The Law of Open Societies : Private Ordering and Public Regulation in the Conflict of Laws [1 ed.] 9789004296800, 9789004296794

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The Law of Open Societies Private Ordering and Public Regulation in the Conflict of Laws

THE HAGUE ACADEMY OF INTERNATIONAL LAW MONOGRAPHS

Volume 9

The titles published in this series are listed at brill.c0m/hamo

T H E H A G U E A C A D E M Y O F I N T E R N AT I O N A L L AW

The Law of Open Societies Private Ordering and Public Regulation in the Conflict of Laws

by

Jürgen Basedow

Library of Congress Control Number: 2015939530

isbn 978-90-04-29679-4 (hardback) isbn 978-90-04-29680-0 (e-book) © 2015 The Hague Academy of International Law. Koninklijke Brill nv incorporates the imprints Brill, Brill Hes & De Graaf, Brill Nijhoff, Brill Rodopi and Hotei Publishing. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Koninklijke Brill nv provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, ma 01923, usa. Fees are subject to change. This book is printed on acid-free paper.

Table of Contents

Table of Abbreviations Preface

xvii xxvii

Introduction 1. Private International Law and Social Change 2. Recent Trends in Private International Law 3. Purpose and Methods of Private International Law a) Legal certainty in a multi-jurisdictional world b) Exclusive jurisdiction c) Application of foreign law pursuant to choice of law d) Choice of law and the welfare state e) The principle of recognition 4. Private and Public Actors 5. The Levels of Rule-making and the Conflict of Laws 6. Survey

1 1 3 6 6 8 9 11 12 14 15 18

Part I

21

From Closed Nation-States to the Open Society

Chapter 1 The Advent of the Open Society Section 1: The Open Society in Political Philosophy 1. Henri Bergson 2. Karl Raimund Popper Section 2: Globalization as a Driving Force of the Open Society 1. Technological Innovation 2. The Impact on Trade in Goods and Services 3. Foreign Direct Investment 4. Migration 5. Globalization a) The nation-State as the starting point b) Opening frontiers towards global life 6. Conclusions

23 23 23 25 28 28 31 33 34 36 36 38 39

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Chapter 2 Globalization and the Law Section 1: Legal Underpinnings and Attendants of Globalization 1. Free Trade in Goods 2. Trade in Services 3. Free Movement of Capital a) Foreign direct investment b) Other capital flows 4. The Free Flow of Data 5. Migration 6. Institutionalization and Private Rights Section 2: Consequences for Policy-Making and Regulation 1. The Loss of State Knowledge and Private Rule-Making 2. Delocalization and the Choice of Connecting Factors 3. Regulatory Competition a) Private choice and State sovereignty b) Theoretical underpinnings c) Types of regulatory competition d) Limitations 4. The Loss of Influence of Individual States and Their Reactions a) National policy versus free trade b) Extraterritorial application of national law c) International minimum standards 5. Collaboration of States: Unification, Harmonization, Coordination, Cooperation a) Purposes, institutions, history b) Forms of legal unification and harmonization c) Coordination by common rules on private international law d) Procedural cooperation Section 3: Outlook

43 43 44 47 48 48 50 51 52 54 56 57 61 65 65 66 67 70 73 73 75 78

Part II

89

Private Ordering

Chapter 1 Substantive “Anational” Private Arrangements Section 1: The International Transaction Dilemma 1. Legal Pluralism and Its Economic Effects 2. Public and Private Remedies Section 2: The Export Trade 1. Balancing Manifold Interests – the Lex Mercatoria 2. Sellers and Buyers (Incoterms) a) Multifarious constellations b) The Incoterms 3. Carriers and Their Liability a) The significance of transport documents b) The carrier’s liability 4. Banks and Payment (Uniform Customs and Practices for Letters of Credit)

79 79 82 83 85 88

91 91 91 92 94 94 96 96 97 99 99 100 102

Table of Contents

a) Evolution of the letter of credit b) The Uniform Customs and Practice for Documentary Credits 5. Insurance Section 3: International Tourism: Package Tour Operators 1. Emergence and Specific Demand 2. Increasing Certainty through Regulation Section 4: Conclusion – The Domestication of International Transactions

102 104 105 107 107 108 110

Chapter 2 Theory of Choice of Law and Party Autonomy Section 1: Party Autonomy in International Contract Law 1. Worldwide Recognition of Party Autonomy 2. Exclusion of Party Autonomy in Latin America a) Brazil b) Uruguay 3. Exclusion of Party Autonomy in the Middle East 4. Limitations on the Power to Choose the Applicable Law a) Choice of non-State law – lex mercatoria b) Relation between the contract and the law selected c) Restrictions for specific contracts d) Conclusion and outlook Section 2: A Priori and Derivative Conceptions of Party Autonomy Section 3: Theoretical Objections to Party Autonomy 1. Sovereignty a) Choice of law as an impairment of sovereignty b) Objective conception of the law c) Criticisms and countervailing contractual theories of State and law d) Conclusions 2. Ordre public a) Specifications of the ordre public b) Domestic contacts c) Conclusions for choice of law 3. No Binding Effect of Contracts outside a Legal Order a) The conclusion of a contract as a result of the applicable law b) The core and corona of the agreement 4. Protection of Weaker Parties a) Freedom of choice and power b) Neutralization through competition c) Imbalances in motivation d) Macro-economic and individual disequilibrium 5. Conclusion Section 4: Theoretical Basis for Freedom of Choice 1. Efficiency 2. Freedom and Natural Will 3. Binding Effect

115 116 116 117 117 118 119 121 121 123 124 124 125 127 127 127 128 130 131 131 132 133 134 134 134 135 136 136 137 137 138 139 139 139 142 143

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4.

Choice-of-Law Agreements as Self-fulfilling (Dispositional) Contracts 5. Freedom of Choice as a Pre-governmental Right a) Enlightenment philosophy and human rights b) Clarification of freedom of choice as derived from human rights Section 5: Conclusion 1. Interaction of Choice of Law and Objective Law 2. The Scope of Freedom of Choice in Private Law

145 146 146 148 149 149 151

Chapter 3 New Domains for Party Autonomy Section 1: Contractual Relations Involving Third Parties 1. Agency a) The structure of agency relations b) Choice of law and party autonomy c) Party autonomy under positive law d) Comments on the Hague Agency Convention e) Conclusion 2. Assignment of Claims a) General backdrop b) Third-party effects: the Dutch solution c) The law governing third-party effects: national conflict rules d) A dual-track approach Section 2: Tort and Delict 1. The Specificity of Tort and Delict a) Primary and secondary rules of conduct b) Contract and tort 2. The Development of International Tort Law a) Lex fori b) Lex loci delicti c) Lex loci actus and lex loci iniuriae d) Specification and flexibilization 3. Party Autonomy a) Survey b) Ex post choice of law c) Indirect ex ante choice of law d) Direct ex ante choice of law: Rome II Regulation e) Direct ex ante choice: other jurisdictions f) Summary 4. Limits of Party Autonomy for Specific Torts 5. Conclusion: Comparative Assessment and Policy Considerations a) Party autonomy and its discontents b) Protection of the weaker party ? About contract and tort c) Freedom of contract in substantive law and tort conflicts

153 153 154 154 154 156 158 159 160 160 161 164 167 168 168 168 170 173 173 174 176 177 179 179 180 181 183 186 187 187 190 190 191 193

Table of Contents

Section 3: Property Rights 194 1. The Development Towards Lex Situs 195 a) The lex situs and its rationale 195 b) A critical policy appraisal 197 2. Party Autonomy: Acquisition and Loss of Rights in Rem in Movables 199 a) Inconveniences of the situs rule 199 b) Party autonomy as a solution 200 c) Indirect admission of party autonomy through an escape clause 201 d) Choice-of-law clauses with inter partes effects 202 e) Title retention clauses in export contracts 203 f) Party autonomy for movable property 204 g) Summary 205 3. Negotiable Instruments: Security Interests in Financial Collateral 206 a) Changes of the commercial environment 206 b) From lex situs to party autonomy 208 4. Intellectual Property 212 a) Nature, development and territoriality of intellectual property rights 212 b) The framework of the lex loci protectionis in international law 214 c) The scope of party autonomy 218 5. Summary 222 Section 4: Persons 223 1. Scope and History of the Law of Persons 223 a) The law of persons – a remainder of the Middle Ages 223 b) Divergent policies 224 2. Capacity and the Protection of Adults 226 a) The rigidity of personal law 226 b) First traces of party autonomy 227 c) Enduring powers to act for incapable persons 228 Section 5: Family 230 1. The Family, Family Law, and Basic Conflicts Law Orientations 230 a) From social institution to family law 230 b) Traditional choice-of-law approaches and party autonomy 233 2. The Effects of Marriage: Marital Property 235 a) The main property regimes 235 b) Dumoulin and French conflicts law 236 c) A comparative survey over three conflicts principles 238 d) Unification of conflicts law 240 e) Conclusion 243 3. Divorce 245 a) The significance and decline of marital status 245 b) Basic orientations of the conflict of laws 246 c) The decline of nationality as a connecting factor and its consequences 247 d) The development towards party autonomy 250 e) Rome III: Priority of party autonomy 253 f) Conclusion 256

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4.

Maintenance a) Basic conflicts orientations b) Party autonomy and its exceptions under the 2007 Hague Protocol 5. Conclusion Section 6: Succession 1. Historical Evolution and Conflict Taboos 2. The Trend Towards Party Autonomy 3. Party Autonomy and Forced Heirship Restrictions in Present Conflicts Statutes 4. Conclusion Section 7 : Procedural Dispositions 1. Information on Foreign Law: the Division of Labour between the Parties and the Court 2. Strategic Options for the Parties a) Pleading of foreign law b) Procedural agreements c) Allegations in law Section 8: Conclusion 1. The Extension of Party Autonomy and its Social Background 2. Political Background: the Role of International Organizations 3. Limitations of Party Autonomy

256 256 259 261 262 262 265

274 275 275 277 278 279 279 280 281

Chapter 4 Optional Law in Europe Section 1: The Europeanization of Private Law 1. Evolution 2. Types of Legislative Instruments Section 2: Optional Instruments of the European Union and the Conflict of Laws 1. Company Law a) Corporate forms and legislative basis b) Conditions of eligibility: the international dimension c) The residual national law and private ordering 2. Intellectual Property 3. Contract Law a) Development and conceptualization b) The Common European Sales Law and the conflict of laws Section 3: Optional Instruments in International Conventions 1. The 1964 Hague Sales Law (ULIS) and other Multilateral Conventions 2. The Franco-German Optional Matrimonial Property Regime Section 4: Conclusion

283 283 283 285 287 288 288 289 290 292 295 295 298 300 300 301 303

Chapter 5 Deliberate Connections (Indirect Choice of Law) Section 1: Connecting Factors Favouring Private Choice 1. Formal Requirements and the Lex Loci Celebrationis a) The recognition of the lex loci celebrationis b) How the rule evolved

305 306 306 306 307

267 271 274

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c) Examples of private dispositions From Nationality to Habitual Residence in the Law of Personal Status a) Rise and decline of nationality b) Old and new Hague conventions c) Domicile and habitual residence d) Private international law in the European Union e) Habitual residence and the open society 3. Conclusion Section 2: The Principle of (Mutual) Recognition 1. The Concept of Recognition a) Multiple meanings and their common core b) Recognition of foreign judicial and administrative measures c) Recognition of legal situations 2. The Liberalization of the Recognition of Judgments a) Abandoning the review of the applicable law b) Loosening the review of jurisdiction 3. The Liberalization of the Recognition of Foreign Companies a) Incorporation theory and real seat theory b) International unification of conflicts law c) The conflicts approach and private choice d) European developments e) Reactions of national conflicts law f) International company law and regulatory competition Section 3: Evasion of Law a) A matter of legal construction b) Codified rules on evasion of law c) Freedoms granted by, and evasion of, law Section 4: Conclusion

308 311 311 314 316 317 319 320 321 321 321 321 324 326 327 330 334 334 336 338 338 340 341 343 343 343 345 347

Part III

349

2.

Public Regulation

Chapter 1 State Action between International and Municipal Law Section 1: Forms and Addressees of State Action Section 2: Objectives of State Action 1. Objectives of State rules on choice of law 2. Domestic order and foreign policy in international relations 3. An example: private law conventions and the decline of reciprocity Section 3: Limitations of State Action Section 4: Systematic Considerations and Survey

351 351 353 353 353 355 359 361

Chapter 2 Foreign Policy Measures and Their Effects in Private Law Section 1: Recognition and Non-recognition of Foreign States or Governments 1. Background in Public International Law 2. Effects of (Non-)Recognition in Private International Law

365 365 365 367

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a) The normative approach b) The factual approach c) A differentiated solution Section 2: Trade Embargoes 1. On Restrictions of Foreign Commerce in General a) Types of trade restrictions b) Tendencies c) Legal issues 2. The Scope of an Embargo a) The US pipeline embargo b) The EU embargo against Iran 3. “Enforcement” of an Embargo 4. Other “Effects” of an Embargo a) Contract terms assigning the risk of an embargo b) The lex causae theory and shared values c) The special connection theory (Sonderanknüpfung) Section 3: Countermeasures (Blocking Statutes) 1. Concept and Reasons for Their Adoption a) Concept b) A weapon for economic warfare 2. Occurrence and Content of Blocking Statutes 3. Clawback Claims in Private International Law 4. Blocking Legislation – a Political Instrument

367 369 372 373 373 373 374 375 376 376 378 379 381 381 382 385 388 388 388 390 391 393 394

Chapter 3 Countervailing State Measures for Asymmetric Private Relations Section 1: The “Weaker Party” and Its Protection 1. Traditional Civil Law 2. Categorical “Weakness” Resulting from Asymmetric Information a) Findings in legislation and economic explanation b) Pros and cons of State intervention in cross-border contracts 3. Categorical “Weakness” Resulting from Market Dominance Section 2: Consumer Protection 1. Survey 2. Personal Scope a) The consumer and the professional b) Inconvenience of the definition 3. Substantive Scope 4. Situative Scope – “Active” and “Passive” Consumers a) Rationale of the special connection b) The contracting situation of the passive “consumer” c) Electronic commerce 5. Special (Bilateral) Conflict Rules for Consumer Contracts 6. The Unilateral Approach a) The absence of specific conflict rules for consumer contracts b) Public policy as the vehicle of consumer protection

397 397 397 398 398 400 401 403 403 404 404 405 407 408 408 409 410 414 417 417 418

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c) Unilateral enforcement in addition to a specific conflict rule ? 7. Conclusion Section 3: Employment Contracts 1. Market Imperfections and Countervailing State Measures a) Market imperfections b) Complex regulation c) Application to cross-border labour relations: characterization d) Survey: confinement to bilateral conflict rules 2. Manifestations of Cross-Border Labour Relations a) General b) Posting of workers c) Modern trends in industrial organization: Outsourcing 3. The Unilateral and Territorial Approach 4. Steps Towards Bilateralism: United States 5. Further Steps Towards Bilateralism: the European Model a) Elements of the European model b) Follow-up legislation outside the EU c) Party autonomy d) Objective connecting factors: habitual workplace e) Overall assessment of the habitual workplace or a cascade connection ? f) The escape clause and maritime labour 6. Overriding Mandatory Provisions a) The room left by Article 8 Rome I b) Lex fori, lex contractus and the law of third States c) Definition of overriding mandatory provisions d) Overriding mandatory provisions and the European Court of Justice e) Outlook 7. Posted Workers a) The tension between social protection and economic efficiency b) Article 8 Rome I and the Posted Workers Directive of the EU c) The Posted Workers Directive as overriding mandatory provisions Section 4: Conclusion

419 423 425 425 425 426 427 429 430 430 430 431 432 436 438 438 438 439 441 443 445 446 446 447 449 451 452 452 452 453 455 457

Chapter 4 Imperative Norms: Protection of Foundational Principles Section 1: Foundational Principles – a Survey 1. Collective Goods 2. Essentials of the Social Model a) The amalgam of public interest and protection of the weaker party b) The policy-mix and the principle of territorial application 3. Ethical Foundations a) Personal status and public policy b) Surrogate motherhood c) Other progress of medical and scientific research 4. Conclusion

459 460 460 461 461 462 464 464 466 468 469

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Section 2: The Legal Framework of Unilateral Adjudication – Imperative Norms 1. Public Policy and Overriding Mandatory Provisions a) Positive and negative public policy b) Lois de police and overriding mandatory provisions 2. The Concepts Distinguished a) According to the subject b) According to the general or specific style of regulation c) According to the scope of application d) According to the written or unwritten nature 3. Identification of Overriding Provisions and Principles a) Explicit scope rules b) The scope in the absence of scope rules c) The political character of the task d) Review in federal entities e) Self-containment outside federal entities 4. International Standards: Human Rights and Fundamental Rights a) Human rights and the conflict of laws b) Connections with the forum State 5. Conclusion Section 3: Respect for Foreign Imperative Norms 1. Introduction: Respecting Foreign Values 2. The Protection of Foreign Currencies a) Currency in private international law b) The IMF Agreement 3. The Protection of Foreign Cultural Objects a) Cultural property, other tangibles and specific legislation b) Conflict rules: from lex situs to lex originis c) Conclusion 4. The Protection of Competition on Foreign Markets a) The development of competition law b) The effects doctrine as a unilateral conflict rule c) Growing respect for foreign competition law d) Emergence of bilateral conflict rules 5. Conclusion Section 4: Conclusion

470 470 470 471 472 472 473 474 476 477 477 478 480 480 481 482 482 484 485 486 486 487 487 489 491 491 493 495 496 496 498 499 501 503 504

General Conclusion 1. Social Change – From Closed to Open Societies 2. A Change of Perspective – from Public to Private Ordering 3. Multiple Forms and Expansion of Private Arrangements 4. Public Regulation 5. Paradigm Europe

505 505 507 508 509 510

Table of Contents

List of Statutory Materials

511

Table of Cases

571

Bibliography

579

Index

627

xv

Table of Abbreviations

A. 2d AC AG AG ALI All ER Am. J. Comp. L. Am. Journ. Int. L. Art. AS

BAG BBl. BDS BerDtGesVR BG BGB BGBl. BGE BGH BGHZ BIT Brit. YBIL Brussels I Regulation

Atlantic Reporter, 2nd series Law Reports ; Appeal Cases, House of Lords and Privy Council Amtsgericht (local court, Germany) Aktiengesellschaft American Law Institute The All England Law Reports American Journal of Comparative Law American Journal of International Law Article Amtliche Sammlung der Bundesgesetze und Verordnungen der Schweizerischen Eidgenossenschaft (Switzerland) Bundesarbeitsgericht (Federal Labour Court of Germany) Bundesblatt (Switzerland) Bundesverband der Deutschen Standesbeamtinnen und Standesbeamten Berichte der Deutschen Gesellschaft für Völkerrecht Bundesgericht (Federal Supreme Court of Switzerland) Bürgerliches Gesetzbuch (German Civil code) Bundesgesetzblatt (Germany) Entscheidungen des Schweizerischen Bundesgerichts Bundesgerichtshof (Federal Supreme Court of Germany) Amtliche Sammlung der Entscheidungen des Bundesgerichtshofs in Zivilsachen Bilateral Investment Treaty The British Yearbook of International Law Council Regulation (EC) no. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ 2001 L 12/1

xviii

Table of Abbreviations

Brussels IIbis Regulation Council Regulation (EC) no. 2201/2003 of 27 November 2003 concerning jurisdicition and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) no. 1347/2000, OJ 2003 L 338/1 Bull. civ. Bulletin des arrêts de la Cour de Cassation. Chambres Civiles (France) BV besloten vennootschap (company with limited liability, Netherlands) BVerfG Bundesverfassungsgericht (German Constitutional Court) BW Burgerlijk Wetboek (Dutch Civil code) CA Court of Appeal Cal. California Cam. YB Eur. Leg. Stud. The Cambridge Yearbook of European Legal Studies Can. Bus. L. Journ. Canadian Business Law Journal Cardozo L. Rev. Cardozo Law Review Cass. Cour de cassation Cass. civ. Cour de cassation, Chambres civiles Cass. com. Cour de cassation, Chambre commerciale, financière et économique Cass. crim. Cour de cassation, Chambre criminelle Cc Code civil (French Civil code) CCP Central Counter Party CCV Convention Internationale relative au Contrat de Voyage / International Convention on Travel Contracts CESE Comité économique et social européen / European Economic and Social Committee CESL Common European Sales Law cf. confer CFR cost and freight (Incoterm) Ch Law Reports ; Chancery Division chap. chapter CIDIP Conferencia Especializada Interamericana sobre Derecho Internacional Privado / Inter-American Specialized Conference on Private International Law CIF cost insurance freight (Incoterm) CIM Règles uniformes concernant le Contrat de transport international ferroviaire de marchandises / Uniform Rules Concerning the Contract for International Carriage of Goods by Rail CIP carriage and insurance paid to (Incoterm) Cir. Circuit

Table of Abbreviations

CISG CJ CLIP Principles

CMNI

CMR

Co. col. cols. COM Com. Com. Mkt. L. Rev. cons. Cornell Int. L. Journ. COTIF

CPT CSD DC D. Colo. D. Mass. DAP DAT DCFR DDP DDR DEFA DOMA Duke LJ e.g. EC ECHR ECJ

United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980 (Lord) Chief Justice Principles for Conflict of Laws in Intellectual Property, European Max Planck Group on Conflict of Laws in Intellectual Property Convention de Budapest relative au contrat de transport de marchandises en navigation intérieure / Budapest Convention on the Contract for Carriage of Goods by Inland Waterway Convention relative au contrat de transport international de marchandises par route / Convention on the Contract for the International Carriage of Goods by Road Company column columns Commission documents (European Commission) Tribunal de commerce (Belgium) Common Market Law Review consideration(s) Cornell International Law Journal Convention relative aux transports internationaux ferroviaires / Convention concerning International Carriage by Rail carriage paid to (Incoterm) central securities depository District of Columbia United States District Court for the District of Colorado United States District Court for the District of Massachusetts delivered at place (Incoterm) delivered at terminal (Incoterm) Draft Common Frame of Reference delivered duty paid (Incoterm) Deutsche Demokratische Republik (former German Democratic Republic) Deutsche Film-Aktiengesellschaft Defense of Marriage Act (USA) Duke Law Journal exempli gratia European Communities / Treaty European Court of Human Rights European Court of Justice

xix

xx

Table of Abbreviations

Economica NS ECR ed. eds. EEC EEIG EGBGB EPT ER et al. et seq. etc. EU EuR Eur. Rev. Priv. L. European Maintenance Regulation

EuZA EuZW EWHC EXW F. 2d F. 3d F. Supp. FamFG FamRZ FAS FCA FDI Fed. Reg. FIFA FLR FOB GATS GATT Gaz. Pal. GC GDP

Economica New Series European Court Reports edition / editor editors European Economic Community European Economic Interest Grouping Einführungsgesetz zum Bürgerlichen Gesetzbuch (Introductory Law to the German Civil Code) Estates, Powers and Trusts Law (2010 New York Code) English Reports et alii / et aliae / et alia et sequens et cetera European Union Europarecht (journal) European Review of Private Law Council Regulation (EC) no. 4/2009 of 18 December 2008 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations, OJ 2009 L 7/1 Europäische Zeitschrift für Arbeitsrecht Europäische Zeitschrift für Wirtschaftsrecht High Court of England and Wales ex works (Incoterm) Federal Reporter, 2nd series Federal Reporter, 3rd series Federal Supplement Gesetz über das Verfahren in Familiensachen und in Angelegenheiten der freiwilligen Gerichtsbarkeit Zeitschrift für das gesamte Familienrecht – Ehe und Familie im privaten und öffentlichen Recht free alongside ship (Incoterm) free carrier (Incoterm) Foreign Direct Investment Federal Register Fédération Internationale de Football Association Federal Law Reports (Australia) free on board (Incoterm) General Agreement on Trade in Services General Agreement on Tariffs and Trade Gazette du palais General Court Gross domestic product

Table of Abbreviations

GEDIP Geo. L. Journ. Germ. YBIL GmbH GmbHG

GWB Harvard L. Rev. HGB HL HR ICJ Reports i.e. IATA ibid. ICAO ICC ICJ ICN ICSID id. IECL IHNJ IIC ILA IMF IMO INCOTERMS Int. Comp. LQ Int. Journ. Proc. L. Int. Leg. Mat. IntGesR IntImmGR IPR IPRax IPRG IPRspr.

