Law Commission (ILC), ‘Fragmentation of International International Law: Difficulties Arising from the Diversification and Expansion of International Law, in Report of the International Law Commission, 58th Session (2006)’ UN Doc A/61/10 (2006), ch. XII, paras 233-51 233 -51 (pp 400-23) (ILC Fragmentation Report); see also ‘Conclusions of the Study Group’ ibid para 251 (conclusion no 1) (p 407).

interests will sometimes be held to supersede rights acquired in a foreign jurisdiction. 5 Reservations against obnoxious, barbaric, burdensome or unjust laws or judgments are universal, although there is no consensus as to a practical technique for proving that a foreign law is abhorrent to the sensibilities of the forum. The progress toward an international common law supposed by Story, and the fatally anomalistic character of ordre public assumed by Savigny,6 simply have not developed to prevent a forum from referring to its own law whenever it chooses. Constraints on public policy and ordre public originate within the forum;" they are not imposed from without." Private international law is not enforceable except at the forum by the forum's conflicts rules, and it is commonly understood that public policy can intervene to reject a claim." While its definition is vague, at least in the sense that public policy has a history and is universally recognized, it is not completely arbitrary and impossible to analyze,' although it lacks status as positive law outside civil law countries.

CH – 4 4 DISGUISED USES OF PUBLIC POLICY Analysis of public policy in Anglo-American law is made especially difficult by the variety of characterization and qualification devices to which a court may turn in the alternative to exclude foreign law. These include the procedure versus substance distinction, use of domicile to determine personal law, the territorial nature of penal law, and crystallization of public policy decisions into rules of law independent of their public policy origins. These devices enable an Anglo-American court to avoid an open and blunt use of public policy in fact situations where application of ordre public would be unavoidable."26 A widely acknowledged rule of conflicts law is that questions of procedure are governed exclusively by forum rules."27 The principal argument for this rule is that no court is the master of foreign procedure, nor is the bar skilled in it, given the variety of the world's legal systems." The basis of the rule is a general agreement that any other solution would be inexpedient. AngloAmerican courts, both to avoid foreign law and to forego reliance on public policy grounds to reject foreign law, find the procedural versus substantive distinction wonderfully supple, and deftly extend or withdraw procedural characterization as they understand the facts in each case to allow."8 Such practices by the courts do not go without criticism. The territorial nature of criminal law is well settled, and foreign penal statutes will not be enforced." Cases turning on this point have involved expropriation without compensation, indefinite deprivations of a property interest,9 " criminal penalties associated with revenue laws, and of course criminal law in its customary sense.92 Thus, characterizing a foreign law as penal precludes application of rights acquired under that law and opens the way for the forum court to apply local law. Although it is well settled that criminal laws are strictly territorial, no standard for defining a foreign law's penal or criminal status has appeared. Apparently, courts have wide discretion in the area.' A third exclusionary technique derives from Anglo-American conflicts rules requiring issues of status, such as marriage, divorce, and legitimacy to be controlled by lex domicilia.95 In contrast, French law (as Mancini argued) often requires that the court look first to the national law of a party in order to discover 26

ILC, ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion International Law. Report of the Study Group of the International Law Commission. Finalized by Martti Koskenniemi’ UN Doc A/CN.4/L.682 (13 April 2006), para 15 (p 14) (Koskenniemi Report).

27

Tomer Broude and Yuval Shany, 'Introduction: The International Law and Policy Governing MultiSourced Equivalent Norms,' in this volume

applicable law." If that law is found to allow a polygamous marriage, for example, the court must rely on ordre public and exclude the foreign law. This initial deference to foreign based rights in matters of status generates a great deal of international litigation and represents a large number of ordre public cases.97 In a nation of immigrants, such as the United States, the overall likelihood of litigation is decreased by applying the law of the party's domicile, since domicile is much easier to acquire than citizenship. At the same time, United States courts are spared the diplomatically awkward task of declaring the law of some other country as contrary to public policy, and thus barbaric b arbaric or uncivilized and unworthy of enforcement in America. Although not truly a device for excluding foreign law in individual cases, the common law, through "mechanical application of the principle of precedent," gradually crystallizes decisions invoking public policy and finds in them independent independen t rules of law that have lost their connection to public policy origins.98 In a system where one case can make law, it is easy eas y to see how this can come about. If courts merely cite the rule of "X v. Y' without looking further into the grounds of that decision, the rule of X v. Y gradually comes to be authority apart from consideration of public policy that prompted its making. Civil law courts in contrast, must reassert ordre public as common law courts cite statutes, and in that process re-examine their commitment to ordre public."28

28

Wilfred Wilfred Jenks, ‘The Conflict of LawLaw -Making Treaties’ (1953) 30 British Yearbook of International Law 401,

CH – 5 5 FUNCTIONS OF PUBLIC POLICY IN PRIVATE INTERNATIONAL LAW Public policy in private international law functions to reject foreign laws repugnant to the forum's sense of morality and decency, to prevent injustice in the special circumstances of the parties before the court, and to affect choice of law. 1°3 The earliest and most enduring use of public policy is to reject morally repugnant law.'0 429 An agreement for prostitution,'015 property in a slave,0 6 and an incestuous marriagell have been held to be arrangements voidable on moral grounds. Although this type of public policy lends itself to invalidation of obviously reprehensible transactions, it is the form of public policy most infrequently invoked.' 8 The cases that define it are relatively old (primarily from the eighteenth century), and deal principally with slavery and with protection of forum sexual standards.' 9 The moral repugnancy use of public policy has declined de clined for three reasons: (1) standards of o f sexual morality change over time and acts once forbidden are now acceptable; (2) courts have become more sensitive in labeling the laws of another country as uncivilized and inhumane; and (3) laws proscribing human degradation and servitude are now universal. Despite the rarity of moral repugnancy cases in modern legal practice, there is no doubt that this function of public policy remains viable. No leg al system can afford to risk opening itself to enforcement of all foreign acquired rights in a world where political freedoms and personal liberty are merely abstract ideas to a large part of the world's population." A second discernible function of public policy is to prevent injustice in the special circumstances of the parties before the court. The problem here is not the repugnancy of an otherwise applicable foreign law, but rather the harsh effect of its application as called for by the conflicts rules of the forum. United States cases illustrating this use of public policy are few."' English judges, especially in personal status cases, have reserved for themselves a "residual discretion" to avoid an unjust or unconscionable result."2 This reserve of discretion has been criticized as contrary to both principles of international law and the authority represented by earlier cases." 3 Nonetheless, English courts that insist upon invoking this privilege have 29