Groupe européen de droit international privé / European Group for Private International Law Georgetown Law Journal The German Yearbook of International Law Gesellschaft mit beschränkter Haftung (company with limited liability, Germany) Gesetz betreffend die Gesellschaften mit beschränkter Haftung (law concerning companies with limited liability, Germany) Gesetz gegen Wettbewerbsbeschränkungen (German Act Against Restraints on Competition) Harvard Law Review Handelsgesetzbuch (Commercial Code, Germany) House of Lords Hoge Raad (supreme court of The Netherlands) International Court of Justice Reports id est International Air Transport Association ibidem International Civil Aviation Organization International Chamber of Commerce International Court of Justice International Competition Network International Centre for Settlement of Investment Disputes idem International Encyclopedia of Comparative Law International Hague Network of Judges International Review of Intellectual Property and Competition Law International Law Association International Monetary Fund International Maritime Organization International Commercial Terms The International and Comparative Law Quarterly International Journal of Procedural Law International Legal Materials Internationales Gesellschaftsrecht Internationales Immaterialgüterrecht Internationales Privatrecht Praxis des Internationalen Privat- und Verfahrensrechts Bundesgesetz über das Internationale Privatrecht (Private International Law Act of 1987, Switzerland) Die deutsche Rechtsprechung auf dem Gebiete des Internationalen Privatrechts

xxi

xxii

Table of Abbreviations

ITO JBl JCP éd. gén. Journ. Priv. Int. L. JZ KB LAG LG LIBERTAD Lloyd’s Mar. Com. LQ LNTS Lugano Convention

Mass. MERCOSUR Minn. MoMiG MR N.F. NC NC Ct. App. NS NYU L. Rev. NAFTA Ned. Jur. NILR NIPR NJW no. nos. NY NYUL Rev. . OECD OGH OHADA OJ OLG Ont.

International Trade Organization Juristische Blätter (Austria) Juris-classeur périodique (La Semaine Juridique, édition générale) Journal of Private International Law Juristenzeitung Law Reports ; King’s Bench Division Landesarbeitsgericht (higher labour court, Germany) Landgericht (Regional Court, Germany) Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 Lloyd’s Maritime and Commercial Law Quarterly League of Nation Treaty Series Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, done at Lugano on 30 October 2007, OJ 2007 L 339/3 Massachusetts Mercado Común del Sur / Southern Common Market Minnesota Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen Master of the Rolls Neue Folge North Carolina North Carolina Court of Appeals New Series New York University Law Review North American Free Trade Agreement Nederlandse Jurisprudentie Netherlands International Law Review Nederlands Internationaal Privaatrecht Neue Juristische Wochenschrift number numbers New York New York University Law Review Organization for Economic Cooperation and Development Oberster Gerichtshof (Supreme Court of Austria) Organisation pour l’Harmonisation du Droit des Affaires en Afrique Official Journal (European Union) Oberlandesgericht (Court of Appeals, Germany) Ontario

Table of Abbreviations

ORDO

Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft OTC transactions Over-the-Counter transactions OTIF Organisation intergouvernementale pour les transports internationaux ferroviaires / Intergovernmental Organisation for International Carriage by Rail p. page P. 3rd Pacific Reporter, 3rd series PL Public Law Pa. Pennsylvania para. paragraph paras. paragraphs PC Privy Council PEICL Principles of European Insurance Contract Law PIL Private International Law pp. pages PRC People’s Republic of China PRIMA Place of the Relevant Intermediary’s Approach QB Law Reports ; Queen’s Bench Division R.S.C. Revised Statutes of Canada RabelsZ Rabels Zeitschrift für ausländisches und internationales Privatrecht Rec. Recital Recueil des cours Receuil des cours de l’Académie de droit international de La Haye Reg. Regulation Resp. Recurso Especial Rest. Restatement rev. ed. revised edition Rev. crit. dr. int. pr. Revue critique de droit international privé Rev. dr. com. belge Revue de droit commercial belge Rev. int. dr. comp. Revue international de droit comparé Rev. trim. dr. fam. Revue trimestrielle de droit familial RITA Research and Innovative Technology Administration Riv. dir. int .priv. proc. Rivista di diritto internazionale privato e processuale RIW Recht der internationalen Wirtschaft Rome Convention of 1980 Convention on the law applicable to contractual obligations, done in Rome on 19 June 1980, OJ 1980 L 266/1 Rome I Regulation 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 2008 L 177/6

xxiii

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Table of Abbreviations

Rome II Regulation

Rome III Regulation

RR RS S. Ct. SARL SCE SE SE 2d sect. sects. SME SOLAS SPE SPV Stat. StAZ

Stb. STJ SZ SZIER TFEU TIAS TRIPS Tulane L. Rev. UCC UCITA

Regulation (EC) no. 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II), OJ 2007 L 199/40 Council Regulation (EU) no. 1259/2010 of 20 December 2010 implementing enhanced cooperation in the area of the law applicable to divorce and legal separation, OJ 2010 L 343/10 Revised Reports Recueil systématique du droit fédéral (Switzerland) Supreme Court Reporter (Supreme Court of the United States) Société à responsabilité limitée (company with limited liability, France) Societas Cooperativa Europaea (European Cooperative Society) Societas Europaea (European Company) South Eastern Reporter, 2nd series section sections small or medium-sized enterprise International Convention for the safety of life at sea Societas Privata Europaea (European Private Company) special purpose vehicle Statutes at Large (USA) Das Standesamt (Zeitschrift für Standesamtwesen, Personenstandsrecht, Ehe- und Kindschaftsrecht, Staatsangehörigkeitsrecht) Staatsblad van het Koninkrijk der Nederlanden (the Netherlands) Superior Tribunal de Justiça Entscheidungen des Österreichischen Obersten Gerichtshofs in Zivilsachen (Austria) Schweizerische Zeitschrift für internationales und europäisches Recht Treaty on the Functioning of the European Union United States Treaties and other International Agreements Agreement on Trade-Related Aspects of Intellectual Property Rights Tulane Law Review Uniform Commercial Code (USA) Uniform Computer Information Transactions Act

Table of Abbreviations

UCP UIFSA UK ULIS UN UNCITRAL UNCLOS UNCTAD UN doc. UNESCO UNIDROIT Unif. L. Rev. Univ. Pittsburgh L. Rev. UNTS US USA USC USSR v. Va. Journ. Int. L. viz. vol. VVDStRL VVR WLR WPNR WTO YBPIL ZaöRV ZEuP ZGR ZPO ZvglRWiss

Uniform Customs and Practice for Documentary Credits Uniform Interstate Family Support Act United Kingdom Uniform Law on the International Sale of Goods, 1964 Hague Sales Law United Nations United Nations Commission on International Trade Law United Nations Convention on the Law of the Sea United Nations Conference on Trade and Development United Nations document United Nations Educational, Scientific and Cultural Organization International Institute for the Unification of Private Law Uniform Law Review University of Pittsburgh Law Review United Nations Treaty Series United States ; United States Supreme Court Reports United States of America United States Code Union of Soviet Socialist Republics (1922–1991) versus Virginia Journal of International Law videlicet volume Veröffentlichungen der Vereinigung der Deutschen Staatsrechtslehrer Vidomosti verkhovnoi rady (Official Gazzette of Ukraine) The Weekly Law Reports Weekblad voor Privaatrecht, Notarisambt en Registratie World Trade Organization Yearbook of Private International Law Zeitschrift für ausländisches öffentliches Recht und Völkerrecht Zeitschrift für Europäisches Privatrecht Zeitschrift für Unternehmens- und Gesellschaftsrecht Zivilprozessordnung (German Code of Civil Procedure) Zeitschrift für Vergleichende Rechtswissenschaft

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Preface

This book is an expanded version of the author’s General Course on private international law taught at the Hague Academy of International Law in 2012. It reproduces to a large extent the version published in vol. 360 of the Recueil des cours de l’Académie de droit international but adds substantial parts dealing with the growing empirical significance of party autonomy in modern private international law (part II, chapter 3). Moreover this book contains several tables intended to facilitate access to the relevant information in the text. When private international law emerged as a new discipline in the 19th century, scholars and courts worked mainly in a non-codified environment. Adopting a non-positivistic and internationally minded approach, they aimed at shaping conflict rules that allowed private actors to accommodate the diversity of the laws of the various jurisdictions. Later, the detachment of conflict rules from the policies of national legislation turned out to be an illusion. Private international law was increasingly considered as an extended arm of national policy-makers. Unilateralism trumped bilateralism. But what is the perspective of the discipline now? This book endeavours to determine the present position of private international law from an historic perspective which is meant to make the fundamental changes more visible than they would appear if our enquiry were limited to the short-term development of the law. Furthermore the book draws from institutional economics: Private ordering and public regulation are juxtaposed as the main mechanisms for the organisation of international relations. Finally, the thrust of the investigation and the title of the book is explained by what appears to be the dominant feature of our time: the opening of frontiers for humans, goods, services, capital and data and its repercussions in the legal framework of international relations. The manuscript was essentially finished in spring 2012. Only a handful of major later developments have been taken into account in the present publication. Given the long-term historical comparison, much of the every-day case law and commentary appears of minor importance for the study of the changing foundations of private international law in our time. I have benefitted from the help and cooperation of several people at the Max Planck Institute for Comparative and International Private Law. First of all, I would like to thank Ms. Gisela Schmitz-Krause, who typed the manuscript and

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Acknowledgments

struggled with a growing body of footnotes. Second, Michael Friedman, Esq. has to be praised for his patient and thoughtful revision of the English text as a language editor; his numerous subtle drafting proposals gave evidence of profound understanding and have greatly improved the final text. Third, Andreas Engel made the text accessible by producing most of the tables; he also brought the manuscript in line with the formatting requirements of the publisher. I am very grateful to the three of them and to some other unnamed colleagues who provided material and further information. Jürgen Basedow

Introduction

1. 1.

2.

Private International Law and Social Change

The private law of cross-border relations, i.e. private international law in a wider sense, has profoundly changed in character and role over the last decades. Its place used to be at the outskirts of the various legal orders delineating their boundaries, in the twilight area where neither domestic law nor foreign law is taken for granted. While this f unction still subsists in some parts, private international law can currently be described more accurately as the key to the private law of global home affairs in a multi-jurisdictional world. This change is due to the growing permeability of national frontiers, the progressive inter-connectedness of societies and economies and to the internationalization of individual lives. Accordingly, the perspective is no longer exclusively anchored inside a single legal order reaching towards its fringes, but increasingly often departs from a comparative and extra-legal, i.e. economic or social, point of view. The starting point is the quest of private actors – individuals and incorporate bodies alike – for orientation and legal certainty in a multi-jurisdictional environment, for a frame of reference for their growing transnational activities. This implies a second change. From its early days onward, private international law – like other areas of the law – has developed post factum. Legal experts and judges have considered, drafted and applied rules from an ex post perspective, i.e. after the emergence of disputes involving contacts with several jurisdictions. Legislation often only laid down pre-existing case law and doctrinal teachings. The rules were however initially drafted in the light of events giving rise to litigation. Thus, the making and application of rules were simultaneous. For those deciding on these rules as judges and arbitrators in light of a pending litigation, the needs felt by those making their plans ex ante for future transactions have been of a secondary significance only; since these needs are not necessarily represented in judicial proceedings, judges may not even be aware of them. Consequently, “planning” rules needed ex ante are not more than a reflection of “adjudicatory” rules laid down ex post. Yet as cross-border relations are becoming increasingly normal, the planning stage of international transactions and other contacts establishing legal relations is attracting more attention. At the early stages of

2

Introduction

3.

4.

1

such relations people are no longer satisfied by the assurance that there are courts of law that one day will decide potential disputes in accordance with rules which nobody can state with certainty and which will only be enunciated with sufficient clarity in the event of later litigation. Rather, people need clear orientation at the time they enter into cross-border transactions. There is an increasing demand ex ante for rules providing legal certainty. Against this backdrop private international law appears as the first step in the legal analysis of ever more frequent transnational exchange and contacts. The present enquiry will elaborate on this general theme as a kind of leitmotiv. It is not meant to serve as a textbook providing systematic and exhaustive information about the black letter law of any specific system of conflict of laws, and it does not address lawyers trained and practizing in any clearly defined jurisdiction. In accordance with the tradition of the General Courses of the Hague Academy of International Law, its purpose rather is to present the essential issues, basic data and fundamental principles that would help to explain the role of private international law in present society.¹ This role emerges not from the positive law of any single jurisdiction, but from a comparative enquiry into the evolution of the discipline in the legal history’s more recent past. This enquiry is facilitated by the broad move towards codification of private international law that can be ascertained across the globe. Much more than the opinions of legal scholars or judgments that by necessity must be interpreted in the light of the pending case, the statutory law reflects political discussions that have taken place in the relevant circles in many countries and that are intended to shape society and economy from an ex ante perspective. The general trends emerging from those laws and from unification projects give evidence of a broad movement of the legal thought guiding the discipline. Our enquiry cannot be limited to an introverted investigation into the various parts of private international law. Of necessity, it presupposes a reflection on the economic, social, cultural, political and legal environment providing the framework for the operation of the discipline. As will be explained later on, the state of that framework can best be encapsulated with the term “open society”. As compared with previous stages of modern history, it is not only as a matter of fact that societies can be designated as “open”. Their openness is also a normative characteristic enshrined in numerous precepts of international law and constitutional law flowing from the shattering experience of mankind in the first half of the twentieth century and from new orientations in political philosophy. This state of openness is reflected by some clearly perceptible changes that have affected private international law over the last 50 or 60 years. Before discussing this context in greater detail, the following remarks should summarize some conspicuous changes of priJulio González Campos, “Diversification, spécialisation, flexibilisation et matérialisation des règles de droit international privé – Cours général”, Recueil des cours 287 (2000), 9-426 at p. 22.

Introduction

vate international law as well as the foundation of the discipline as viewed in legal theory and the different levels of rule-making that determine the role of conflict of laws. 2.

Recent Trends in Private International Law

5.

Ever since World War II, the growth in practical significance of private international law has been clearly visible. There is plenty of evidence for this proposition: in his annual surveys of choice of law in the American courts, Symeon Symeonides counted a total of 1,551 cases decided in 1987² and 4,711 cases in 2011, an increase of more than 300 per cent in less than 25 years; the increasing volume of this “annual avalanche” of cases has compelled the author to confine the survey to appellate judgments.³ For the European Union, no comprehensive statistics of this type appear to exist. But the data published by the European Commission in the context of its proposal on international divorces⁴ speaks a clear and similar language. For the year 2007 the Commission reports more than one million divorces in the 27 EU Member States, 140,000 (13 per cent) of which had an international element.⁵ The international character was understood in the sense that the spouses either were of different nationality or were living in different states or were living together in a State other than their home country. The significant impact of private international law can be inferred from this data. It also clearly emerges from the need felt by legislators in numerous countries to codify existing rules of private international law. Andreas Bucher has listed approximately 30 comprehensive statutes that have been enacted worldwide in the 30 years since the Austrian Act of 1978,⁶ and the codification movement

2

Symeon C. Symeonides, “Choice of Law in the American Courts in 2011: Twentyfi fth Annual Survey”, Am. J. Comp. L. 60 (2012), 291-367 at p. 293 in footnote 5. Symeonides, previous footnote, at p. 294. Proposal for a Council Regulation (EU) implementing enhanced co-operation in the area of law applicable to divorce and legal separation, COM (2010) 105 final/2 of 30 March 2010; this Proposal later became the Rome III Regulation, see infra paras. 381 and 399 et seq. From a previous document it emerges that the number of international divorces and their share of the overall number of divorces has perceptibly increased in some Member States, e.g. Germany, in the period covered by the statistical enquiry, i.e. from 15 per cent in 2000 to 17 per cent in 2004, see Commission staff working document – annex to the Proposal for a Council Regulation amending Regulation (EC) No. 2201/2003 as regards jurisdiction and introducing rules concerning applicable law in matrimonial matters – impact assessment, SEC (2006) 949, Annex 4. See “Clearer Rules for International Couples – Frequently Asked Questions”, MEMO/10/100 (Brussels, 24 March 2010), attached to “European Commission goes ahead with 10 countries to bring legal certainty to children and parents in crossborder marriages”, Press release IP/10/347 of 24 March 2010. Andreas Bucher, “La dimension sociale du droit international privé – Cours général”, Recueil des cours 341 (2009), No. 6, pp. 30-32 with further references to French,

3 4

5

6

3

4

Introduction

6.

7

8

9

has kept its pace in the more recent past. A further sign of the growing practical significance of private international law is the publication of various new periodicals many of which focus on collecting and critically evaluating court decisions dealing with private international law.⁷ These observations clearly show that the former characterization of the discipline as a peripheral and mainly academic branch of the law no longer corresponds to reality. Some further trends emerging from the development of private international law in the post-World War II period can be summarized as follows:⁸ (1) A growing differentiation has given rise to a vast number of detailed conflict rules for a great variety of legal institutions and issues. (2) Such differentiation has entailed a flexibilization since more differentiated conflict rules allow for more inventive legal construction and thereby for a better adjustment of legal analysis to the particular needs of the single case. (3) A simultaneous process has led to a certain materialization having two aspects: first, more weight is given to the substantive outcome of the application of private international law. This is achieved, for example, by having recourse to public policy or by the use of alternative connecting factors supporting a certain substantive result such as the legitimate descent of a child. Some authors have even favoured a so-called better law approach making the designation of the applicable law dependent on what the judge considers to be the superior solution in light of a comparative assessment of the substantive laws involved.⁹ Second, international legislation appears to favour the adopEnglish and German translations of the respective national acts. In his new book Symeon Symeonides, including recasts of existing laws, counts even about 70 new statutes since the Austrian codification, see Symeon Symeonides, Codifying Choice of Law around the World, Oxford 2014, pp. 7-12. See for Italy the Rivista di Diritto Internazionale Privato e Processuale, published since 1965; for Germany Praxis des Internationalen Privat- und Verfahrensrechts (IPRax), first published in 1981; for the Netherlands Nederlands Internationaal Privaatrecht (NIPR), first published in 1983; for Switzerland the Schweizerische Zeitschrift für internationales und europäisches Recht, first published in 1991 as a successor to the Schweizerisches Jahrbuch des internationalen Rechts; for Spain Anuario Español de Derecho Internacional Privado, first published in 2000; since 1999 the Yearbook of Private International Law (YBPIL) has been published in Switzerland, since 2005 the Journal of Private International Law in the United Kingdom, etc. For some of these trends (differentiation, flexibilization and materialization) see already González Campos, Recueil des cours 287 (2000), Nos. 104 et seq., pp. 156-213, Nos. 155 et seq., pp. 214-308 and Nos. 221 et seq., pp. 309-411; see also Jürgen Basedow, “The Recent Development of the Conflict of Laws – Some Comparative Observations”, in Jürgen Basedow, Harald Baum and Yuko Nishitani, eds., Japanese and European Private International Law in Comparative Perspective, Tübingen, 2008, pp. 4-18 at p. 12 et seq. (specification), 14-16 (liberalization). The better law approach was conceived in the United States by Robert Leflar, “Choice-Influencing Considerations in Conflicts Law”, NYUL Rev. 41 (1966), 267327, setting forth five choice-influencing considerations and among them the quality of the law; for a more recent version of this approach see Friedrich K. Juenger,

Introduction

7.

10 11

tion of conventions on uniform substantive law; the concept of private international law is thereby extended beyond the choice-of-law method to the substantive regulation of private relations with an international element. (4) In choice of law, a progressive liberalization can be ascertained in the sense of greater weight being attributed to party autonomy, i.e. the individual’s choice of the applicable law; see the detailed analysis below in Part II. (5) A gradual proceduralization has shifted attention from the choice of the applicable law to procedural issues, in particular jurisdiction and the recognition and enforcement of foreign judgements as well as judicial cooperation across national borders. Some of these tendencies are the result of the fundamental methodological debate that started in the United States in the 1960s and led to what is called the American Conflicts Revolution. That revolution culminated in a rather chaotic situation in the United States.¹⁰ European scholars were at first attracted and some even infected by the explicit policy assessment and interest orientation of the US movement. But they were not willing to completely abandon legal certainty as provided by conflict rules using localizing factors. In hindsight, some of the trends identified supra, in particular the differentiation allowing for more flexible solutions and the materialization, for example by the use of alternative connecting factors in conflict rules, can be characterized as European answers to the American Conflicts Revolution. Whatever its merits may have been, the revolution is over, and it will not be addressed here in detail.¹¹ Instead, we shall try to uncover the consequences flowing from the social and economic changes of the late twentieth and the emerging twenty-first century for private international law. We shall see that some of the trends outlined supra can be interpreted as consequences of those changes.

“General Course on Private International Law”, Recueil des cours 193 (1985), 119-388 at pp. 286 et seq.; in Europe this approach has been endorsed by very few scholars, but see e.g. Konrad Zweigert, “Zur Armut des Internationalen Privatrechts an sozialen Werten”, RabelsZ 37 (1973), 435-452, and, as a residual solution, Axel Flessner, Interessenjurisprudenz im Internationalen Privatrecht, Tübingen, 1990, p. 90; for a comprehensive assessment from a present perspective Giesela Rühl, Statut und Effizienz, Tübingen, 2011, pp. 299-301. Characterization by Peter Nygh, “Reform of Private International Law in Australia”, RabelsZ 58 (1994), 727-740 at p. 739. In US conflict of laws Courtland Peterson, “Private International Law at the End of the Twentieth Century: Progress or Regress ?”, Am. J. Comp. Law. 46 (1998), Supp., 197-228 at p. 199, identifies “three fairly distinct but overlapping periods: the vested rights era, the policy revolution, and the era of eclecticism” which he believes is the present one, see pp. 207-208; for a survey from outside the United States see Rühl, pp. 307 et seq.

5

6

Introduction

3. 8.

Purpose and Methods of Private International Law

a) Legal certainty in a multi-jurisdictional world A further preliminary remark should address the justification and purpose of private international law as understood in the narrow sense of the choiceof-law method. Many academic treatises actually dedicate broad and thorough explanations to this fundamental issue. Why do legislators prescribe the application of foreign law ? And why do judges have recourse to foreign law ? The authoritative public international law textbook of Akehurst and Malanczuk offers an unexpected reason: “If a judge in state X is trying a case which has more connection with state Y than with state X, he is likely to feel that the case should have been tried in state Y or (since some judges are reluctant to forego the sense of self-importance which comes from trying cases) that he himself should try the case in accordance with the law of state Y. Feelings of this sort have produced a complicated set of rules in almost every country...”¹²

9.

10.

12

What the authors appear to suggest is a jurisdictional approach featuring an unambiguous allocation of each case to the courts of a single country; it would follow that once a court has affi rmed its competence it would apply its own law, the lex fori. They further insinuate that this simple solution is avoided by the judges’ sense of self-importance. But is private international law mainly the result of judicial selfishness ? Public international law scholars perhaps tend to neglect the interests of private actors afforded only a marginal role in their discipline. But this is different in private international law, an area mainly dealing with private interests and which is thus a part of private law. Its development is based on two fundamental facts of life: first, a great number of divergent legal systems governing private relations are to be encountered across the globe. The harmonization or unification of such laws would cope with this problem, but realism imposes the insight that it can only reduce divergences in specific areas and to a limited extent. The existence of hundreds of jurisdictions, many of them being endowed with all-embracing sovereign powers, makes comprehensive uniform law at the universal level a utopian perspective. Private actors, whether individuals or companies, have to accept this multitude and diversity of laws. Nevertheless, and here is the second fact of life, they feel a strong need for legal certainty; rights they have acquired or that they are about to acquire in one country should be respected by the courts of other countries, and agreements they made or are going to make under the laws of one State should not be invalidated under the laws of other States. This desire is not limited to situations where the applicable law is chosen Peter Malanczuk, Akehurst’s Modern Introduction to International Law, 7th ed., London, 1997, pp. 71 et seq.

Introduction

11.

13

14

15

by the parties in advance. It can equally be ascertained in the context of any action taken in the social or economic sphere. For example, even where non-contractual liability may be incurred as a result of their conduct, the persons involved will often expect that liability to be covered by liability insurance which already exists or which they are about to take out; this, in turn, implicitly includes the expectation that the law applicable to liability is not stricter than the one laid down and contemplated for a potential liability at the time the insurance was or is being taken out. The quest for a stable, uniform and reliable legal framework for conduct pursued in a multijurisdictional world is the very basis of private international law. Several methods dealing with the coordination of the diverse legal orders and their accommodation by private actors have emerged from this background:¹³ (1) The traditional or classic method is the localization of a fact situation and its assignment to a country closely connected whose law will then be applied to the international fact situation as if it were of a purely national dimension (nationalization of the international fact situation); (2) Another method that Akehurst and Malanczuk hint at is the assertion of exclusive jurisdiction for certain fact situations and disputes, of the courts of a country which will invariably apply the lex fori (and whose decisions are expected to be recognized in all other countries); (3) A compromising though less frequent solution is a combination of the two previous methods; it makes jurisdiction of the courts of a country dependent on the forecast of the prospective recognition of its judgment in the country whose law is to govern the merits under the conflict rules of the forum;¹⁴ (4) A further intermediate approach determines the applicable law in light of substantive values such as the validation of a will or transaction, in particular by the use of alternative connecting factors;¹⁵ (5) It is, finally, not uncommon that States recognize foreign judgments without concerning themselves with the law that has been applied in the foreign court; here, international harmony is achieved exclusively at the level of the rules of recognition. The following

They have been studied repeatedly in a comparative perspective by Paolo Picone, see e.g. Paolo Picone, Ordinamento competente e diritto internazionale privato, Padova, 1986; id., “Les méthodes de coordination entre ordres juridiques en droit international privé”, Recueil des cours 276 (1999), 9-296, see the survey at p. 25; id., La riforma italiana del diritto internazionale private, Padova, 1998, Nos. 2 et seq., 7 et seq., 10 et seq., pp. 5-46. See Picone, Ordinamento competente, p. 61; a related example in current German law is § 98, para. 1, No. 4, of the Law on proceedings in family matters and matters of voluntary jurisdiction (FamFG) of 17 December 2008, BGBl. 2008, I-2586: this provision lists the heads of jurisdiction of German courts in matters relating to marriage and status, a residual head being that the German courts have jurisdiction “where [only] one spouse is habitually resident in Germany unless the prospective decision will obviously not be recognised by the national laws of either spouse”. See already supra at para. 6.

7

8

Introduction

remarks are meant to shed some light in particular on the first, second and fifth of these methods.

12.

13.

16 17

18

19

b) Exclusive jurisdiction The quest for a uniform legal framework cannot be satisfied by endowing a single competent court with exclusive jurisdiction for every legal relation under the sun as insinuated by Akehurst and Malanczuk.¹⁶ Exclusive jurisdiction has been acknowledged as a means for the coordination of divergent legal systems in situations which are by necessity and inseparably connected to a single State, for example where rights in rem in immovable property or entries in national public registers for companies or intellectual property rights are at stake.¹⁷ The fact situations involved in these cases are inescapably linked to the jurisdiction of a single State. But all attempts to extend this mechanism to other, more mobile or even dynamic legal relations have failed. Dynamic legal relations such as contracts, torts, or family relations often require the recognition of the concurrent jurisdiction of several courts located in different countries and do not admit the concentration of all possible disputes within a single State. In this respect, the development of the law relating to international divorce proceedings in England provides a telling example. In the second half of the nineteenth century English courts increasingly took the view that only the court of the spouses’ common domicile could issue a divorce decree,¹⁸ this trend ultimately culminating with the Privy Council holding that any other connecting factor was detrimental to the harmony of decisions and contrary to international law.¹⁹ The tacit understanding underlying the concept of exclusive jurisdiction was of course that a judgment rendered in the competent court would be recognized in all other countries, thus producing a global uniformity of the legal assessment. This theory of jurisdiction and recognition was based on the English law of domicile as applied in those days. The English-style domicile could be far away from the actual residence of the persons involved; it could be, for example, in England while the individuals in question were living in India. Moreover, every person could only have a single domicile and wives shared the domicile determined by the husband. Therefore, the said English court practice amounted to the exclusive See the citation supra at para. 8 of the text. See for example Article 22 (4) of Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial Matters, OJ 2001 L 12/1, now Article 24 (4) of the recast Regulation (EU) No. 1215/2012 of 12 December 2012, OJ 2012 L 351/1 (hereafter also referred to as the Brussels I Regulation). Pitt v. Pitt, (1864) 10 Jurist NS 735, 141 RR 752 (HL); Harvey v. Farnie, (1882) 8 AC 43 (HL); Armitage v. A-G, [1906] P. 135 (Ch); see also Fritz Juenger, “Recognition of Foreign Divorces – British and American Perspectives”, Am. J. Comp. L. 20 (1972), 1, 7. LeMesurier v. LeMesurier, [1895] AC 517 (PC) at p. 540.

Introduction

divorce jurisdiction of the courts of a single country for every couple in the world irrespective of the spouses’ residence. For persons residing far away from the country of their domicile this could amount to a great hardship and even to an outright denial of justice. The idea of exclusive divorce jurisdiction therefore had to be abandoned over time.²⁰ In the field of jurisdiction for general civil and commercial matters, modern instruments such as the Brussels I Regulation²¹ or the Lugano Convention²² clearly demonstrate that procedural convenience and justice in many situations require the coexistence of several heads of competence potentially located in as many States.

14.

20

21 22

23

24

25

c) Application of foreign law pursuant to choice of law Given the concurrent jurisdiction of courts in different countries in many cases having a cross-border dimension, legal certainty is seriously imperilled unless the application of the substantive laws of the various fora involved leads to the same result – the case of a so-called false conflict.²³ In the case of a “true conflict”, legal certainty for private actors translates into what traditionally has been called harmony of decisions or uniformity of outcome. As it was put by Savigny: “Legal relations must expect, in cases of a conflict of laws, the same adjudication irrespective of whether the judgment will be handed down in this or in that state.”²⁴ The application of one and the same substantive law by the courts of the various countries involved, which for some of the courts includes the general willingness to apply foreign law, is a basic precondition for attaining this objective. For identifying the law that would ideally be applicable in all courts of the world, Savigny suggested to localize the legal relation in question and to look for the jurisdiction where, according to its nature, it is rooted.²⁵ This has been the result of numerous specific statutes and – after World War II – of a new orientation of case law, see Travers v. Holley, [1953] P. 246 (CA); the final blow was dealt to the previous law in Indyka v. Indyka, [1969] 1 AC 33 (HL). See for example Articles 2, 5 and 6 of the Brussels I Regulation, now Articles 4, 7 and 8 of the recast Regulation supra footnote 17. See Articles 2, 5 and 6 of the Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, done at Lugano on 30 October 2007, OJ 2007 L 339/3. In American conflicts law the term “false conflict” has been used for different situations, see Peter Hay, Patrick Borchers and Symeon Symeonides, Conflict of Laws, 5th ed., St. Paul/Minn. 2010, p. 30. But it includes the case where all legal systems involved contain identical rules; in that case nothing turns on the selection of a specific law, see Albert Ehrenzweig, Private International Law, Vol. I – General Part, 3rd printing, Leiden, 1974, pp. 86-88. Friedrich Carl von Savigny, System des heutigen römischen Rechts, Vol. 8, Berlin, 1849, p. 27 (§ 348); an English translation of this book is available: Private International Law: A Treatise on the Conflict of Laws, and the Limits of Their Operation in Respect of Place and Time, translated by William Guthrie, Edinburgh, 1869. Savigny, p. 28 (§ 348).

9

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Introduction

15.

The goal enunciated by Savigny has been subject to severe criticism ever since World War II, first in the American Conflicts Revolution and later in its European aftermath. In the words of Trevor Hartley: “Attempts to attain international uniformity of result are futile. However, they are more than futile: They can be positively harmful. In attempting to frame choice-of-law rules capable of universal acceptance, writers and courts avoid any policy content in case the policy is unacceptable to some states. They also tend to view the exercise as one of delimiting the application of a legal system in space... rather than solving a concrete case. The result is that legitimate policy considerations and the interests of the parties are often ignored... This is the unwelcome part of Savigny’s legacy.”²⁶

It has to be admitted that conflict rules are sometimes too general and inflexible and do not take appropriate account of the specific interests of the parties to a dispute nor of the policies pursued by the States involved. The American Conflicts Revolution stressing governmental interests in the choice-of-law process²⁷ and European writers pointing to private interests of the parties²⁸ are reactions to this criticism. And it is one to which the supramentioned tendencies of flexibilization, liberalization, etc. respond; they have to be elaborated further in legislative and judicial rule-making.²⁹ Yet, this plea does not affect the basic need for international uniformity of result as the supreme objective of the whole discipline. It is certainly true that uniform choice-of-law rules referring the courts of the various countries to the same applicable law are only a necessary and not a sufficient precondition for the achievement of such uniformity of outcome. For example, they do not accommodate differences in the law of procedure. Since procedure is for good reason almost always governed by the law of the forum, divergences 26

27

28

29

Trevor Hartley, “The Modern Approach to Private International Law: International Litigation and Transactions from a Common-Law Perspective – General Course on Private International Law”, Recueil des cours 319 (2006), 9-324 at pp. 29-30. See in particular Brainerd Currie, “Notes on Methods and Objectives in the Conflict of Laws”, Duke LJ 8 (1959), 171-181, reprinted in, and here cited from, id., Selected Essays on the Conflict of Laws, Durham, NC, 1963, pp. 177-187 at pp. 178-179: “The central problem of conflict of laws may be defined, then, as that of determining the appropriate rule of decision when the interests of two or more states are in conflict – in other words, of determining which interest shall yield… . So long … as we have a diversity of laws, we shall have conflicts of interests among states.” See in particular Gerhard Kegel, “Fundamental Approaches”, IECL, Vol. 3, Chap. 3, Sect. 13, pp. 14-15, who, for the sake of conflicts justice, distinguishes interests of the parties, community interests and interests of legal order, particularly in a workable law; Axel Flessner, Interessenjurisprudenz im Internationalen Privatrecht, Tübingen, 1990, pp. 45-46, criticizes Kegel’s interest approach as too abstract and pale to provide guidance; he favours a realistic interest analysis, see pp. 49 and 53. See supra, para. 6.

Introduction

resulting from, for example, the law of evidence are inevitable. But they do not affect the outcome of each and every dispute. Moreover, objectives are usually not abandoned for the sole reason that they cannot be attained in all cases without any exception. It would finally appear contradictory to reject the quest for uniform solutions but at the same time to posit consistency and predictability, i.e. legal certainty, as the major objectives of choice of law.³⁰

16.

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30 31 32

d) Choice of law and the welfare state The critique voiced by Currie, Hartley and others seems to be well taken with regard to the neglect of policy considerations. In the middle of the nineteenth century, when liberal capitalism reached its peak and Savigny wrote his treatise, State interventions into economic and social life were indeed increasingly renounced and became exceptional. Consequently, Savigny did not write more than a very short chapter of seven pages on what he called “statutes of a strict and positive, mandatory nature and foreign legal institutions which are altogether unknown at home”.³¹ Very few examples are given: polygamy, restrictions on the acquisition of real property by Jews, slavery and civil death.³² Of course, the rise of the interventionist and welfare state of the twentieth century has profoundly changed the model of society underlying Savigny’s propositions. The public good is no longer perceived as exclusively flowing from the unhindered interaction of private actors, but is very often defined and directly targeted by State legislation. There are considerable differences between the laws of the various countries, and many of them are implemented by mandatory private law or even by public law interventions. Due to the conditions of his time, Savigny turned a blind eye to this part of the legal order. But this does not deprive his considerations of their fundamental value as far as the other part of the legal order relating to the liberal sections of economy and society is concerned. After World War II and starting in the United States, a growing number of scholars and judges became aware of the limitations of the Savignyan model, and step by step a conflict system has been established in respect of the interventionist and welfare component of the legal order, relating to issues such as labour law, consumer law, competition law, market regulation and products liability. While conflicts theory focused, until about the 1960s, on a further development and refinement of bilateral conflict rules conceived for traditional private law relations, attention soon shifted almost completely to what was thought to be the “modern” part of the law inspired by considerations of public policy. As early as 1949, Heinrich Kronstein, motivated by his interest in the laws ordering the However, that objective is explicitly enunciated by Hartley, supra footnote 26 at p. 33. See Savigny, pp. 32-39 (§ 349), at p. 33. Savigny, pp. 36-37.

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Introduction

economic and social system, demanded a completely new orientation of the conflict of laws: “Rules of Conflict of Law … should guarantee that the social and economic order of each country and its institutions are protected. … We cannot sustain our present method of finding the applicable law on a basis of a bridge between facts and an artificial legal concept, … and then try to protect public policy in extreme cases. Instead, the public order has to give the primary consideration.”³³

It is the present author’s belief that this is a one-sided and narrow perspective and that a comprehensive analysis has to take into account both areas, those left to the interaction of decentralized and autonomous private actors, operating under conditions of freedom and market processes, and those subject to State interventions carried out in pursuance of a politically defined public good.³⁴ This can at best be achieved by a Savignyan approach, specified and complemented by bilateral and unilateral conflict rules dealing with those areas of the legal system that owe their existence to the emergence of the welfare state.

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33 34

35

e) The principle of recognition Conflicting decisions of the courts and authorities of different jurisdictions dealing with the same matter can be further avoided by a strict rule of recognition: where a legal relation or situation has been the object of a certificate, order, judgment or any other public act in a jurisdiction A, a State authority or court in jurisdiction B dealing with the same matter will not address the merits but will simply recognize accordingly the document issued in A and the legal relation or situation emerging from or certified in it. The Full Faith and Credit Clause of the US Constitution provides an example for this approach;³⁵ it demonstrates the strength of the principle but also the vagueness of the requirements that have to be met for its operation. In the past the United States Supreme Court sometimes made use of the clause in order to Heinrich Kronstein, “Crisis of ‘Conflict of Laws’ ”, Geo. L. Journ. 37 (1948-1949), 483513 at p. 511, emphasis in the original text. This view, which is currently shared by many legal writers at least in Europe, has been very ably explained by Flessner, pp. 61-63, in his critique of the “political” conflicts theory of Christian Joerges, Zum Funktionswandel des Kollisionsrechts, Die “Governmental Interest Analysis“ und die “Krise des Internationalen Privatrechts”, Tübingen, 1971, pp. 156 et seq.; Flessner points to the large portions of private law that do not pursue any political objective. Article IV, Section 1, of the US Constitution reads: “Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.”

Introduction

19.

36

37

38

open the choice-of-law process to the consideration of sister State interests or even in order to impose the application of their laws, apparently considering those laws as “public acts” for the purposes of the Full Faith and Credit Clause. However, the current significance of the clause seems to be much more limited and mainly confined to the recognition of judicial records and decisions.³⁶ In the European Union, the principle of recognition may play an important role in the future. Legislation on private international law is to be “based on the principle of mutual recognition of judgments and of decisions in extra-judicial cases,” see Article 81 TFEU; the explicit reference to judgments and decisions in extra-judicial cases would appear to exclude recourse to the principle of mutual recognition for the purposes of choice of law. But the bearing of the principle is still unclear and will have to be determined by future legislation and case law.³⁷ The principle of recognition undoubtedly has an important function to perform in private international law, in particular when it comes to the effect of acts issued by the administrative authorities and courts of foreign jurisdictions. However, it supplements but is no substitute of other methods.³⁸ Rather, it only addresses decisions to be made in State B after some kind of legal crystallization has occurred in foreign State A. It does not help the See the thorough treatment of the case law in Hay, Borchers and Symeonides, pp. 175-176 and 185 et seq. At p. 197 the authors point out that “it is the purpose of the Full Faith and Credit clause to insure extraterritorial effect for the government acts of a state …”. See, with regard to marriages, p. 652, and for judgments, pp. 1440 and 1459. For an early discussion of the recognition principle see Ulrich Drobnig, “Skizzen zur internationalprivatrechtlichen Anerkennung”, in Hans Claudius Ficker et al., eds., Festschrift für Ernst von Caemmerer, Tübingen, 1978, pp. 687-704; for the EUrelated debate see Erik Jayme and Christian Kohler, “Europäisches Kollisionsrecht 2001: Anerkennungsprinzip statt IPR ?”, IPRax (2001), 501-514 at pp. 502-503; Paul Lagarde, “Développements futurs du droit international privé dans une Europe en voie d’unification: quelques conjectures”, RabelsZ 68 (2004), 225-243 at pp. 230235; Heinz-Peter Mansel, “Anerkennung als Grundprinzip des europäischen Rechtsraums”, RabelsZ 70 (2006), 651-731, in particular at pp. 687 et seq.; Ralf Michaels, “EU Law as Private International Law ? Reconceptualising the Country-of-Origin Principle as Vested-Rights Theory”, Journ. Priv. Int. L. 2 (2006), 195-242; with a more general perspective Pierre Mayer, “Les méthodes de la reconnaissance en droit international privé”, in Le droit international privé – esprit et méthodes. Mélanges en l’honneur de Paul Lagarde, Paris, 2005, 547-573; for an assessment of the principle in light of the jurisprudence of the European Court of Justice in family matters see Toni Marzal Yetano, “The Constitutionalisation of Party Autonomy in European Family Law”, Journ. Priv. Int. L. 6 (2010), 155-193; see more recently the collected papers in Paul Lagarde, ed., La reconnaissance des situations en droit international privé, Paris 2013. See Mansel, RabelsZ 70 (2006), 730: “Das Grundprinzip der Anerkennung von Rechtslagen … kann … die Schaff ung eines einheitlichen europäischen Verweisungsrechts nicht ersetzen, sondern nur ergänzen.”

13

14

Introduction

judge in State A when he is called upon to take a decision on a pending case with cross-border elements. The assumption that the judge in State A may always apply the lex fori will often reveal itself as erroneous and as imperilling justice. Where, for example, a foreign traveller was injured in an accident in State A and made a will before dying in a hospital in that country, the application of the law of State A to that will would be entirely fortuitous; if it engenders the invalidity of the decedent’s dispositions, the judge of State A, being aware of the subsequent recognition of his decision to be had in the decedent’s home country B, might even feel that the injustice of his decision is specifically aggravated by the principle of recognition that extends its effects beyond the borders of A. He might, consequently, rather abstain from applying the law of A in a comprehensive fashion. But the principle of recognition may also be of doubtful value in country B, in particular if applied to legal situations and relations that have not been the object of a sufficient degree of legal crystallization in a judgment or other authoritative decision in State A. Moreover, even where that crystallization has occurred, the court in State B may have difficulty in adjusting the foreign decision to its own law without looking into the foreign law of the country of origin. In summary, the various methods of coordination applied in private international law are at the same time friends in need of each other as well as rivals in competition with each other. 4.