International Law Commission (ILC), ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law, in Report of the International Law Commission, 58th Session (2006)’ UN Doc A/61/10 (2006), ch. XII, paras 233-51 233 -51 (pp 400-23) (ILC Fragmentation Report); see also ‘Conclusions of the Study Group’ ibid para 251 (conclusion no 1) (p 407).

received support in the legal literature."4 Critics of "residual discretion" assert that when parties to a contract decide on its terms, they do not have in mind to submit to any discretion other than that embodied in the contract. Only the known rules for formation of a contract can guide parties to an agreement; frustration of their efforts is to be discouraged, although it might be argued that a residual discretion approach, which emphasizes a particular hardship on a party rather than principle, is preferable to a general reservation."30 Choice of law is a third function of public policy. Rather than modifying or changing an otherwise applicable conflicts rule, the court may utilize public policy to reject the choice of law made by its own rules."8 The usual effect of the choice of law function is to reject foreign law and assert "the forum's right to have its law applied to the transaction because of the forum's relationship to it.""31 In other words, public policy as choice of law serves to focus forum conflict rules more sharply in a particular case than initially intended by the framers of those rules.120 The effect is to make specific what had been a general rule of conflicts without installing a permanently modified rule. The usual case is where the court simply finds it intolerable that forum law should not apply. 1 ' It has been suggested that the courts' rejection of foreign law on policy grounds in anticipation of adverse forum effects is a departure from ordinary choice of law deliberations.4 ' In invoking public policy, courts are not assessing the relationship of the parties to the forum, or the governmental interest as such. The court's concerns reduce to an analysis of the obnoxious effect to be anticipated at the forum. The court thus chooses without regard to the parties' choice of law and sets an outer limit on the discretion accorded to parties to a contract. The object of a court is a delicately balanced tension holding parochialism in check by respect for foreign law and concern for regularized conflicts rules. The primary role of public policy and ordre public is to negate the effect of foreign legislation or judicial judgment. No country elects to restrain entirely its courts from from decisions on public policy grounds. Indeed, public policy provides for a flexible response to unforeseen consequences of forum recognition of foreign acquired rights.

30

Wilfred Jenks, ‘The Conflict of LawLaw-Making Treaties’ (1953) 30 British Yearbook of International Law 401, Tomer Broude and Yuval Shany, 'Introduction: The International Law and Policy Governing MultiSourced Equivalent Norms,' in this volume

31

CH – 6 6 SUMMARY AND CONCLUSION One writer, unable to determine factors that might reliably account for public policy decisions in the future or in the past, stated that the cases can be explained only in relation to the broadest of democratic values. 4 " Another analyst figuratively shrugged and said of the predictability of the judicial invocation of public policy, ''you never can tell."1'49 Despite its inscrutability and resistance to formal definition, public policy has a legal history susceptible to analysis. From a domestic inception employed principally to void morally repugnant agreements in England and to protect the social order in France, public policy and ordre public later found their way into decisions involving foreign laws that forum courts would not accept. Although civil law countries tend to embrace ordre public as an integral part of a regular system of conflicts, AngloAmerican jurisprudence has been less rigorous in defining the role to be played by public policy. In part, this contrast might be explained by the influence of three founders of modern conflicts law, each of whom espoused a slightly different view of the place for public policy in an ideal system of law dedicated to resolving conflicts between the prescriptions of individual sovereign nations. Generally and traditionally, however, rejection of foreign acquired rights on public policy grounds is neither arbitrary nor incautious, as it is utilized only under self-imposed conditions of restraint. Differences between ordre public and public policy are more structural than substantive. Due to a traditional antipathy toward invocation of public policy, AngloAmerican courts avail themselves of procedure and characterization conflicts devices, which lead to results obtainable in a civil law system only by a forthright application of ordre public. The results of public policy as a ground of decision serve the functions of protecting the forum from laws pernicious or immoral, preventing injustice in individual cases by the mechanical application of conflicts rules, and aiding the court in choosing to apply forum law in cases with strong local contacts. Public policy and ordre public burden a forum court with great responsibility to exercise restraint and prudence in rejecting foreign acquired rights. The effect of such a rejection is to criticize a foreign law as Unacceptable because of its moral attitude, its threat to social order, or some other fundamental defect rendering it unworthy of enforcement in a civilized country.

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Bogdan M (2011) Private international law as component of the law of the forum: general course

on private international law. Recueil des Cours 348 2.

Bonomi A (1999) Mandatory rules in private international law: the quest for uniformity of

decisions in a global environment. Yearb Private Int Law 1:215 – 1:215 – 247 247 3.

“Cheshire, North & Fawcett,” “Private international law”, Oxford University Press, Oxford,

Fourteenth Edition (2008). 4

Clarkson CMV, Hill J (2011) The conflict of laws. Oxford University Press, Oxford

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