Private and Public Actors

20. It is noteworthy that all the methods discussed above are to be implemented by either courts or legislatures, i.e. by State institutions, whether within a given jurisdiction or at the international level. This focus on governmental action in a wider sense is misleading since States often act in a dual capacity: as members of the international community under public international law and as municipal regulators who are responsible for the maintenance and development of the law within their respective countries inclusive of private cross-border relations. The concentration on State action stands also in contrast to the fact that private international law primarily deals with private activities in the international arena. It is also in the first instance private actors who become aware of, and have to face, the difficulties arising from the multitude of jurisdictions and the divergence of laws. They realize that with regard to international activities, the law does not fulfi l what it promises at the national level, namely a framework providing legal certainty. Therefore they often try to conceive of strategies to cope with those problems before any State action is contemplated. Thus, spouses to a cross-border marriage often think about the legal problems arising therefrom before getting married; they may choose the place of marriage or conclude a marital agreement accordingly. Whoever enters a transaction with an international dimension will contemplate potential frictions and try to avoid them by means of private arrangements; he or she will take steps to ensure performance by the

Introduction

21.

other side, a potential repair in case of defects, or the cross-border transfer of payments. And the owner of an estate located in different countries will consider the various measures at his disposal to achieve the succession he has in mind. It is surprising that the legal literature on private international law does not take account of these private actions and instead almost exclusively concentrates on the enunciation of legal rules by government actors, i.e. courts and legislatures. As will be shown later on, that approach excessively narrows the perception of private international law. This is particularly true in an open society where individuals and companies, due to the greater permeability of frontiers, have a much wider range of cross-border conduct at their disposal which they actually make use of. In the open environment of contemporary society it appears appropriate to investigate first the array of private actions. This does not exclude government action from the investigation. But it should be clear that State actors only play a secondary role: they establish the underlying rules of the private-sector game, they state default rules that come into operation where the private actors have not adopted any measures, and they intervene in order to protect various interests including those of the public. It is in the latter context that their activities relating to private cross-border relations often raise issues of both public and private international law. The predominance of private action will be reflected by the structure of our enquiry. It will proceed from private to public actors and will include those private measures designed to cope with the internationality of an economic or societal problem, regardless of whether they qualify as private international law in the traditional sense. 5.

The Levels of Rule-making and the Conflict of Laws

22. The designation of the discipline as private inter-national law (and of the neighbouring discipline of public inter-national law) suggests that the laws governing private relations emanate from sovereign nation-States. As a consequence, public international law is said to regulate the horizontal relations between sovereign States equipped with comprehensive regulatory power, and private international law would exclusively deal with conflicts arising between private actors involving the laws of various nations. This is an obvious oversimplification which neither corresponds to the constitutional reality of many political entities nor to that of the ensuing conflicts of laws. With regard to legal history the concept of the nation-State as the sole subject of public international law has accurately been criticized as overly narrow.³⁹ At present it obviously no longer reflects the governmental powers bestowed, in so many variations, on international organizations, on internal sub-entities

39

See Wilhelm Grewe, Epochen der Völkerrechtsgeschichte, 2nd ed., Baden-Baden, 1988, pp. 26-27 with further references.

15

16

Introduction

of States or on non-state bodies such as religious authorities. A closer look at the reality of rule-making reveals four regulatory levels in modern society: (1) Regulation at the sub-national level, in particular in federal States such as Australia, Canada, Mexico, Spain, the United Kingdom or the United States; in view of its Special Administrative Regions, i.e. Hong Kong and Macao, China may also be classified in this group of States. In some countries of the Middle East, the law of persons, family law and the law of succession are matters determined by religious authorities for individual religious groups. (2) Regulation at the national level which is common in centralized nationStates such as France, Italy, Japan or Turkey; in federal States it often coexists with the sub-national regulation mentioned above; (3) Regulation at the regional and supra-national level, in particular by regional integration organizations such as the European Union;⁴⁰ regulations of this kind usually coexist with regulations of the national and sub-national types; (4) Global regulations which usually result from international conventions, but may also be issued by international bodies empowered by such conventions.⁴¹ 23.

The multi-layered structure of rule-making in the world generates conflicts of a very different nature. There are vertical conflicts, for example between the federal law of a nation-State such as the United States and the law of a single province or State of that nation, or between the law of the European Union and the law of a Member State. These conflicts are a matter for the constitutional law of the respective entities or, in Europe, for the law of the European Union. There are horizontal conflicts, mainly between the laws of different nation-States relating to private legal relations; they form the traditional subject of private international law and have given rise to the name of the discipline. A similar category of conflicts relates to horizontal conflicts between the laws of different sub-units of a single nation, for example so-called interstate conflicts within the United States; Savigny had already pointed out that such conflicts will usually be treated in the same way as the conflicts between the laws of independent nation-States.⁴² Con-

40

For a more elaborate discussion and references to other regional organisations see Jürgen Basedow, “Worldwide Harmonisation of Private Law and Regional Economic Integration – General Report”, Unif. L. Rev. (2003), 31-49. E.g. the International Convention for the Safety of Life at Sea (SOLAS) concluded in London on 1 November 1974, 1184 UNTS 277; Article VIII provides for the tacit acceptance of resolutions of the IMO Maritime Safety Committee for the adoption of new safety regulations. Savigny, at p. 27; when Savigny published his treatise, there existed a multitude of more than 30 German states, but no central State. The social reality of private international law that he had in mind was likely more influenced by the large number

41

42

Introduction

flicts between the laws of the Member States of the European Union may be compared to interstate conflicts in nations with a federal structure.⁴³ 24. Finally, diagonal conflicts may arise between the law of a sub-unit of a nation-State and the (central) law of another nation-State, for example between Scottish law and Norwegian law or between the law of California and Swiss law. A similar diagonal conflict would be the one between Japanese law and a regulation of the European Union. Such conflicts are diagonal because they result from a combination of horizontal conflicts and the vertical relation between a Member State of the European Union and the Union itself or between the United States and a single State.⁴⁴ Again, the general rules of private international law are basically suited to deal with such diagonal conflicts. In some cases, the choice-of-law rules of the forum will directly designate the applicable law of the sub-unit of the foreign nation-State as that which is deemed to govern a case; this method is particularly appropriate where the conflict rules of the forum employ localizing connecting factors such as the locus delicti or habitual residence.⁴⁵ In other cases the private international law of the forum will refer to the internal conflict rules of the foreign nation-State that may declare the law of one of the several subunits as being applicable; this method is inevitable where the conflict rules of the forum refer to the citizenship of a person since nationality generally is an attribute of the nation-State as a whole and not of its various sub-units. Where these methods do not lead to a clear designation of the applicable law, conflict rules will instruct the judge to search for the closest connection of the pending case with a single sub-unit and its law.⁴⁶

43 44

45

46

of interstate conflicts between these German jurisdictions than by the few international conflicts. See Jürgen Basedow, “Federal Choice of Law in Europe and the United States – A Comparative Account of Interstate Conflicts”, Tulane L. Rev. 82 (2008), 2119-2146. For the designation of such conflicts as diagonal, see Christoph Schmid, “Diagonal Competence Conflicts between European Competition Law and National Regulation – A Conflict of Laws Reconstruction of the Dispute on Book Price Fixing”, Eur. Rev. Priv. L. 8 (2000), 155; Jeremy Heymann, Le droit international privé à l’épreuve du fédéralisme européen, Paris, 2010, p. 117. See e.g. Article 22 para. 1, of 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 2008 L 177/6: “Where a State comprises several territorial units, each of which has its own rules of law in respect of contractual obligations, each territorial unit shall be considered as a country for the purposes of identifying the law applicable under this Regulation.” Almost identical is Article 25, para. 1, of Regulation (EC) No. 864/2007 of the European Parliament and of the Council of 11 July 2007 on the Law Applicable to Noncontractual Obligations (Rome II), OJ 2007 L 199/40. See for example Article 16 of the Hague Convention on the Law Applicable to Maintenance Obligations, done on 2 October 1973, Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, p. 235:

17

18

Introduction

25. It is not only substantive law that is adopted at different levels. Conflict rules, too, may be issued at the sub-national or the national or the supranational level. While private international law is a matter for national legislation in most countries, it is left to decentralized rule-making by the individual States, for example in the United States under the so-called Klaxon doctrine.⁴⁷ By contrast, in Europe the Treaty of Amsterdam has bestowed on the European Union comprehensive powers for legislation in the field of private international law and has thereby allocated these powers at a supra-national level.⁴⁸ Where rule-making for substantive law and for private international law is accomplished at the same level, legislators and courts often shape conflict rules in the light of the interests of the forum State as emerging from its substantive law; the conflicts rule-maker may be regarded as a “player” in the conflicts scenario. Where the conflict rules are however issued at a higher level than the substantive law, the conflicts rule-maker adopts the role of the “referee” between the claims of the sub-units for the application of their respective laws. This is the situation in some parts of private international law in the European Union. 6.

Survey

26. As explained above in paragraphs 20 and 21, the following treatise will look at private international law from a new perspective. It primarily focuses on the actors in the international arena: private actors in the first place, because the discipline deals with activities private actors engage in under conditions of – relative and sometimes limited – freedom; and public actors in the second place, i.e. Governments pursuing certain policy objectives. What the

47

48

“Where the law of a State, having in matters of maintenance obligations two or more systems of law of territorial or personal application, must be taken into consideration – as may be the case if a reference is made to the law of the habitual residence of the creditor or the debtor or to the law of common nationality, reference shall be made to the system designated by the rules in force in that State or, if there are no such rules, to the system with which the persons concerned are most closely connected.” A similar conflict rule designating the law applicable to divorce and legal separation is contained in Article 15, Rome III Regulation. Klaxon Co. v. Stentor Electric Manufactoring Co., 313 US 487 at 496 (1941), ruling that federal courts of the United States should apply the confl ict-of-laws rules that conform to those prevailing in the state of their respective location. See now Article 81 of the Treaty on the Functioning of the European Union (TFEU), consolidated version in OJ 2010 C 83/47. For examples of supranational legislation based on that provision see supra at footnotes 17 and 45. The Treaty of Amsterdam was concluded on 2 October 1997, OJ 1997 C 340; the effects for private international are discussed by Christian Kohler, “Interrogations sur les sources du droit international privé européen après le traité d’Amsterdam”, Rev. crit. dr. int. pr. 88 (1999), 1-30; Jürgen Basedow, “The Communitarization of the Conflict of Laws under the Treaty of Amsterdam”, Com. Mkt. L. Rev. 37 (2000), 687-708.

Introduction

two have in common is the desire to implement their respective targets with regard to cross-border relations in a world composed of multiple jurisdictions. The foundation of the following approach is the insight emanating from the growing permeability of frontiers, a process generally addressed as globalization. It has certain philosophical underpinnings reaching back to the first half of the twentieth century and can be ascertained from a large amount of statistical data relating to the cross-border flow of persons, goods, services and capital, see below, Part I. 27. Against this backdrop we shall enquire into the various forms of private ordering intended to reduce the risks of international transactions, see below, Part II. They include private arrangements channelling the risk of legal divergence to professionals who have built up a special expertise through their activities and are remunerated for bearing and distributing this risk. They also encompass the choice of the applicable law and of the competent court; the latter choice is of particular significance for litigation, but less so for the vast majority of private relations which are coordinated by the parties involved on the basis of what they have agreed and without any legal proceedings. The law of jurisdiction will therefore be called upon only occasionally. More recently, private arrangements concern options between different legal instruments within a given legal system, in particular in the European Union. Sometimes, they also aim at the deliberate configuration of fact situations in accordance with certain connecting factors employed in private international law; this method may be addressed as an indirect choice of law since those connecting factors designate the applicable law. It will become apparent that in all these areas the scope of private ordering has been extended in more recent times, partly because of private initiative and partly due to legislative activities which have had the effect of creating additional options for private actors. The discussion in Part II will therefore outline those major developments in private international law which enable private parties to make their arrangements. 28. Despite the general trend towards private ordering of international relations, States have not abandoned their intention to shape social and economic relations. Quite to the contrary, in open societies and open markets some States appear to invoke their sovereign right to regulate commercial and societal relations by mandatory provisions more often than done previously. Sometimes they pursue objectives within the international community, but adopt measures binding on individuals and undertakings which are targeted, however, at specific foreign States. In other areas, explicit State intervention with private relations can be ascertained for the sake of shaping a specific model of society; legislative activities in fields such as anti-discrimination, competition or labour and capital market regulation offer examples. A third group of regulations is meant to cope with the imbalance of power between private parties engaged in private ordering; such measures are intended to outweigh market imperfections such as asymmetric information or externalities. This interventionist role of States in international private relations

19

20

Introduction

will be highlighted in Part III below. States also perform other functions in private international law: they provide for default solutions applicable in the absence of private ordering and they designate the governing law in situations where third parties are inevitably affected and private arrangements are, because of the high transaction costs involved, consequently of limited significance. As pointed out in the previous paragraph, the developments of private international law in these areas will be outlined, as a frame of private ordering, in Part II.

Part I

From Closed Nation-States to the Open Society

Chapter 1

The Advent of the Open Society

29. The designation of a society as “open” or “closed” connects to everyday language and at first blush does not appear to need any further explanation. Openness refers to the absence of barriers to entry and exit, and closedness conversely to the existence of such barriers. Beyond this common understanding, some philosophers have made use of these concepts to describe the evolution of human culture and society from closed to open; this will be described in Section 1. This development has been stimulated by technological innovations and a conspicuous increase in economic, social and political interactions usually encapsulated in the term of globalization, see below, Section 2. Section 1: The Open Society in Political Philosophy 1.

Henri Bergson

30. The concept of the open society was apparently first used by the French philosopher Nobel Laureate Henri Bergson (1859-1941). In his book titled The Two Sources of Morality and Religion, published in 1932, he inquires into the nature of moral obligation and into the place and purpose of religion.⁴⁹ With regard to the sphere of society where morality and religion unfold their effects, Bergson draws a sharp distinction between the closed and the open. His analysis departs from a biological view of society, its being compared to an organism: “And in this more or less artificial organism habit plays the same role as necessity in the works of nature. ... Social life appears to us a system of more or less 49

Henri Bergson, Les deux sources de la morale et de la religion, Paris, 1932; a crucial edition has been edited by Frédéric Worms and was published by Presses universitaires de France in 2008. An English edition translated by R. Ashley Audra and Cloudesley Brereton has been published under the title The Two Sources of Morality and Religion at Notre Dame, Indiana, in 1977, reprinted in 2006; the text refers to this English edition.

24

Part I

From Closed Nation-States to the Open Society deeply rooted habits, corresponding to the needs of the community. Some of them are habits of command, most of them are habits of obedience. ... Each of these habits of obedience exerts a pressure on our will. ... We feel a sense of obligation.”⁵⁰

31.

The equivalence of necessity in nature with habit (or obligation or morality)⁵¹ is demonstrated by reference to “two divergent lines of evolution with societies at the extremities of each.”⁵² On the one end he alludes to the natural society governed by instinct and gives the example of a beehive. What unites the bees is considered to resemble the link which holds together the cells of an organism.⁵³ At the end of the other line he postulates societies where a certain latitude is left to the individuals. Here it is left to intelligence to achieve what is accomplished by instinct in the societies of the first type. Instinct and intelligence are thus said to have a certain functional equivalence, having penetrated each other in the rudimentary state of human society and becoming dissociated later on. 32. Only “very simple human societies, that is to say primitive or rudimentary societies” are said to be governed by necessity and instinct.⁵⁴ They are what Bergson designates as closed societies: “The closed society is that whose members hold together, caring nothing for the rest of humanity, on the alert for attack or defence, bound, in fact, to a perpetual readiness for battle. Such is human society fresh from the hands of nature.”⁵⁵

At the other extreme, the open society is said to comprise all mankind: “The open society is the society which is deemed in principle to embrace all humanity.”⁵⁶

These are the countervailing poles of the formation of society. The reality of modern societies lies somewhere between the extremes: “With all it has acquired during centuries of civilisation, society still has need of that primitive instinct which it coats with so thick a varnish.” Therefore, even a very large society such as a nation maintains the social instinct of a closed society. In the world of Bergson, it cannot and will not evolve into an open society:

50 51 52 53 54 55 56

Bergson, p. 10. On this equivalence see Bergson, p. 26. Bergson, p. 26. Bergson, p. 26. Bergson, p. 29. Bergson, p. 262. Bergson, p. 267; see also p. 30.

Chapter 1 – The Advent of the Open Society “For between the nation, however big, and humanity there lies the whole distance from the finite to the indefinite, from the closed to the open.”⁵⁷

Without reaching the extreme of the open society, however, the society can gradually open up,⁵⁸ and Bergson asks that education pave the way for international understanding: “The mastery of a foreign tongue, by making possible the impregnation of the mind by the corresponding literature and civilisation may at one stroke do away with a prejudice ordained by nature against foreigners in general.”⁵⁹

33.

What has been said depicts a utopian understanding of the open society. The Bergsonian model can hardly be said to be an objective for practical politics. The relation between any given society and the outside world is very much characterized by the innate tendency of any group of humans to cut itself off from the external world with its inherent risk of violent conflict. In fact, war is mentioned repeatedly in the context of the closed society, which is said to subsist even in modern, civilized communities. Given the extreme atrocities of World War I which clearly were on Bergson’s mind when writing the book, its pessimistic mood cannot come as a surprise. While it hints at certain ways to increase tolerance as a means for facilitating mankind’s approximation of the open society, this conceptual vehicle is far from being the basis for a rule-oriented or rule-driven coordination of different systems and legal orders. 2.

Karl Raimund Popper

34. The concept of the open society has been further elaborated by the Viennaborn philosopher Karl Raimund Popper (1902 – 1994), who during his New Zealand exile finished his book The Open Society and Its Enemies, initially published in English in 1944.⁶⁰ The treatise is essentially a criticism of the philosophies of Plato, Hegel and Marx which are blamed for boasting of superior knowledge and certainty in the prediction of the future evolution of society and its ultimate objectives. According to Popper’s contention, these philosophies were scholarly preparations and part of totalitarian programmes. They thereby correspond to the conditions of tribalism in primi57 58 59 60

Bergson, p. 32. Bergson, p. 276. Bergson, p. 286. Karl Raimund Popper, The Open Society and Its Enemies, Vols. 1, 2, 1945; the following references are to the edition in Routledge Classics, Milton Park, Abbingdon, Oxfordshire 2003, reprinted in 2008; on Popper’s philosophy see Herbert Keuth, Die Philosophie Karl Poppers, 2nd ed., Tübingen, 2011, in particular pp. 230 et seq. on his social and political philosophy and the concept of the open society.

25

26

Part I

From Closed Nation-States to the Open Society

tive societies governed by the “magical or irrational attitude towards the customs of social life, and the corresponding rigidity of these customs.”⁶¹ Such tribal societies are characterized by the unity of natural and political laws. They “are not based upon a rational attempt to improve social conditions... Taboos rigidly regulate and dominate all aspects of life. ... The right way is always determined, though difficulties must be overcome in following it. It is determined by taboos, by magical tribal institutions which can never become objects of critical consideration. ... Based upon the collective tribal tradition, the institutions leave no room for personal responsibility.”⁶²

35.

By contrast, the ways of modern life, while still beset to a certain extent with taboos, are characterized by “an ever-widening field of personal decisions, with its problems and responsibilities. ... Personal decision may lead to the alteration of taboos, and even of political laws which are no longer taboos. The great difference is the possibility of rational reflection upon these matters ... In our time many of us make rational decisions concerning the desirability or otherwise of new legislation, and of other institutional changes; that is to say, decisions based upon an estimate of possible consequences, and upon a conscious preference for some of them. We recognize rational personal responsibility.”⁶³

36. Having thus juxtaposed the tribal society ordered by magic to the modern society governed by rational decision-making, Popper identifies the first with the closed society and the second with the open society: “The magical or tribal or collectivist society will also be called the closed society, and the society in which individuals are confronted with personal decisions, the open society.”⁶⁴

While Popper, following Bergson, compares the closed society to an organism subject to the operation of biological laws, the open society has lost the organic character. While its members may freely enter into personal relationships not determined by the accidence of birth, many live in anonymous relations and isolation, turning societal relations into abstract phenomena.⁶⁵ In summary, Popper points out,

61 62 63 64 65

Popper, Vol. 1, p. 184. Popper, Vol. 1, p. 185. Popper, Vol. 1, p. 185 et seq. Popper, Vol. 1, p. 186. Popper, Vol. 1, p. 186-188.

Chapter 1 – The Advent of the Open Society “that the transition from the closed to the open society can be described as one of the deepest revolutions through which mankind has passed.”⁶⁶

37.

The breakdown of tribalism and the end of the closed societies of ancient Greece are traced back by Popper to the sending forth of colonists. The process led to contacts with foreign cultures and thereby “created what was perhaps the worst danger to the closed society – commerce.”⁶⁷ A partial dissolution of the old ways of life ensued and, as Popper points out shortly after in the same context: “Perhaps the most powerful cause of the breakdown of the closed society was the development of sea-communications and commerce. Close contact with other tribes is liable to undermine the feeling of necessity with which tribal institutions are viewed.”⁶⁸

While Popper elucidates the link between cross-border communications and the rise of the open society based on rational discourse about the forms of life, he pays little attention to the international relations resulting from the same course of events. His plea for a move towards a rational policy discourse, towards tolerance and towards democracy relates to the internal changes of political systems. However, the same causes must also bring about new views on the cultures of other peoples and on relations with them. If communication with them can generate sustainable doubts about the traditional order of the seafarers’ own community, the foreign way of life that has produced these doubts cannot be altogether rejected any longer. The growth of internal tolerance is reflected in a tolerance of the habits of other peoples. This is the very root of international law in general and of private international law in particular.⁶⁹ It is also the reason for, and mirrored in, the designation of private international law as “derecho de la tolerancia” by the late German émigré Werner Goldschmidt.⁷⁰

66 67 68 69

70

Popper, Vol. 1, p. 188. Ibid. Popper, Vol. 1, p. 190. It should not go unnoticed that Popper points out the parallelism between the institutional problems of civil and international peace in another context, see Popper, Vol. 1, p. 321, where he extensively deals with the “analogy between civil and international peace” and its limits. Werner Goldschmidt, Derecho internacional privado – Derecho de la tolerancia, 5th ed., Buenos Aires, 1985. At p. xi the author writes: “Si designamos el respeto positivo al Derecho Privado extranjero, salvo nuestro orden público internacional, con el concepto de la tolerancia, podemos sostener que el DIPr, como derecho de la extraterritorialidad del Derecho extranjero, constituye el Derecho de la tolerancia.”

27

28

Part I

From Closed Nation-States to the Open Society

Section 2: Globalization as a Driving Force of the Open Society 38. The shift from the closed to the open society has been described by both Bergson and Popper as a kind of model for the development of mankind from the very points of its origins. But both authors also derive certain lessons from that shift for the future evolution and ordering of modern society. In the era of globalization these predictions fall on fertile ground. Popper’s reference to the development of sea-communications and commerce mirrors the close link between technological innovation in traffic and transport on the one side and a growing tolerance of mankind vis-à-vis the order and habits of other societies. In more recent times such technological innovation has been the main driving force for what currently is usually designated as globalization, see below, subsection 1. This general change in our living conditions comes to the surface in the growth of trade in goods and services, see below, subsection 2, an increase in foreign direct investment, see below, subsection 3 and an ever burgeoning cross-border migration, see below, subsection 4. In combination, these changes have produced far-reaching social, political and economic consequences, see below, subsection 5. 1.

Technological Innovation

39. The development of transport technology has not progressed smoothly and steadily, but rather intermittently, depending on innovations and their economic exploitation as can be ascertained at various historical instances. The improvement of navigation through the invention of the compass and sextant in the late Middle Ages allowed seafarers to look beyond traditional coastal shipping and to steer more daringly off the shores into the open sea; this was a precondition for the great discoveries of the Modern Age. In the nineteenth century the invention of the steam engine and the advent of efficient steel production methods paved the way for railroads and for liner shipping operated in accordance with pre-established timetables. The former opened up the landmasses of the continents, the latter made transoceanic division of labour feasible and reliable. Thus, the industrial revolution of the nineteenth century undeniably contributed to what may be called a first phase of globalization.⁷¹ This is somehow obscured by the simultaneous

71

Tolerance is also stressed as a characteristic of private international law by Spyridon Vrellis, “Conflit ou coordination de valeurs en droit international privé – A la recherche de la justice”, Recueil des cours 328 (2007), 175-485 at p. 229. In a similar sense Stefan Oeter, “Globalisierung (J)”, in Werner Heun, Martin Honecker, Martin Morlok and Joachim Wieland, eds., Evangelisches Staatslexikon, 4th ed., Stuttgart, 2006, cols. 869-877 at 869-870; see also Frédéric Mégret, “Globalization”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law, http://www.mpepil.com (2010), Nos. 4-7, who outlines “various phases of globalization”, starting with “the discovery of a world exterior to Europe in the form of the Americas” and reaches through “colonial imperialism” and World Wars I and II

Chapter 1 – The Advent of the Open Society

movement towards nation-States favouring demarcation from each other, and in hindsight one might further argue that the international movements of goods and persons in the nineteenth century did not reach the same extent and the same volume as they have in more recent years. But from an ex ante point of view, the increase in mobility brought about by the industrial revolution exceeded all previous experience. 40. The second phase of globalization can essentially be ascribed to the last two decades of the twentieth century.⁷² This period has been characterized by tremendous acceleration and cost reduction in the transport of passengers, goods and data. The construction of the first wide body passenger aircraft, the jumbo jet, fundamentally changed market conditions in civil aviation. It led to considerable overcapacity putting pressure on regulated airfares. In 1977 and 1978 the United States deregulated their domestic air transport industry,⁷³ and intense competition on long-distance international routes rendered existing price regulation meaningless. As a consequence, the cheapest return tickets on the North Atlantic market dropped dramatically to only 50 per cent of what they were previously, and even now, a full generation later, they have hardly regained their earlier levels. Over the same period of time, per capita income has witnessed at least a six- or even sevenfold increase in industrialized nations.⁷⁴ As a consequence, large portions of the population can afford long distance travel, and the soaring growth rates of international civil aviation give evidence that many people effectively make use of that opportunity.⁷⁵

72 73 74

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as “some of the first global events” to the “current era of globalization” ushered in by the end of the Cold War. In a similar vein Oeter, previous footnote, col. 870: second half of the twentieth century. PL 95-163 of 9 November 1977, 91 Stat. 1278 for Air Cargo and the Airline Deregulation Act of 1978 for passenger traffic: PL 95-504 of 24 October 1978, 92 Stat. 1705. See for example the data reported in Gustav Fochler-Hauke (ed.), Der Fischer Weltalmanach 1976, Frankfurt am Main, 1975, p. 279, Mario von Baratta (ed.), Der Fischer Weltalmanach 1996, Frankfurt am Main, 1995, col. 955, and Eva Berié (ed.), Der Fischer Weltalmanach 2011, Frankfurt am Main, 2010, pp. 540-543; the per capita income in the United States has soared from US6,600 in 1974 to US24,750 in 1994 to US46,350 in 2008, that of Switzerland from US5,780 in 1974 to US36,410 in 1994 to US42,420 in 2008. The statistical data which are publicly accessible refer to very different findings. The World Air Transport Statistics published annually by the International Air Transport Association (IATA) give the following numbers of passengers flying North Atlantic routes: 4,091,670 for 1965 (1966, pp. 42-43), 8,590,975 for 1970 (1971, p. 21), 12,400,000 for 1975 (1976, p. 59), 18,575,000 for 1980 (1981, p. 24) and 21,083,000 for 1985 (1986, p. 33); the reports do not indicate corresponding data for later years. The Annual Reports of the Council of the International Civil Aviation Organization (ICAO), most of which are available at http://www.icao.int/annualreports since 1995, provide telling data about the increase of total numbers of passengers carried by the airlines of the contracting states of ICAO on their respective worldwide routes:

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41.

A similar development has occurred in the worldwide transport of goods. This was mainly due to the so-called container revolution and to the new organization of shipping and of multimodal transport. Traditionally, the handling of cargo depended heavily on human labour for the loading, trimming, stowing and discharge of goods. Starting in roughly 1960, the use of standardized boxes has considerably reduced labour costs and at the same time contributed to an unprecedented acceleration of the terminal operations which used to account for a very significant part of the overall transport time. Huge vessels carrying thousands of containers over intercontinental shipping routes now call only at major ports around the globe, where only a few hours are needed for the transhipment of hundreds of containers which are then distributed by smaller feeder vessels or by land transport to destinations in that region of the world. These changes have brought about a continuous and extraordinary decrease in the rate index of container shipping in the 1980s and 1990s.⁷⁶ The reduction in freight rates means that traders can target more distant markets without incurring additional transportation costs. This is tantamount to an extension of the geographical scope of relevant markets.⁷⁷ As goods can be sold in more and more distant markets, trade is stimulated and so is competition between goods originating in very different parts of the world. 42. More conspicuous than the far-reaching changes in the transport of passengers and goods are the changes relating to the transport of data. The enormous progress of electronic communication as evidenced by the World Wide Web and the transmission of television and telephone signals by satellite is a striking feature of contemporary society.⁷⁸ Very large quantities

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1,288 million in 1995 (p. 2), 1,647 million in 2000 (p. 2), 2,260 million in 2007 (p. 6) and 2,280 million in 2009 (p. 7). According to statistics compiled by the Bureau of Transportation Statistics of the Research and Innovative Technology Administration (RITA), an agency of the US Department of Transportation, the total number of passenger emplanements for both domestic and international flights at US airports has seen surges from 169,922,000 in 1970 to 296,903,000 in 1980 to 465,557,000 in 1990 to 674,201,000 in 2000 and to 709,202,000 in 2009, see http://www.bts.gov. The freight rate index calculated by the Federal Ministry of Transport of Germany for shipping and fi xed at 100 for the year 1985 moved up to 179 in 1993 for tankers and to 152 for tramp shipping, but dropped to 74 for general goods and even to 64 for containers, cf. Der Bundesminister für Verkehr (ed.), Verkehr in Zahlen, 1994, p. 265. Since the mid-1990s, the freight rate index has, despite some oscillation, essentially remained unaltered, see Bundesministerium für Verkehr, Bau und Stadtentwicklung (ed.), Verkehr in Zahlen 2009/2010, Hamburg, 2009, p. 284, indicating almost the same level for 1995 and 2006. Cf. Gerd Aberle, Transportwirtschaft, Munich, 1996, pp. 1 et seq. See for a perspicacious survey of the characteristics and consequences of the internet Christoph Engel, “Das Internet und der Nationalstaat”, in Völkerrecht und Internationales Privatrecht in einem sich globalisierenden internationalen System – Auswirkungen der Entstaatlichung transnationaler Rechtsbeziehungen, BerDtGesVR 39 (2000), 353-425 at 356-365 with further references.

Chapter 1 – The Advent of the Open Society

of data can be sent around the globe and even to remote countries within seconds. This has brought about a qualitative change in economic, social and political thinking. Data-based cooperation has become possible even between very distant partners, whether in the production of motion pictures or books or in research and development endeavours. Capital markets have become interconnected as a matter of practice, and even minor changes of prices of shares listed in one stock exchange will be reflected, within seconds, by analogous price fluctuations in other markets. As news spreads all over the world in a moment’s time, distance loses its importance in the formation of political judgment. Civil unrest, the destruction of the environment and the violation of human rights are of almost equal significance whether they occur in a neighbouring country or at the other end of the world. 2.

The Impact on Trade in Goods and Services

43. The improvements in transport and communication reported supra have led to a huge increase in the volume of international exchanges. A first yardstick is the tremendous growth of trade in goods and services which gives evidence of the increased permeability of national boundaries. According to the international trade statistics published by the World Trade Organization, the overall merchandise exports of all countries have soared from US59 billion in 1948 to US3,675 billion in 1993 and US15,917 billion in 2008.⁷⁹ The statistical data shows that the volume of exports has more than quadrupled in the 15 years between 1993 and 2008 and has even exceeded an eightfold amount of its 1983 level, i.e. 25 years before. 44. What is perhaps more significant in our context is the share of exports represented in the overall production and in the world gross domestic product (GDP), which has similarly witnessed constant growth over the last years. In particular, it has to be noted that the growth rates of world merchandise exports have continuously exceeded the growth rates of the world production of merchandise inclusive of agriculture, mining and manufacturing. The average production growth rate was 3 per cent from 2000 to 2007, dropping to 2.5 per cent thereafter (2008) due to the global financial crisis.⁸⁰ On the other hand, the growth rate of global exports in such merchandise was considerably higher throughout the whole period: It amounted to 5.5 per cent from 2000 to 2007, dropping to 5.0 per cent on account of the 2008 slump; yet it should be emphasized that even in 2008, when the financial 79

80

World Trade Organization, International Trade Statistics 2009, WTO, Geneva, 2009, p. 10, also available online at www.wto.org/english/res_e/statis_e/its2009_e/ its09_toc_e.htm visited on 8 December 2010. Table I.6 provides the following data in billion US dollars: 59 (1948), 84 (1953), 157 (1963), 579 (1973), 1,838 (1983), 3,676 (1993), 7,377 (2003), and 15,717 (2008). International Trade Statistics 2009, supra footnote p. 7, table I.1.

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crisis started, the world export of merchandise had grown by 1.5 per cent as compared with the previous year.⁸¹ If we look at manufactured goods exclusively, the differences are even more marked: while world merchandise production grew at an average rate of 2.5 per cent from 2000 to 2008, the export of manufactured goods grew more than twice as fast over the same period, i.e. at an average rate of 6.0 per cent per year.⁸² Due to the financial crisis the global production of manufactured goods shrank by 1.5 per cent in 2008, but in the same year the world exports of such goods increased by 2.0 per cent.⁸³ Put in other words, the portion of the production intended for export is constantly growing, and more and more manufacturers produce in view of a foreign demand. A similar observation can be made with regard to the world GDP which grew by an average rate of 3.0 per cent from 2000 to 2008, while the world exports of merchandise rose by an annual rate of 5.0 per cent over the same period.⁸⁴ It can be inferred from this data that world income expressed in terms of GDP increasingly depends on international trade. 45. The data for trade in goods has even been surpassed by the growth rates of trade in services in recent years. According to the World Trade Organization, the overall volume of world exports of commercial services amounted to US3,730 billion in 2008; this included US875 billion for transport services, US945 billion for travel and US1,910 billion for other commercial services including such diverse offerings as communication services, construction services, insurance and other financial services, computer services as well as royalties and licence fees. From the years 2000 to 2008 the average annual percentage increase was 12 per cent,⁸⁵ which clearly demonstrates the extraordinary growth of the services sector. 46. The world economic crisis led to dramatic cutbacks in the trade of both goods and services beginning in late 2008 and in particular in 2009. The WTO Secretariat quantifies the negative growth in trade at -13 per cent with regard to services and at – 23 per cent with regard to merchandise; the latter figure is, however, considered to be excessive and mainly due to a plunge in the prices for crude oil and other commodities in 2009.⁸⁶ Regardless of the exact reasons and extent of the crisis, the gradual recovery of the world economy since 2010 indicates that the 2009 crisis did not herald an end 81 82 83 84 85

86

Op. cit., supra footnote 79. Ibid. Ibid. Ibid. World Trade Organization, World Trade Report 2009. Trade Policy Commitments and Contingency Measures, WTO, Geneva, 2009, p. 9, also available online at www. wto.org/english/res_e/booksp_e/anrep_e/world_trade_report09_e.pdf, visited on 8 December 2010, Table 3. World Trade Organization, World Trade Report 2010, WTO, Geneva, 2010, p. 26, also available online at www.wto.org/english/res_e/booksp_e/anrep_e/world_ trade_report10_e.pdf; see also Tables 3 and 4.

Chapter 1 – The Advent of the Open Society

to the growth of international trade in goods and services, instead representing a temporary setback. The projections for the future development of trade in goods and services in fact point to continuous growth in the coming years.⁸⁷ 3.

Foreign Direct Investment

47.

As the costs of carriage have been lessening as a result of technological innovation in the transport sector, their share of the market price of the goods carried has diminished as well. Consequently, the distance between production and market has lost much of its previous importance. Instead, other elements have gained significance for the entrepreneurial decisions regarding the location of production plants: for example, the availability of human resources and skills, the cost of labour, the applicable tax system, or the access to raw materials. Considerations of this kind have drawn attention to another aspect of international economic relations, i.e. the ability of firms to transfer their capital into those countries where investment promises the highest reward. Designated as Foreign Direct Investment (FDI), this ability is considered a paramount indicator of economic globalization in general and of the globalization of specific national economies in particular. 48. Foreign direct investment is the basis of a fundamental change in the worldwide division of labour. In former times, companies would set up foreign subsidiaries for business purposes limited to the host country: the extraction of minerals, the exploitation of other natural resources, the establishment of a local production for the host market, the distribution of products imported from the home base. The links between the affi liates in the host State and the base company in the home State were mainly of a financial or a trade character. The relative decrease of transport costs has brought about a profound change in this respect. Today, many multinational companies build up production networks extending around the globe. A car manufacturer may have its gearboxes fabricated in Japan, its engines in the United States, its brakes in Brazil and its chassis in Italy; the various parts such as the engines may in turn hold foreign-produced content, for example cylinders from Canada and roller bearings from Korea. All parts are then assembled in a German plant in a production process invented and first patented in Switzerland. In putting this global division of labour into effect, the manufacturer may buy the components at issue from independent suppliers in those countries, but it may prefer to make some or all of the parts itself

87

International Monetary Fund, World Economic Outlook, October 2010 – Recovery, Risk and Rebalancing, IMF, Washington, DC, 2010, also available online at www. imf.org/external/pubs/ft/weo/2010/02/pdf/text.pdf. Table A9 at p. 192 projects the growth of world trade in goods and services at 11.4 per cent in 2010 and 7.0 per cent in 2011.

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and to keep the various production processes under its control. The latter option is heavily dependent on the possibilities of foreign direct investment. 49. In 2008 the United Nations Conference on Trade and Development (UNCTAD) estimated the number of transnational corporations at 79,000 and the number of their affi liates at roughly 790,000; the value of their stock resulting from foreign direct investment was said to amount to US15 trillion.⁸⁸ According to this source, the value added by the operation of foreign affi liates worldwide represented about 11 per cent of the global GDP in 2007, and the number of employees of these companies amounted to some 82 million people.⁸⁹ Thus, worldwide prosperity is due to transnational corporate activities to a large extent; many of these activities are due to foreign direct investment. 50. Over the years, the flows of foreign direct investment have increased in an extraordinary manner. In 1982, the FDI inflows amounted to US58 billion worldwide; this figure rose to US207 billion in 1990 and US1,411 billion in 2006 to US1,833 billion in 2007.⁹⁰ Annual growth rates were calculated at more than 20 per cent for the decade between 1986 and 1995. They soared to 39.9 per cent in the period between 1996 and 2000 and even to 47.2 per cent in 2006.⁹¹ This data translated into a considerable number of cross-border mergers and acquisitions: 200 in 1990, 1,118 in 2006 and 1,637 in 2007.⁹² 4.

Migration

51.

The facilitation of, and price reductions for, long distance travel have also favoured international migration. The decision to leave one’s home country is no longer considered as definitive; a return appears much easier than in previous centuries. Before emigrating, instead of making a spring into the dark, one may first visit and try out the foreign country. Consequently, the number of migrants has been growing continuously and has been estimated by a recent publication of the World Bank at more than 215 million people, i.e. about 3.2 per cent of world population.⁹³ While the authors point out that migration flows, relative to population, are weaker than those of the last

88

United Nations Conference on Trade and Development, World Investment Report 2008. Transnational Cooperations and the Infrastructure Challenge, UNCTAD, New York/Geneva, 2008, p. xvi, also available online at www.unctad.org/en/docs/ wir2008_en.pdf, visited on 8 December 2010. Ibid. nited Nations Conference on Trade and Development, supra footnote 88, p. 10, Table I. 4. Ibid. Ibid. The World Bank, Migration and Remittances – Fact Book 2011, 2nd ed., World Bank, Washington, DC, 2011, also available online at http://sitresources.worldbank.org/ INTLAC/resources/factbook2011-Ebook.pdf, visited on 8 December 2010, Highlights, p. ix.

89 90 91 92 93

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decades of the nineteenth century,⁹⁴ the absolute numbers give evidence of a rapid growth of the migrant stock. In the post-World War II period, the supra figure is estimated to have grown from 75.5 million in 1960 to 215.8 million in 2010.⁹⁵ The data on migration has to be viewed with some caution, however, since it is based on national statistics which employ different definitions. In some countries they refer to a person’s birth in a foreign country, in others to his or her foreign nationality. In any event, the minimum duration of residence in a country must be one year, which excludes short-term visits and many stays for internships and programmes of study in foreign countries.⁹⁶ 52. The increase in migration suggests an international trend towards the formation of a multicultural society. This may be somewhat misleading, however, since the statistical data also includes the remigration of persons who return to the country of their ethnical or cultural origin. Thus, the Russian Federation was the country with the second largest number of immigrants in the world in 2010.⁹⁷ On a similar note, one may explain part of the emigration of 3.5 million people from Germany by a remigration of former immigrants to their home countries, especially Turkey and Kazakhstan.⁹⁸ 53. Keeping that in mind, it is perhaps more important to look at the relative significance of immigrants in the respective countries of immigration: the World Bank study indicates an immigrant population of only 6.8 per cent for host countries in Europe and Central Asia⁹⁹, but much higher percentage shares in countries like Canada (21.3 per cent),¹⁰⁰ Australia (25.7 per cent),¹⁰¹ Saudi Arabia (27.8 per cent), Israel (40.4 per cent) and the United Arab Emirates, the latter having an immigrant population of not less than 70.0 per cent.¹⁰² Again, however, this data does not necessarily indicate the existence of a multicultural society. For instance, since most immigrants in the United Arab Emirates are from other Islamic countries, the necessary adjustment to the new environment poses minor problems, and for those

94 95

Ibid. See Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, Trends in Total Migrant Stock: The 2005 Revision, available online at esa.un.org/migration, visited on 8 December 2010; the data for 2010 is printed in the World Bank Fact Book 2011, supra footnote 93, p. 18. 96 The World Bank Fact Book 2011, supra footnote 93, p. xiv. 97 The World Bank Fact Book 2011, supra footnote 93, pp. 1 and 211 indicating that most of the 12.3 million immigrants living in the Russian Federation came from source countries that belonged to the former Soviet Union prior to 1991. 98 The World Bank Fact Book 2011, supra footnote 93, p. 123. 99 The World Bank Fact Book 2011, supra footnote 93, p. 25. 100 The World Bank Fact Book 2011, supra footnote 93, p. 86. 101 The World Bank Fact Book 2011, supra footnote 93, p. 63. 102 The World Bank Fact Book 2011, supra footnote 93, p. 2 with a list of the top immigration countries.

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immigrants originating in other Arab countries there is not even a difference in language. 54. A further facet of the migration statistics that needs to be reviewed concerns the motivating factors and the migration corridors. In Western countries there is a widespread belief that migration is mainly triggered by an uneven distribution between the “South” and the “North” of wealth and benefits derived from globalization, and that migration therefore principally flows from societies on the “periphery” to the “centre” of the industrialized parts of the world.¹⁰³ While it is true that the United States appears to be the destination of choice for migrants, countries of the “South” such as India, Iran and the United Arab Emirates have equally received large numbers of immigrants,¹⁰⁴ and the World Bank explicitly states that “South-South migration (migration between developing countries) is larger than migration from the South to the high-income countries belonging to the Organization for Economic Cooperation and Development (OECD).”¹⁰⁵ Thus, migration statistics tell us something about the factual composition of an open society. But as to the nature of conflicts of cultures, habits and laws that may arise in such a society and with regard to the specific cultures that may come into conflict, they provide only a very rough picture. 5.

Globalization

a) The nation-State as the starting point The data reported above sheds some light on certain aspects of the crossborder exchanges that are usually encapsulated in the concept of globalization: trade as the flow of goods and services, foreign direct investment as a flow of capital and migration as a flow of persons. But globalization as conceived in current social sciences is more than just the sum of these empirical findings. The concept indirectly relates to the previous order whereby a society characterized by a system of self-satisfied and clearly separated nation-States was simultaneously the counter-model to – and the point of departure for – the process of globalization. This process is then understood as a growing permeability of national borders in social and economic matters carrying various consequences in all fields. 56. The basic idea underlying modern thinking on cultural and social as well as economic and political matters has, ever since the French Revolution, been the nation-State. It is conceived of as an entity exercising sovereign powers over persons who are no longer subject to a personalized sovereign. They are considered to share a common identity because of their native descent; that is the root of the term “nation”, which made its first appearance in a major

55.

103 In this sense for example Oeter, supra at footnote 71, col. 872. 104 The World Bank Fact Book 2011, supra footnote 93, p. 6. 105 The World Bank Fact Book 2011, supra footnote 93, p. 12.

Chapter 1 – The Advent of the Open Society

piece of legislation in the French Civil Code of 1804.¹⁰⁶ While the State is still considered as the absolute ruler, it is now an anonymous body whose existence and legitimacy is reconducted to its citizens. They are simultaneously a source and a subject of State authority. 57. The worldwide success of the nation-State model can be explained on various grounds.¹⁰⁷ There are cultural explanations, in particular the close link between the exercise of State power and the emerging national cultures which, in the course of the sixteenth and seventeenth centuries, were witnessed by the various vernacular languages coming to replace Latin in academic education, in communications between the princes’ chancelleries, as the language of literature and finally as the language of educated persons in general. Thus, the national territory subject to the political power of the nation-State and the geographical scope of national culture were converging. A similar convergence had been achieved, first in France, between what is still called the national economy and the territorial scope of political powers. In fact, the large-scale harmonization of currencies, of weights and measures, and of commercial law in the mercantilist period of the seventeenth century as well as major infrastructure investments in roads and canals had created a national economic space that did not exist before. Thus, France, as the most advanced European country of the time, set the tone in 1800 and triggered a kind of imitation process in other countries. The convergence of economic, cultural and political space, which was soon followed by a national unification of civil law, created a far-reaching national coherence in all major areas of society and became a highly attractive model for the organization of society in other parts of Europe and beyond. 58. The other side of this development was the progressive separation of the nation-States from one another. European societies became increasingly introverted and self-concentrated, trying to develop their own national identity in all sectors of life. Relations between different countries – whether economic or academic, whether cultural or political – became increasingly formalized; even when neighbouring, where regions belonged to different nation-States their mutual relations often had to pass through the respective capitals. The perfection of the nation-State went hand-in-hand with the rise of nationalism. The convergence of the territory of political rule with eco106 Several articles of the preliminary title and of the first book distinguish between the rights of French citizens and those of foreigners, see for example Article 3, Article 8, Articles 14-16; Article 11 explicitly refers to a foreign country as a “nation”. 107 A survey can be found in Andreas Wimmer and Yuval Feinstein, “The Rise of the Nation-State across the World, 1816 to 2001”, American Sociological Review 75, 764790 (766-771). The cultural roots of the nation-State particularly have been studied by Benedict Anderson, Imagined Communities, rev. ed., London, 1991. More inspired by economics is the view taken by Ernest Gellner, Nations and Nationalism, Ithaca, NY, 1983, who points out that the flexibility of workers required in the industrial society is favoured by, or even dependent on, a common culture and education as well as a centralized order-enforcing agency, see pp. 140 et seq.

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nomic and cultural space allowed Governments to instrumentalize interventions in markets or in cultural matters for the sake of more effective rule. From the introduction of orthographic standards and the uniform pronunciation of the national language through the promotion of certain content of motion pictures and theatre plays and on to the design of school syllabuses, nation-States have tried hard to produce a homogeneous common core of the respective national culture with a corresponding foreclosure effect on all foreign influences. In a similar vein, the convergence of the scope of national markets and national territory allowed rulers to interfere with market processes such that a kind of national cocoon developed; currency exchange as well as import and export transactions were heavily regulated, and access to the national market or the grant of intellectual property rights was either confined to the State’s own citizens or subject to the condition of reciprocity. Political action of this kind created borders where no borders existed by nature. To employ the terminology of Bergson and Popper, the nation-States reconducted mankind into a closed society or, rather, into multiple closed societies.¹⁰⁸ b) Opening frontiers towards global life 59. The terrible bloodshed and destruction of World Wars I and II gave evidence of the failure of the model of the self-satisfied or even narcissistic and cocooned nation-State. Ever since World War II, the major political current pursued at the universal level by the Governments of Western Europe and North America was directed towards a progressive opening of nation-States. While the original model of the nation-State was not entirely abandoned, it was supplemented by ideas of closer and institutionalized international cooperation and a progressive integration of markets that would allow economic and societal players to build their own international networks independent from government support and permission. This is the true turning point in recent political history. The new trend towards a greater permeability of national borders arose in the 1950s and 1960s. The push ahead of the 1980s and 1990s that is usually designated as globalization is a mere acceleration of that trend, which however has sharpened our consciousness of the whole process and the changes that it entails in economic, social and political matters. 60. In the social sciences, the term globalization is generally used to describe the fact that an increasing number of social problems now have a global dimension and can no longer be solved by insulated national measures. For example, John Baylis and Steve Smith, two British political scientists, define globalization as “the process of increasing interconnectedness between societies such that events in one part of the world more and more have effect on people and socie108 See supra at paras. 32 and 36.

Chapter 1 – The Advent of the Open Society ties far away. A globalized world is one in which political, economic, cultural and social events become more and more interconnected... The world seems to be ‘shrinking’ and people are increasingly aware of this.”¹⁰⁹

61.

This quote gives evidence of the interest of political scientists in those changes that determine decision-making in the various sectors of society. The sociologist’s focus is more on the changes of the individual’s identity and the formation of groups, as pointed out very concisely by the German sociologist Ulrich Beck. He states that we have to “give up the ideas of living and acting in the closed and clearly divided spaces of nation-states and their corresponding national societies. Globalization refers to the cognisable process of the growing unboundedness of everyday action... The eradication of distance; the exposedness to transnational forms of life which are frequently unwanted and not understood.”¹¹⁰

Here again, we are referred to the closedness of the nation-State and indirectly to the counter-model of the open society where especially migrants are engaged in “transnational forms of life”, influenced by habits rooted in their country of origin as well as in the culture of the host State. 62. Economists, for their part, tend to think in terms of resources, whether goods, capital or human resources, which may be used in a more efficient manner in one place than in another and thereby may contribute to an increase in regional or universal welfare; therefore, their interest focuses on the free movement of such resources. It follows that they refer to globalization as a “reduction of market segmentation at the global level [up to a point where] the national and international mobility of goods and production factors is completely unhindered”.¹¹¹

6.

Conclusions

63. What has been said in the preceding sections leads to the conclusion that globalization can be understood neither by simple economic explanations nor as a matter of political fashion. First, it should have become clear that the driving motive behind the outlined developments is not only the pursuit 109 John Baylis and Steve Smith, eds., The Globalization of World Politics, Oxford, 1997, p. 7; several similar definitions are cited at p. 15. 110 Ulrich Beck, Was ist Globalisierung ?, 5th ed., Frankfurt am Main, 1998, pp. 44 et seq. (author’s translation). 111 Wolf Schäfer, “Entmonopolisierung des Nationalen ?”, in Hartmut Berg, ed., Globalisierung der Wirtschaft: Ursachen – Formen – Konsequenzen. Schriften des Vereins für Socialpolitik, N.F. 263, Berlin, 1999, p. 9.

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of greater efficiency in enlarged markets and an aspiration to economic arbitrage, although different price levels for similar goods in different markets may indeed confer strong incentives for trade and transport. To exclusively refer to economic motivations would be too narrow and simplistic an explanation. The tremendous growth rates of passenger transport in civil aviation can be more convincingly attributed to mankind’s eternal desire for mobility, for the discovery of the unknown and for overcoming barriers created by distance. 64. If that is true, a second conclusion can be drawn: the globalization movement of the 1980s and 1990s is not fundamentally different from previous increases in human mobility generated by technological innovation advances such as the organization of postal communication lines, the use of the steam engine for the propulsion of ships or the construction of railroads. The intermittent occurrence of such innovation often gives the impression that completely new problems are generated and posed to society. But there are historical antecedents for the social and political problems created by a sudden increase in mobility, in particular in the nineteenth century.¹¹² Thus, former generations had to cope with similar problems generated by erratic accelerations characterizing technical, economic and social evolution. The main difficulty they raise is the lack of time for reflection; they require very quick reactions from the political and legal system. 65. A third conclusion concerns the relationship between globalization and political decision-making. In the social sciences, there has been a fundamental dispute about whether globalization has been a natural and automatic process flowing from technological innovation in the transport and communication sectors or whether it has been man-made and triggered by conscious and deliberate decisions of the political system. This dispute is very clearly encapsulated in the following citation from Rieger and Leibfried, two authors who stress the political character of globalization: “Rules and regularities can, but need not, apply to human conditions. Human behaviour and the realm of politics are not determined. Every problem presents the actor with alternative possibilities... there are no social scientific theories, trivial ones aside, of necessary truth ... What to globalization theorists as diverse as Melvyn Krauss ... Wolfgang Reinecke ... and Geoff rey Garrett ... seem to be ‘necessary’ developments and ineluctable relationships, may at first glance appear to be deductions from ostensibly manifest premises. Yet in fact, and this is easily demonstrated, these are nothing other than well-worn and ideologically familiar normative demands and apodictic statements. They 112 On the “globalization” period of the late nineteenth century, see Elmar Rieger and Stephan Leibfried, Limits to Globalization, Cambridge, 2003, pp. 17 et seq.; cf. Peter Bernholz, “Globalisierung: Ein neues Phänomen ?”, in Theresia Theurl and Christian Smekal, ed., Globalisierung. Globalisiertes Wirtschaften und nationale Wirtschaftspolitik, Tübingen, 2001, pp. 1 et seq.

Chapter 1 – The Advent of the Open Society argue de more geometrico and thereby conceal the contingent and discretionary nature of social action. That which they portray as a true image and objective investigation of a reality which exists independent of the observer and seems unhinged by any subjective conceptions is actually a model – a normative design.”¹¹³

66. The two opinions emerging from this citation are by no means irreconcilable. Globalization can best be understood as a process resulting from scientific and technological progress and at the same time from political decisions that try to exploit those innovations to the maximum extent possible.¹¹⁴ Those political decisions could hypothetically be reversed, but only at a high price: Such reversal would require sacrificing the use of available technology to a certain extent and, thereby, the renunciation, for the respective societies and national economies, of certain efficiency gains of the past. This would imply the forbearance of productivity gains which flow from these technological innovations. The voluntary abandonment of efficiency gains and benefits which accrue to the economy as a whole is neither realistic nor likely, irrespective of the system of government, but in particular not in democracies. We may therefore consider globalization as an irreversible process which poses serious questions as to the future order of international affairs conducted by both Governments and private actors. 67. A further conclusion reconnects globalization to the concept of the open society. The increasing unboundedness of social and economic life means that the openness of society, in addition to being an objective to be attained by human tolerance and political action, becomes a fact of life. The aforementioned congruence of cultural, economic and political space that characterizes the nation-State has partly ceased to exist. Consumer markets across the globe are dominated by the same trademarks and in some sectors also by the same goods which are traded everywhere. Celebrated awards for books, motion pictures and other artistic creations generate a kind of ubiquitous world culture that complements and partly supersedes national cultures. More and more scientists and managers of business undertakings have international biographies. In all sectors of sports, world cups and Olympic Games create a global elite whose performances are discussed by hundreds of millions of people watching them on television. Important shares of immigrants in national populations import customs and habits of their home countries which are amalgamated with those of their host countries. While 113 Rieger and Leibfried, supra footnote 112, pp. 51-52. 114 Armin von Bogdandy, “Demokratie, Globalisierung, Zukunft des Völkerrechts – Eine Bestandsaufnahme”, ZaöRV 63 (2003) 853-877 at p. 856: “Die als Globalisierung zusammengefassten vielfältigen Entwicklungen sind jedoch nicht allein als ein gleichsam naturwüchsiger Prozess technischer Erfindungen und Applikationen zu erklären, sondern auch als Frucht bewusster politischer Entscheidungen, welche Grenzen unterschiedlichster Art abbauten.”

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nation-States still have borders and preserve some of their characteristics, the open society is a reality for large parts of the globe. People living in those parts are conscious of the liberties allowing them to change their way of life in their home country or to leave that country altogether. These factual changes that have been implemented over the course of two generations have certain legal underpinnings, especially in public international law. They also require a review of many principles of private international law.

Chapter 2

Globalization and the Law

68. The factual changes outlined above have been reflected, affirmed and even strengthened by a large number of legal measures that have been adopted partly as unilateral acts of single nation-States and partly as commitments in bilateral and multilateral treaties under international law; at the regional level in Europe, an entirely new legal system has emerged that aims at the implementation and perpetuation of the open economy and society, the law of the European Union. Section 1 is meant to provide a concise survey of the legal aspects of globalization. Our enquiry will thereafter turn to the consequences of these changes for the regulation of private cross-border relations, i.e. for private international law, see below, Section 2. Section 1: Legal Underpinnings and Attendants of Globalization 69. The overall effect of a great many legal measures adopted over the years has been the gradual liberalization of the cross-border movements of goods and services, of capital and of persons. At the regional level and particularly in Europe, restrictions have been removed to an especially large degree. The five basic freedoms laid down in the European Treaties ensure the free movement of goods, capital and workers, the freedom of establishment and the freedom to provide services.¹¹⁵ Since the 1960s these freedoms have progressively been interpreted as being directly applicable and granting subjective rights to the individuals and companies involved; their implementation is subject to only a few exceptions justified by compelling reasons of the public good.¹¹⁶ Other regional organizations have emerged in various parts 115 See Articles 28, 34, 35, 49, 56 and 63 of the Treaty on the Functioning of the European Union as agreed and amended in the Treaty of Lisbon, OJ 2010 C 83/47. 116 The leading case has been ECJ, 5 February 1963, Case 26/62 (Van Gend & Loos), [1963] ECR 1 (special English edition); on Articles 34 and 35 as they are numbered now, see ECJ, 29 November 1978, Case 83/78 (Pigs Marketing Board v. Raymond Redmond), [1978] ECR 2347, cons. 66; for the freedom of establishment see ECJ, 21 June 1974, Case 2/74 (Reyners v. Belgian State), [1974] ECR 631, cons. 24/28 and 29/31; for the freedom to provide services see ECJ, 3 December 1974, Case 33/74 (Van Binsber-

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of the globe,¹¹⁷ but they have been less ambitious and effective in ensuring free movement. As to regulation outside the European Union, the freedom of trade has received a firm multilateral foundation in the WTO Treaty whereas the free movement of persons is still essentially regulated by national law and bilateral agreements. For the free movement of capital, a legal basis is provided by a very large number of bilateral investment treaties. The foundations for the free trade in services which is basically laid down in the GATS as a part of the WTO Treaty is still uncertain and dependent on further negotiations. 1.

Free Trade in Goods

70. Free trade is rather a newcomer among the principles of international economic law. The academic foundation was laid by the English economist David Ricardo, who first pointed out in 1817, “that our enjoyments should be increased by the better distribution of labour, by each country producing those commodities for which by its situation, its climate and its other natural or artificial advantages, it is adapted, and by their exchanging them for the commodities of other countries, as that they should be augmented by a rise in the rate of profits.”¹¹⁸

At the time, the exploitation of the comparative advantages of the various countries by a liberalization of trade was in fact pursued as a political goal by Great Britain, which had emerged as a very strong trading power in the aftermath of the Napoleonic Wars. But it took 40 more years until the gen v. Bestuur van de Bedrijfsvereniging voor de Metaalnijverheid), [1974] ECR 1299, cons. 24/26; for the free movement of workers see ECJ, 16 June 1992, Case C-351/90 (Commission v. Luxembourg), [1992] ECR I-3945, cons. 18; for the free movement of capital the Court of Justice had initially taken a different stand, see ECJ, 11 November 1981, Case 203/80 (Casati), [1981] ECR 2595, cons. 9-13, but changed its view in favour of direct application after an amendment of the respective Treaty provisions by the Treaty of Maastricht in 1992, see ECJ, 14 December 1995, Joined Cases C-163/94, C-165/94 and C-250/94 (Sanz de Lera), [1995] ECR I-4821, cons. 41 and 42. 117 Alberta Fabricotti, “Economic Organizations and Groups, International”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law, http:// www.mpepil.com (2010), No. 43, reports the existence, in 2007, of 380 regional trade agreements, 205 of which were in force at that time. She provides a useful survey of the major regional organizations in Europe, the Americas, Africa and Asia and the Pacific region, see Nos. 45-57 with many further references in the extensive bibliography. 118 David Ricardo, On the Principles of Political Economy and Taxation, 3rd ed., London, 1821, at pp. 136-137. The 1st edition of the Principles was published in 1817. In a modern edition published in Mineola, NY, in 2004 and introduced by F. W. Kolthammer, the cited passage appears at p. 80.

Chapter 2 –Globalization and the Law

71.

continental economies had recovered and were ready for free trade, such as implemented in a series of treaties subsequent to 1860.¹¹⁹ These bilateral treaties of commerce and navigation or of friendship, commerce and navigation were concluded in great numbers and were characterized as a kind of codification of free trade which enshrined three principles: the national treatment of the citizens of the other contracting States; the termination of the prohibitions of import, export and transit; and the most-favourednation clause, ensuring that the nationals of the other contracting State be treated in the same way as the citizens of the country receiving the greatest privileges from the granting State.¹²⁰ The free trade period came to an end with World War I and the subsequent period of inflation. These occurrences triggered a growing number of State interventions in international money transfers which were designed to stop capital flight. By necessity, those interventions affected import operations and led to a trading system built on prohibitions and quotas and to a coupling of import and export volumes in bilateral relations. ¹²¹ The foundations for the liberalization of trade after World War II were laid as early as August 1941, even before the United States entered World War II, when US President Roosevelt and the British Prime Minister Churchill signed the so-called Atlantic Charter that contained some basic principles the two statesmen held to be fundamental for the development of the world in the post-war period. Among others, they pointed out that “the two states will endeavour with due respect for their existing obligations, to further the enjoyment by all states, great or small, victor or vanquished, of access on equal terms, to the trade and to the raw materials of the world which are needed for their economic prosperity.”¹²²

72. The post-World War II negotiations brought about the General Agreement on Tariffs and Trade (GATT) in 1947, which took provisional effect on 1 January 1948.¹²³ In 1948 the GATT was incorporated into the Havana Charter of the International Trade Organization (ITO), an instrument also covering 119 Georg Erler, Grundprobleme des internationalen Wirtschaftsrechts, Göttingen, 1956, pp. 67-70. 120 Erler, p. 74; Ernst-Ulrich Petersmann, “World Trade Principles”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law, 2010, Nos. 3 et seq.; Meinhard Hilf and Robin Geiß, “Most-Favoured-Nation Clause”, in Wolfrum, ed., Max Planck Encyclopedia of Public International Law, 2010. 121 See Erler at pp. 81-95 on the development of German foreign trade policy between World Wars I and II, in particular p. 89 on the leading role of the currency crisis and pp. 92-95 for a general assessment. 122 Cited after Andreas F. Lowenfeld, International Economic Law, 2nd ed., Oxford, 2008, p. 24, footnote 1. 123 Lowenfeld, p. 27; for the text of the GATT 1947 see the website of the World Trade Organization, http://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm.

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From Closed Nation-States to the Open Society

other fields of international economic law such as restrictive business practices.¹²⁴ However, the Havana Charter did not receive the approval of the US Congress and never became binding law. What remained was the GATT, which had been adopted as an interim agreement but continued to serve, for almost half a century, as the basis for several negotiation rounds serving to adjust the trading system to changing circumstances and to develop free trade. The so-called Uruguay Round finally led to the establishment of an international organization, the World Trade Organization, in 1994.¹²⁵ A slightly amended version of the GATT is now attached to the WTO Agreement as Annex 1A. Following the collapse of various socialist systems in 1990/1991, numerous further States have acceded to the GATT which today stands as the undisputed foundation of the world trading system. The basic principles of the GATT do not differ very much from the bilateral trade agreements concluded in the nineteenth century, see above at paragraph 70, but they are now enshrined in a multilateral and universal treaty. “With respect to all rules and formalities in connection with importation and exportation”, Article I provides for most-favoured-nation treatment. There is a liberalizing and harmonizing effect inherent in this principle since an advantage granted to anyone accrues to everyone’s profit.¹²⁶ A second principle of the GATT provides for what may be called minimum liberalization: under Article II, the contracting States are to accord to the commerce of other contracting parties a treatment that is at least as favourable as that laid down in one of the various schedules to the GATT. This also implies a basic prohibition of all restraints exceeding those existing at the time the treaty was concluded. From several provisions of the GATT, a third principle is inferred limiting trade policy to the imposition of tariffs and thereby excluding in particular quantitative restrictions, see Article XI.¹²⁷ National treatment, as a fourth principle, has been agreed upon only with regard to internal taxation, Article III.¹²⁸ A fi fth characteristic of the GATT system is the commitment of the contracting parties to engage, from time to time, in negotiations for the reduction of customs duties under Article XXVIIIbis. The current round of negotiations was initiated in Doha, Qatar,

124 The text of the Havana Charter is displayed on the website of the World Trade Organization http://www.wto.org/english/docs_e/legal_e/havana_e.pdf. 125 Marrakesh Agreement establishing the World Trade Organization, concluded at Marrakesh on 15 April 1994, 1867 UNTS 3; see also Matthias Oesch, “Uruguay Round”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law, 2010. 126 Meinhard Hilf and Robin Geiß, “Most Favoured Nation Clause”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law, 2010, Nos. 4-5; Christian Tietje, in id., ed., Internationales Wirtschaftsrecht, Berlin, 2009, § 3, Nos. 63 et seq.; Tobias Bender in Meinhard Hilf and Stefan Oeter, eds., WTO-Recht, 2nd ed., Baden-Baden, 2010, § 10, Nos. 29 et seq. at pp. 239 et seq. 127 Lowenfeld, p. 31; Bender in Hilf and Oeter, § 10, Nos. 16 et seq. at p. 236. 128 Tietje(-Tietje), § 3, Nos. 71 et seq.

Chapter 2 –Globalization and the Law

in 2001. Overall, these principles of universal acceptance have proved effective in supporting the steady growth of the international trade in goods. 2.

Trade in Services

74. The liberalization of the international trade in services is still lagging far behind the achievements concerning the trade in goods. It was only with the General Agreement on Trade in Services (GATS), embodied as Annex 1B to the WTO Treaty of 1994,¹²⁹ that the previous network of numerous bilateral agreements was finally superseded by a multilateral foundation. The GATS specifies four modes of provision of services that are covered by the agreement, these depending on whether the provider (through commercial presence or through the presence of natural persons) moves into the country of the client (modes 3 and 4) or whether the client moves into the country of the provider (mode 2) or whether the services themselves are provided across national borders by any means of communication (mode 1), see Article I (2). 75. While many provisions of the GATS are modelled on those of the GATT, there are some significant departures. In both instruments, the cornerstone is the most-favoured-nation clause, see Article II GATS. In order to allow a monitoring of the national regulatory framework of the markets for services, Article III GATS puts the contracting States under an obligation of transparency with regard to the relevant measures of general application pertaining to trade in services. Both instruments allow for a closer regional cooperation, see Article XXIV GATT and Article V GATS. A guarantee of inland treatment with regard to internal taxation, as laid down in Article III GATT, is lacking for services. For many types of services, States have traditionally provided for monopolies or have reserved these markets for their own citizens. The most-favoured-nation clause is therefore of little avail for the opening of the respective markets because it only ensures non-discrimination as compared with other foreigners who are not, however, equally restricted from entry into many markets for services. Specific rules on market access and national treatment of foreign providers are urgently needed. Articles XVI and XVII give evidence of the embryonic state of liberalization in the services sector. In practice, they refer to specific commitments made by single contracting States for specific services. 76. Put in other words, the liberalization of the international trade in services cannot thus far be said to have been realized through a universal and multilateral instrument, instead still being left to unilateral and bilateral action to a large extent. For the countries concerned, in particular developing countries, this way of liberalizing services would allow them a more targeted

129 See Annex 1B to Marrakesh Agreement, supra footnote 125.

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approach in respect of single sectors.¹³⁰ Conversely, the system of specific commitments encourages very selective approaches and even the introduction of new regulatory schemes.¹³¹ According to a very optimistic assessment, the GATS, “although in some ways seriously flawed, ... now offers an overall ‘umbrella’concept for trade in services that, it is hoped, will allow an on-going negotiating process for additional detail (probably at least a 50 year process) to occur.”¹³²

3. 77.

Free Movement of Capital

a) Foreign direct investment The free cross-border movement of capital is primarily significant with regards to investment in foreign production. Once made, such investment very often has the economic nature of sunk costs; it cannot be withdrawn by investors, which makes it easy prey for expropriations as well as other discriminatory measures of the host State. A legal framework favouring crossborder capital flows therefore has to deal not only with the access to the host country, but also with the subsequent phase, i.e. with the substantive and procedural safeguards protecting the investor’s rights. To date, there is no comprehensive multilateral instrument outside the European Union¹³³ on the treatment of foreign investment, but activities sponsored by the World Bank and a vast number of bilateral treaties have created an important corpus of international law.¹³⁴ Formerly, many bilateral treaties of friendship, commerce and navigation dealt with investments made by private investors of one contracting State in the territory of the other contracting State. These treaties usually provided for the non-discriminatory treatment of such investment and for full compensation or – in the terms of the so-called Hull formula – prompt, adequate and effective compensation in the event of a

130 See Martin Michaelis in Hilf and Oeter, § 20, Nos. 44 et seq. at pp. 425 et seq.; see also the report on countries such as India, Indonesia or Malaysia by H. Adolf, “Financial Services Agreement of the GATS: The Developing Countries’ Perspective”, International Trade Law and Regulation, 2000, 207-212. 131 E. Leroux, “Trade in Financial Services under the World Trade Organization”, Journal of World Trade 36 (2002) 413 at 433. 132 John H. Jackson, The World Trading System – Law and Policy of International Economic Relations, 2nd ed., Cambridge, Mass., 1997, 4th print, 2000, p. 2. 133 See Article 63, TFEU; in accordance with that provision both the capital flows within the European Union and those between the European Union and third States are liberalized, see the comprehensive treatment by Steffen Hindelang, The Free Movement of Capital and Foreign Direct Investment, Oxford, 2009, in particular pp. 275 et seq. with regard to third States. 134 Lowenfeld, p. 591.

Chapter 2 –Globalization and the Law

taking by the host State.¹³⁵ However, beginning in the 1960s, many of the young States that acquired independence after World War II were unwilling to embrace that obligation and as a consequence the international community conceived of a new type of investment protection enshrined in bilateral investment treaties (BITs).¹³⁶ 78. The BITs usually address the following issues:¹³⁷ (1) the admission of foreign investors to a State including, in more recent times, restriction of certain performance requirements which may be imposed by the host State, for example the compulsory use of a certain level of local content or the transfer of technology to a national company of the host State; (2) the fair and equitable treatment of the foreign investment as well as its full protection and security; (3) the unhindered transfer of payments, in particular the repatriation of profits flowing from the investment; (4) the preconditions for a lawful expropriation, namely that it has to serve a public purpose, must be nondiscriminatory, is imposed in transparent proceedings, and is compensated by the taking State, usually in accordance with the Hull Formula mentioned above; (5) a most-favoured-nation clause prohibiting the State from treating the foreign investor worse than an investor from another country benefiting from a better protection under the relevant rules; (6) finally a dispute settlement procedure allowing the private investor to initiate arbitration proceedings against the foreign State, the latter, by virtue of the BIT, subjecting itself to the jurisdiction of an arbitration panel. The first of these treaties was concluded between Germany and Pakistan in 1959.¹³⁸ Their number has surged to 2,750 at the end of 2009.¹³⁹ Their conclusion in very large numbers points to a consensus among the international community which some observers consider to be “evidence of customary international law, applicable even when a given situation or controversy is not explicitly governed by a

135 See for the history of that formula in US-Mexican relations: Lowenfeld, pp. 475 et seq. 136 Andreas L. Paulus, “Treaties of Friendship, Commerce and Navigation”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law, 2010, Nos. 4-5. 137 See Giorgio Sacerdoti, “Bilateral Treaties and Multilateral Instruments on Investment Protection”, Recueil des cours 269 (1997), 251-460 (302); Lowenfeld, pp. 555 et seq.; for a survey of the model BIT used by the Federal Republic of Germany see Markus Krajewski, Wirtschaftsvölkerrecht, Heidelberg, 2006, No. 551. A comprehensive survey including national reports of more than 20 countries is provided by Wenhua Shan, ed., The Legal Protection of Foreign Investment, Oxford, 2012. 138 Krajewski, No. 550; Sacerdoti, previous footnote, Recueil des cours 296 (1997), 299. See Treaty between the Federal Republic of Germany and Pakistan for the Promotion and Protection of Investments, done at Bonn on 25 November 1959, BGBl. 1961, II-793. 139 See United Nations Conference on Trade and Development, World Investment Report 2010. Investing in a Low-Carbon Economy, also available online at www.unctad. org/en/docs/wir2010_en.pdf, p. 81, visited on 10 January 2011.

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treaty.”¹⁴⁰ Whatever the outcome of that particular debate, it is noteworthy that States have to such a large scale accepted the clarification of investment disputes by arbitration as well as the standing of private investors in those proceedings.¹⁴¹ b) Other capital flows 79. Apart from investment purposes, the free cross-border flow of capital is also relevant as a yardstick for the confidence of economic actors in the relative strength of an economic system. Where that confidence is lacking, a flight of capital will ensue; where an economy is strong as compared with others, it will attract capital from outside. At all times, and in particular in the preWorld War II period, States have tried to influence this mechanism by all kinds of currency exchange regulations: fi xed exchange rates, restrictions on the convertibility of their respective currencies, devaluations and revaluations, moratoria for the payment of foreign debt owed by their own citizens and companies.¹⁴² Neither general international law nor the International Monetary Fund (IMF) Agreement¹⁴³ restricts such interventions adopted by States for the sake of their balance of payments. The liberalizing effect of the IMF Agreement is limited to so-called current transactions, i.e. payments due, for instance, in connection with foreign trade or as remittances by workers for the support of their families living in their home countries.¹⁴⁴ 80. A far-reaching, almost complete liberalization of international capital flows has been attained, however, by the Organization of Economic Cooperation and Development (OECD), which adopted in 1961 the Code of Liberalization

140 Lowenfeld, p. 584; similar Sacerdoti, supra footnote 137, Recueil des cours 296 (1997), 397: “In any case the consistency of the standard prescribed in BITs warrants the conclusion that at present, in principle, the members of the international community share the view that foreigners cannot be deprived of their property for domestic policy reasons without being effectively compensated for the current value of their investment.” Contra Bernhard Kishoiyian, “The Utility of Bilateral Investment Treaties in the Formulation of Customary International Law”, Northwestern Journal for International Law and Business 14 (1994), 327. 141 See infra, para. 85. 142 Dominique Carreau, “Le système monétaire international privé”, Recueil des cours 274 (1998), 309 et seq.; Caroline Kleiner, La monnaie dans les relations privées internationales, Paris, 2010, Nos. 131-133 ; Hugo J. Hahn, Währungsrecht, Munich, 1990, pp. 309 et seq., summarizing German currency exchange regulations after World War I; see also infra, paras. 741 et seq. 143 Articles of Agreement of the International Monetary Fund, signed and entered into force on 27 December 1945, 2 UNTS 39, Art. VI (3). 144 See Matthias Ruffert, “Capital, Free Flow of”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law, 2010, No. 10.

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of Capital Movements.¹⁴⁵ Subsequent to its initial adoption, the Code has at regular intervals been adjusted and supplemented by decisions of the OECD Council which are binding as between the member States of the OECD under Article 5 (a) of the OECD Convention.¹⁴⁶ According to its Article I, the Code pursues the objective of a progressive reduction of restrictions on capital movements; member States are obliged to not introduce new restrictions (standstill), to not discriminate against individual member countries and to make their barriers to capital movements transparent and accessible to all interested parties. Unlike the 34 member States of the OECD, important transition economies such as China, Brazil and India are not, however, bound by the Code. Nonetheless, the Code has implemented standards which are observed by an increasing number of non-OECD countries. 4. 81.

The Free Flow of Data

Contrary to goods and services, neither data nor information has ever been the object of a comprehensive protectionist policy of nations in the sense that domestic data should not be exported and foreign data should not be imported. There have at all times been exceptions for sensitive information concerning matters such as national security or – in authoritarian regimes – facts regarding the operation and stabilization of the political system. But apart from such matters, there has always been a free cross-border flow of information, holding true even for data which forms the object of intellectual property rights (subject to appropriate licensing agreements). Thus, the unprecedented data flows through the World Wide Web and satellite communication did not encounter any regulatory barriers in the individual States which had to be lowered or overcome by means of international agreements. Quite to the contrary, the speedy and unhindered transmission of unlimited amounts of data including personal data has raised concern about the protection of personal rights and privacy. Beginning in about 1970, national data protection laws enacted in various European countries, Directives of the European Union, Article 8 of the Union’s Charter of Fundamental Rights and numerous activities of various international organizations have been rather directed towards a restriction of such unhindered flows of sensitive data.¹⁴⁷

145 Organisation for Economic Co-operation and Development, OECD Code of Liberalization of Capital Movements, accessible at http://www.oecd.org/dataoecd/10/62/39664826.pdf; see also the users’ guide of 2008, accessible at http://www. oecd.org/dataoecd/21/23/38072327.pdf. 146 See Ruffert, supra footnote 144, No. 17; Hahn, supra footnote 142, p. 327. 147 Peter Malanczuk, “Data, Transboundary Flow, International Protection”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law, 2010, Nos. 5 et seq.; Lee Bygrave, “Privacy and Data Protection in an International Perspective”, Scandinavian Studies in Law 56 (2010), 166-200 (180-188); Michael Kort, “Datenschutzrecht in der Europäischen Union: de lege lata und de lege ferenda”, Der Be-

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5.

Migration

82. Outside the European Union, human cross-border mobility is essentially a matter for national regulations on emigration and immigration. A multilateral and universal legal framework exists only for refugees, viz. the Convention relating to the status of refugees of 1951¹⁴⁸ and its extension by the Protocol of 1967.¹⁴⁹ However, these instruments do not establish a right of access to a certain State of refuge; rather, their definition of refugee presupposes that the respective person has already left his home State out of fear of persecution. The Convention attaches to the factual presence of the refugee in a contracting State. The situation for asylum seekers under human rights instruments appears to be similar. Under Article 12(2) of the International Covenant on Civil and Political Rights,¹⁵⁰ “everyone shall be free to leave any country, including his own”, but there is no corresponding right of an alien to enter the territory of a State party or to reside therein.¹⁵¹ 83. The regulation of migration of persons other than refugees is even less developed in international law. No State is obliged to admit aliens into its territory.¹⁵² As pointed out above, Article 12(2) of the International Covenant on Civil and Political Rights ensures the right of the individual to leave a country,¹⁵³ but a right to enter a foreign country is not granted by international law, although it may in particular contexts result from other human rights such as the right to family reunification.¹⁵⁴ In general, however, it is

148 149 150

151

152 153 154

trieb, 2012, 1020-1024, providing a survey of such activities. In a recent landmark decision the European Court of Justice declared a directive on the retention of electronic data by police forces to be invalid because of an infringement of Articles 7 and 8 of the Charter of Fundamental Rights, see ECJ, 8 April 2014, Joined Cases C-293/12 and 594/12 (Digital Rights Ireland v. Minister of Communications), [2014] ECR I-0000, not yet reported. This might be a first step to a restriction of crossborder flows of personal data imposed by fundamental rights. Convention relating to the Status of Refugees, signed at Geneva on 28 July 1951, 189 UNTS 150. Protocol relating to the Status of Refugees, signed at Geneva on 31 January 1967, 606 UNTS 267. International Covenant on Civil and Political Rights, signed at New York, 16 December 1966, 999 UNTS 171 and 1057 UNTS 407; see Anne Peters, “Wettbewerb von Rechtsordnungen”, in Gemeinwohl durch Wettbewerb. VVDStRL 69 (2010), 7-56 at p. 42. Dieter Kugelmann, “Refugees”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law, 2010, No. 38, with a reference to a corresponding comment adopted by the Human Rights Committee of the United Nations. Dieter Kugelmann, “Migration”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law, 2010, No. 22. See supra footnote 150. See Article 23 of the International Covenant on Civil and Political Rights, supra footnote 150; Article 8 of the European Convention for the Protections of Human Rights and Fundamental Freedoms, signed at Rome on 4 November 1950, 213 UNTS

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up to the municipal law on aliens as found in the individual States to decide on the admission of foreigners to their respective territories. Such migration may be based on diverse motivations; the expectation of employment and an improved economic condition is often an important factor on the part of the migrants. 84. Where that economic motivation of the migrants has met with a particular scarcity of labour on the side of a receiving State, that country may even have concluded a bilateral agreement with the country of the workers’ origin. Thus, in the 1950s and 1960s, when western European countries experienced a period of economic boom and full employment, some of their Governments entered into various bilateral recruitment agreements with countries in southern Europe and northern Africa; after the collapse of the socialist systems in eastern Europe, similar agreements were made with countries such as Poland and Hungary.¹⁵⁵ In the economic recovery phase after World War II, Germany, for example, concluded such recruitment agreements with Italy, Greece and Turkey.¹⁵⁶ They were not meant to trigger a permanent immigration of foreigners. The recruitment was subject to certain conditions which give evidence of the intention of the Governments involved to bridge a temporary shortage of labour on the German market and to alleviate the strain of unemployment in the Mediterranean countries. Thus, the 1961 agreement between Germany and Turkey established an upper limit of two years for the duration of residence permits and – contrary to the agreement between Germany and Italy¹⁵⁷ – did not provide for family reunification. However, the time limit for residence permits was soon lifted,¹⁵⁸ and the agreement became the foundation for a mass immigration of Turkish

155

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158

221; Article 10, Convention on the Rights of the Child, signed at New York on 20 November 1989, 1577 UNTS 3. This relates to Belgium, France, Germany and Austria, but apparently less so to the Netherlands and the United Kingdom, see the country reports in Ulrike Davy, ed., Die Integration von Einwanderern – Rechtliche Regelungen im europäischen Vergleich, Frankfurt, 2001, p. 217 for Belgium, pp. 316-317 for Germany, pp. 452-453 for France, pp. 534-535 for the Netherlands, pp. 603-604 for Austria, p. 824 for the United Kingdom. See for the agreement between Germany and Turkey, Vereinbarung vom 30.10.1961 zur Regelung der Vermittlung türkischer Arbeitnehmer nach der Bundesrepublik Deutschland, Bundesarbeitsblatt, 1962, 69. A complete list of the various recruitment agreements with the sources in the official gazette can be found in Davy, supra footnote 155, p. 997 ([D] Anwerbeabkommen) and p. 1000 ([D] Gastarbeitsabkommen). See Vereinbarung zwischen der Regierung der Bundesrepublik Deutschland und der Regierung der italienischen Republik über die Anwerbung von italienischen Arbeitskräften nach der Bundesrepublik Deutschland of 20 December 1955, as amended on 20 February 1961, printed in Bundesarbeitsblatt, 1962, 71 et seq., see Article 16 on family reunification. See the exchange of memoranda by the German and the Turkish Governments of 20 July and 30 September 1964, Bundesanzeiger, 1968, No. 22, p. 1 with the text of the

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citizens into Germany, with a rough estimate of 500,000 to 750,000 immigrants entering Germany until recruitment was stopped in 1973. 6.

Institutionalization and Private Rights

85. To summarize what has been outlined so far, it is fair to say that the free movement of goods and capital has a rather solid foundation in international law, that the free flow of data is ensured without such a basis, that a programme for the further liberalization of the trade in services has been agreed and that the free movement of persons is still very much a matter of the individual States. This legal synopsis appears less impressive than the factual changes outlined above in Section 2. There are, however, two factors which have provided additional support for the opening of national economies and societies. One is the institutionalization of international law; the other one the progressive granting of rights, including some mobility rights, to private persons. 86. After World War II the international community founded a vast array of international organizations, both at the universal and at the regional level, which have made great contributions to the internationalization of lawmaking in their respective fields. Whether one speaks of the World Intellectual Property Organization, the United Nations Educational, Scientific and Cultural Organization (UNESCO), the International Telecommunications Union, the International Maritime Organization, the International Civil Aviation Organization, the World Health Organization, the World Bank or the International Monetary Fund, these and many other organizations of the United Nations system help in both perceiving those problems usually first visible at the national level as international or global problems and in forging international solutions for them. Conversely, national advances, i.e. political action decided upon by national Governments and designed to cope with such problems at the national level, require more explanation and justification at present in order to appear legitimate; this is particularly the case where such measures have the effect of separating States from each other. Thus, the institutionalization of international law has led to a very sustainable change of global political consciousness. 87. The institutionalization is not limited to law-making agencies. A large number of international courts and tribunals as well as dispute settlement panels and arbitration institutions have been established which engage in judicial activities in most areas of the law and thereby affirm the rule of law in international relations.¹⁵⁹ While international courts traditionally have dealt with disputes between States, private persons are now increasingly being agreement as amended. Immigration from Turkey later continued outside effective international agreements. 159 For a survey of the great variety of such institutions see August Reinisch, “Verfahrensrechtliche Aspekte der Rechtskontrolle von Organen der Staatengemeinschaft”,

Chapter 2 –Globalization and the Law

afforded standing before such courts. The most obvious example is the individual complaint alleging a violation of human rights which may be raised before the European Court of Human Rights, with thousands of cases being lodged every year.¹⁶⁰ But standing is also granted to private entities in the settlement of disputes in deep seabed mining before the International Tribunal for the Law of the Sea.¹⁶¹ A third example of high practical importance can be found in the protection of foreign investment. The bilateral investment treaties referred to above usually contain clauses on the settlement of disputes which allow private investors and/or their home countries to initiate arbitration proceedings either on an ad hoc basis subject to, for example, the UNCITRAL Arbitration Rules or in the International Centre for the Settlement of Investment Disputes (ICSID) which was established in the 1960s specifically for that purpose.¹⁶² Article 25 of the ICSID Convention provides for the standing of nationals of contracting States and defines this status in detail. 88. This development has a particular significance for the opening of national economies and societies. To the extent that decisions about the judicial enforcement of rights are no longer reserved to States, instead being entrusted to private persons who are actually the beneficiaries of international law, the decision is no longer a matter predominantly influenced by political discrein Die Rechtskontrolle von Organen der Staatengemeinschaft. Vielfalt der Gerichte – Einheit des Prozessrechts ? BerDtGesVR 42 (2007), 43-92. 160 Convention for the Protection of Human Rights and Fundamental Freedoms, done at Rome on 4 November 1950, as amended by Protocol No. 11, Restructuring the Control Machinery Established Thereby, done at Strasbourg on 11 May 1994, 2061 UNTS 7; see Article 34 of the amended Convention and on its application Francis Jacobs and Robin White, The European Convention on Human Rights, 2nd ed., Oxford, 1996, pp. 349-352; Karen Reid, A Practitioner’s Guide to the European Convention on Human Rights, 2nd ed., London, 2004, No. I-51; Frédéric Sudre, Droit international et européen des droits de l’homme, 7th ed., Paris, 2005, p. 552. According to the statistical information displayed on the website of the European Court of Human Rights, the Court received no less than 57,400 applications in 2010, see www.echr.coe.int/ECHR/EN/Header/Reports+and+Statisctics/Statistics/ Statistics+information+by+year. 161 Cf. Article 20, No. 2, of the Statute of the International Tribunal for the Law of the Sea, Annex VI to the United Nations Convention on the Law of the Sea (UNCLOS), done at Montego Bay on 10 December 1982, 1833 UNTS 2; see also Article 187 (c) of the Convention and Niels-Jürgen Seeberg-Elverfeldt, The Settlement of Disputes in Deep Seabed Mining, Baden-Baden, 1998, pp. 69 et seq. 162 Convention on the Settlement of Investment Disputes between States and Nationals of Other States, signed at Washington on 18 March 1965, 575 UNTS 159; for a survey see Christian Tietje, “The Law Governing the Settlement of International Investment Disputes – Structures and Some Recent Developments”, in id., ed., International Investment. Protection and Arbitration – Theoretical and Practical Perspectives, Berlin, 2008, 17-32. See also Sacerdoti, supra footnote 137, Recueil des cours 296 (1997), 420-436 for a number of other dispute settlement mechanisms.

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tion. Rather, individuals and companies will initiate proceedings when they consider this step as beneficial to them. At the same time, they indirectly contribute to the affirmation of international law by judgments and awards, many of which are published and contribute to the further development of international law. When private actors, being representatives of their respective societies, enforce their own rights and liberties, they render these liberties more effective and thereby contribute to the opening of closed national systems. Section 2: Consequences for Policy-Making and Regulation 89. The increase of international exchanges resulting from the growing permeability of frontiers is a challenge for legal systems of the world which often have grown from closed systems in respect of values and traditions; it affects many areas of the law.¹⁶³ Some examples: In neighbourhoods of Christian tradition, the construction of mosques and minarets may raise serious administrative law problems, as does the ritual slaughtering by the shechita in light of animal welfare standards recognized by the law in some countries. The co-existence of large groups of different cultural origin and habits in one and the same city may suggest a zoning policy favouring separate settlements for the sake of social order and peace which, however, will be considered as a form of discrimination by others. The ban on headscarves for women in public buildings or for female teachers has been challenged in European administrative courts now many times. In countries of Islamic tradition, the figurative motives and sexual innuendo common to Western commercials pose a similar challenge to customary standards of behaviour recognized by the law. The tensions are equally noticeable in substantive private law. Even where immigrants from an Islamic background are naturalized in Western countries and therefore become subject to the family law of their new citizenship, they often adhere to habits which are characteristic of a different cultural tradition such as marriages arranged by the families of the spouses or the provision of dowers; such habits cannot be accommodated in Western law without an adjustment of some accepted rules and principles. What becomes visible in these examples are the contours of a new discipline of the law, the law of integration. While it deserves close attention, the present investigation has by necessity to focus on one of its aspects, that of private international law. 90. In respect of private international law, several changes have occurred which have had a strong impact on policy-making in this field of the law. First, as compared with the past of closed societies, States and their Governments are much less aware of the particular features and international links of 163 For the following examples see the report on the German situation in Jürgen Basedow, “Multiculturalism, Globalisation and the Law of the Open Society”, Revue hellénique de droit international 62 (2009), 715-742 at 727-729.

Chapter 2 –Globalization and the Law

the private transactions of individuals and companies. As the empirical or knowledge base underpinning State regulation is vanishing, that regulation is progressively deprived of both its justification as well its relevancy in the eyes of private actors, which in turn favours the emergence of private regulation, below, subsection 1. Second, societal fact situations and economic transactions are increasingly delocalized, losing the clear links with any specific jurisdiction; new techniques are thus required for the conflict of laws to cope with the growing number of pluri-lateral connections, below, subsection 2. Third, the combined effect of the two just-outlined observations gives rise to regulatory (or legislative) competition between States, carried out, inter alia, through appropriate conflict rules, below, subsection 3. Fourth, the influence of the individual States on cross-border movements of persons and capital, and of goods and services, is shrinking, a process that gives support to broad tendencies towards the unification or harmonization of laws as well as the transfer of sovereign powers to regional or international organizations, below, subsection 4. Fifth, as fact situations are increasingly often connected to more than one State, State actors and in particular the courts realize that for the promotion of justice in cases linked to several States, it is not sufficient to demarcate spheres of judicial competence, but that the cooperation between the judiciaries of the several countries involved has to be encouraged, below, subsection 5. 1. 91.

The Loss of State Knowledge and Private Rule-Making

Normative decisions are usually based on certain assumptions about reality. With regard to judicial decisions, this comes to the fore very clearly in the Roman adage: da mihi factum, dabo tibi jus. But the same dependency on a proper appreciation of the facts also applies to normative precepts designed to guide conduct and the settlement of future disputes.¹⁶⁴ With regard to the construction of “a rational economic order”, the Austrian economist and Nobel Laureate Friedrich von Hayek was the first to point out the futile attempts of central agencies to collect all the information needed for the planning of the economy.¹⁶⁵ According to von Hayek, economic problems always and only arise as a consequence of change, and this change usually occurs

164 See Arno Scherzberg, “Wissen, Nichtwissen und Ungewissheit im Recht”, in Christoph Engel, Jost Halfmann and Martin Schulte, ed., Wissen – Nichtwissen – Unsicheres Wissen, Baden-Baden, 2002, pp. 113-144, at p. 121 : “Das Recht … hat die Befindlichkeit und Entwicklung der von ihm geregelten gesellschaftlichen Prozesse richtig zu diagnostizieren und zu prognostizieren – es kann nur gelten, wenn es die gesellschaftlichen Sachverhalte auch ‘triff t’ mit seinen tatbestandlichen Erwartungen. Es richtet sich an Adressaten, die ihrerseits unter den Bedingungen der Ungewissheit mit Recht interagieren, und wird nur wirksam, wenn es diesen geeignete Maßstäbe für ihre fortlaufende Selbstorientierung bietet.” 165 F. A. von Hayek, “The Use of Knowledge in Society”, The American Economic Review 35 (1945), 519-530.

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not at the central level of the planners who might be identified with State rule-makers, but within the numerous companies and lives of individuals. He concludes that awareness of these changes is “of the kind which by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form. ... It follows from this that central planning based on statistical information by its nature cannot take direct account of these circumstances of time and place. ... It would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances who know directly of the relevant changes and of the resources immediately available to meet them.”¹⁶⁶

92. Translated into the language of law, these observations have a double meaning. First, an accurate appraisal of social and economic reality is a necessary prerequisite for the adoption of rules which are respected by the addressees and which have a certain impact on social and economic reality. Examples from substantive law affirm this observation. If, for example, fault-based liability were introduced for the operators of nuclear power plants or for other high-risk technology, this regime would clearly not address the social and economic problems inherent in such operations. In a similar vein, mandatory contract law is often designed to outweigh a disparity of information existing between the contracting parties. Its adoption therefore requires an assessment, by the legislature, of the existence of such disparity in a certain type of situations.¹⁶⁷ Where such mandatory information requirements apply in the absence of asymmetric information, the respective rules will generate unnecessary costs and be considered as flowing from a patronizing attitude of the legislature. The second influence for law that may be drawn from von Hayek’s considerations on central planning relates to the difficulty legislatures face in accurately assessing the social reality addressed by legal rules. As a consequence, rule-making should be left to a greater extent to the private actors themselves. 93. The observations made above with regard to law in general also apply to private international law. Most conflict rules depict a certain perception, by the legislature or the courts, of the reality of international economic or social relations. An example is the nationality principle that still prevails with regard to personal status in many continental European countries, but also in the private international law of several countries of the Middle

166 Von Hayek, supra footnote 165, p. 524. 167 See for example Robert Cooter and Thomas Ulen, Law and Economics, 4th ed., Boston, 2004, pp. 200 et seq.; Gerhard Wagner, “Zwingendes Privatrecht”, ZEuP (2010), 243-278 at pp. 257-258.

Chapter 2 –Globalization and the Law

East ¹⁶⁸ and Japan¹⁶⁹. The principle was conceived and advanced by the Italian scholar Pasquale Stanislao Mancini,¹⁷⁰ who argued that the affi liation of an individual to a nation determines his or her character and that the nation is constituted by a number of factors including geography, language, race, customs, religion and also its law; since the individual’s character is influenced by the laws of his or her home country, that law should govern personal status in private international law.¹⁷¹ Similar reasons have been given by many authors in subsequent years.¹⁷² When the recruitment of foreign workers, so-called guest workers, started in Germany in the 1950s, adherence to the nationality principle was defended by many scholars arguing that the foreign workers’ citizenship still designated a closer relationship than their habitual residence. This was underpinned by the prediction that these migrants would return to their home countries after retirement at the latest and that the centres of their private legal relations were therefore located in their respective home countries.¹⁷³ As such factual assessments are, in the course of globalization, belied by social reality, abidance by the 168 See for example for Egypt, Articles 11 et seq. of the Civil Code, in French and German in Jan Kropholler, Hilmar Krüge, Wolfgang Riering, Jürgen Samtleben and Kurt Siehr, eds., Außereuropäische IPR-Gesetze, Hamburg and Würzburg, 1999, p. 14; similarly for Jordan, Articles 12 et seq. of the Civil Code, ibid., p. 324, and for Iran, Articles 6, 7 and 962 et seq. of the Civil Code, p. 298; for Tunisia, Articles 39 et seq. of the law of 1998, p. 880. 169 See Articles 4 et seq. of the Act on General Rules for Application of Laws No. 78 of 2006, English translation in Jürgen Basedow, Harald Baum and Yuko Nishitani, eds., Japanese and European Private International Law in Comparative Perspective, Tübingen, 2008, p. 405. 170 See the biographical essay by Erik Jayme and Pasquale Stanislao Mancini, Internationales Privatrecht zwischen Risorgimento und praktischer Jurisprudenz, Ebelsbach 1980. 171 First developed by Pasquale Stanislao Mancini, “Della nazionalità come fondamento del diritto delle genti. Prelezione al corso di diritto internazionale e marittimo, pronunziata nella R. Università di Torino nel dì 22 gennaio 1851”, in id., Diritto internazionale, Naples, 1873, pp. 1-64 (27 et seq.); see also id., “De l’utilité de rendre obligatoire pour tous les Etats, sous la forme d’un ou de plusieurs traités internationaux, un certain nombre de règles générales du droit international privé pour assurer la décision uniforme des conflits entre les différentes législations civiles et criminelles”, Clunet 1 (1874), 220-239 (I), 285-304 (II), in particular pp. 224-225 and 292 et seq. See also the thorough treatment by Heinz Peter Mansel, Personalstatut, Staatsangehörigkeit und Effektivität, Munich, 1988, pp. 16 et seq. 172 See for example in Germany, Ernst Frankenstein, Internationales Privatrecht, Vol. I, Berlin, 1926, pp. 36-37, pointing out that the colonies of foreigners “durch engsten Zusammenschluss, oft unter Förderung des Heimatstaates, den Zusammenhang mit der Heimat aufrechterhalten, die Sprache der Heimat reden, die Feste der Heimat feiern …”. 173 See the sceptical remarks about such predictions by Turul Ansay and Dieter Martiny, “Die Gastarbeiterfamilie im Recht”, in Tuğrul Ansay and Volkmar Gessner, ed., Gastarbeiter in Gesellschaft und Recht, Munich, 1974, pp. 171-207 at p. 176.

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nationality principle in private international law becomes increasingly questionable. But the criticism is not only directed against the use of nationality as opposed to habitual residence as a connecting factor for personal status. That alternative has been discussed for decades.¹⁷⁴ Even more doubtful is the presumptuous prediction by a State, i.e. by its legislature or its courts, that an individual will either maintain closest ties with the home country or will give up these ties in favour of closer ties with the country of habitual residence. The first prediction will be correct for some persons, the second one for others. But whatever the conflict rule will be, it will increasingly turn out to be wrong. In accordance with the conclusion drawn by von Hayek in respect of economic organization, the individual is probably in a better situation than any State to decide which law will suit his or her needs presently and in the future. 94. Similar arguments could be made up with regard to contracts, torts or corporations. The traditional connecting factors for contracts – the place of performance, the place of contracting, the habitual residence of the debtor of the characteristic performance – all build upon a certain assumption about the centre of gravity of a given contract. They suit many simple transnational contracts between parties established in different countries for cross-border supplies. But they cannot reasonably apply without modifications to the complex contracts increasingly common in open societies. Where a party sequentially accepts various clauses of a contract offer while staying in different countries, for example by using e-mail correspondence for the negotiations, the place of contracting becomes completely immaterial. Similarly, the place of performance which can be determined for a single obligation loses its significance in contracts providing for obligations of different kinds and in respect of branches of the creditor established in different countries. More and more contracts adopt the form of a cooperation instead of an exchange of money against the supply of goods and services; the stronger the cooperative elements, the less possible the identification of a characteristic performance. 95. With regard to business torts, the place where the damage occurs, a connecting factor which is frequently used for the determination of the applicable law, very much depends on market strategies of the private actors which are difficult to predict for State rule-makers in regards to open markets. Moreover, such damage often consists of pure economic loss, the reverse side of profits and benefits which may be assigned, within a network or group of companies, to an affiliate deliberately selected, e.g. for tax reasons. Whatever the connecting factor for corporations might be, the free cross-border movement of capital and investment protection allow for a sophisticated division of functions between the various affi liates within a multinational

174 See Louis I. de Winter, “Nationality or Domicile ? The Present State of Affairs”, Recueil des cours 128 (1969), 347-503.

Chapter 2 –Globalization and the Law

group of companies. It is therefore rather arbitrary for statutory or judgemade conflict of laws to localize a company within a given jurisdiction. 96. To sum up, the opening of societies and economies progressively deprives State rule-makers of their ability to to have a sufficient awareness of the typical transnational situations and to forge corresponding rules. Similar to what was postulated by von Hayek, knowledge of the factual circumstances which is material for the regulation of international transactions is much more likely to be vested, in open societies, in private individuals than in Governments or courts of law. As a consequence, private rule-making, whether in a collective way by associations and other private bodies or by the individual through private choice of law, comes to the fore.¹⁷⁵ Subject to certain limitations which will be discussed later on, private rule-making should therefore take the lead since it is much closer to the relevant facts and changes occurring in society and the global economy. The remaining need for public rule-making relates to four situations: first, to default cases where the parties have not provided for private ordering. Second, to the necessary balance in cases where private ordering results from some kind of market imperfection. Third, to situations where third parties may adversely be affected by a private disposition. And fourth, where a single State pursues public interests of a political, economic or social nature that are at stake and have to be imposed. 2. 97.

Delocalization and the Choice of Connecting Factors

As shown above, shifting the task of rule-making to private actors does not solve all problems. Public rule-making will continue to be required where private rule-making is lacking or ineffective or immaterial due to market imperfections, in particular asymmetric distributions of information, and where public interests have to be protected. However, public law-making necessarily depends on a certain localization of the fact situations to be covered. State sovereignty has territorial limits which are rather strict with regard to enforcement. While prescriptive jurisdiction may reach out beyond those limits, the designation of the applicable law requires some proximity

175 See for example Horatia Muir Watt, “Aspects économiques du droit international privé”, Recueil des cours 307 (2004), 25-383 (47 et seq.), who speaks of an “essor contemporain de la volonté privée dans des domaines traditionnellement perçus comme relevant de réglementations internationalement impératives”; Pedro Alberto de Miguel Asensio, “El Derecho Internacional Privado ante la Globalización”, Annuario Español de Derecho Internacional Privado 1 (2001), 37-87 (47), pointing to “la creciente importancia que assumen organismos y processos de creación de normas de caracter privado o extra-estatal”. At p. 53 the author describes a “desarollo de mecanismos de autorregulación” and at pp. 75 and 77 et seq. the growing significance of party autonomy in private international law; see also Erik Jayme, “Le droit international privé du nouveau millenaire: La protection de la personne humaine face à la globalisation”, Recueil des cours 282 (2000), 9-40 (37 et seq.)

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of the case to the respective country, a proximity which usually is expressed by a specific connecting factor.¹⁷⁶ Even where governmental interests are explored to determine the applicable law as recommended by some US authors, proximity plays a certain role in the ascertainment and weighing of the various government interests involved.¹⁷⁷ 98. As national boundaries are becoming increasingly permeable, allowing for broader cross-border movements of people and economic resources, a general process of delocalization of fact situations is taking place.¹⁷⁸ It is particularly pronounced in cyberspace. Where music or pictures or software is sold online, the whereabouts and identity of the seller will often be undisclosed to the buyer (and vice versa) and can be ascertained only with great difficulty. Likewise, the infringement of a trademark on the World Wide Web occurs at a universal level, while the place of acting where the perpetrator could theoretically be enjoined may be almost undetectable for the owner of the respective intellectual property rights. 99. But even in the “real world” the ascertainment of relevant connections encounters serious problems. Where is the habitual residence of a professor who has his family home in Brussels but teaches at a university in London ? And what about a commuter domiciled in Bratislava and employed in Vienna ? Open frontiers and the needs of dual-career couples favour a delocalization of individuals and families up to a point where single connecting factors become meaningless and the link with any given jurisdiction can only

176 Lagarde, “Le principe de proximité dans le droit international privé contemporain”, Recueil des cours 196 (1986), 9-237 at p. 29 ; this approach goes back to Savigny, p. 28, who postulated that “for every legal relation [there] should be identified the jurisdiction which this legal relation belongs to or is subject to in accordance with its legal nature”. As pointed out by Lagarde, the Savignyan approach was aprioristic and has evolved, in modern times, towards a more specific assessment of proximity. 177 According to Brainerd Currie, “The Constitution and the Choice of Law: Governmental Interests and the Judicial Function”, University of Chicago Law Review 26 (1958), 9-84 at p. 10, reprinted in id., Selected Essays on the Conflict of Laws, Durham, NC, 1963, pp. 188-282 at p. 189, the court should determine whether in the light of “the relationship of the forum state to the case at bar – that is to the parties, to the transaction, to the subject matter, to the litigation … the state has an interest in the application of its policy in this instance”. However, the discussions of the American conflicts revolution have focused much more on substantive policies of the various States and their ascertainment and weighing than on the significance of localizing factors, see the papers in the symposium “New Trends in the Conflict of Laws”, Law and Contemporary Problems 38 (1963), 673-869, including some papers on European positions. 178 Muir Watt, Recueil des cours 307 ( 204), 43: “Le territoire tend à perdre sa signification en tant qu’assise de l’autorité du législateur national …”; de Miguel Asensio, Anuario Español de Derecho Internacional Privado 1 (2001), 43: “Las nociones de proximidad fisica y de comunidad geográfica pierden parte de su sentido …”.

Chapter 2 –Globalization and the Law

be established by an accumulation of a number of connecting factors.¹⁷⁹ Similar problems may arise, for example, where the country in which an employee habitually carries out his work in performance of an employment contract has to be ascertained. Open frontiers allow for multinational enterprises and networks sending their employees for periods of time to locations in different countries, and the seat of the employer may also be more an expression of a rational maximization of advantages provided by company law, the social security regime or labour and tax law than an indicator of social integration in that country. Finally, it has to be kept in mind that the larger part of the surface of our planet is covered by oceans which are mainly mare liberum and thus not subject to the sovereignty of any State. As mankind increasingly avails itself of maritime resources and events localized in those spheres become more frequent, connecting them to single jurisdictions will continue to meet new challenges.¹⁸⁰ 100. Delocalization has several serious consequences for the legal framework of cross-border and transnational movements. In the first place, many of the traditional connecting factors found in conflict rules turn out to be too rigid to cope with the great variety of conditions of cross-border life that evolve in open societies. More flexibility is needed, for example through exceptions in the conflict rules that allow for the application of the law of a country having a closer connection with the facts of the case.¹⁸¹ Other techniques aiming at more flexibility consist in the use of “cascades” or “ladders” of connecting 179 When asked of the significance of the habitual residence of a child that had moved several times between Finland and Sweden, the European Court of Justice gave the following answer: “The habitual residence of a child … must be established on the basis of all the circumstances specific to each individual case. In addition to the physical presence of the child in a Member State, other factors must be chosen which are capable of showing that presence is not in any way temporary or intermittent and that the residence of the child reflects some degree of integration in a social and family environment. In particular, the duration, regularity, conditions and reasons for the stay on the territory of a Member State and the family’s move to that State, the child’s nationality, the place and conditions of attendance at school, linguistic knowledge and the family and social relationships of the child in that State must be taken into consideration.” (See ECJ, 2 April 2009, Case C-523/07 (A), [2009] ECR I-2805, cons. 37-39.) Concealed behind the soft formula of habitual residence, this amounts to the cumulative application of a large number of connecting factors. 180 Cf. Jürgen Basedow, “Rome II at Sea – General Aspects of Maritime Torts”, RabelsZ 74 (2010), 118-138; Kurt Siehr, “The Rome II Regulation and Specific Maritime Torts: Product Liability, Environmental Damage, Industrial Action”, RabelsZ 74 (2010), 139-153. 181 See in general de Miguel Asensio, Anuario Español de Derecho Internacional Privado 1 (2001), 37 at 75; for a detailed account of statutory clauses correcting the basic rule of connection see Lagarde, Recueil des cours 196 (1986), at pp. 97 et seq.; González Campos, Recueil des cours 287 (2000), 253 et seq.

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factors: The connecting factor employed at a subsequent rung only comes into play in the absence of the facts required by the preceding rung;¹⁸² an example is provided by Article 8 of the European Divorce Regulation.¹⁸³ A further flexibilization may be attained by a grouping of contacts whereby the applicable law is only designated if several contacts coincide within the same jurisdiction.¹⁸⁴ A more general method of flexibilization of conflict rules consists in the use of open criteria such as habitual residence¹⁸⁵ or the “direction of activities” – by a professional – to the country of the habitual residence of a consumer.¹⁸⁶ Further evidence for these developments 182 The arrangement of connecting factors in a kind of ladder or cascade was first conceived in Germany by Gerhard Kegel and is, for example, incorporated in Article 14 of the Introductory Law of the German Civil Code (EGBGB), see Gerhard Kegel and Klaus Schurig, Internationales Privatrecht, 9th ed., Munich, 2004, p. 832; for a more general assessment see González Campos, Recueil des cours 287 (2000), 226 et seq. 183 Article 8 of Council Regulation (EU) No. 1259/2010 of 20 December 2010 implementing enhanced co-operation in the area of the law applicable to divorce and legal separation, OJ 2010 L 343/10, provides for divorce and legal separation to be subject, in the absence of a choice of law “to the law of the State: (a) where the spouses are habitually resident at the time the court is seized; or, failing that (b) where the spouses were last habitually resident, provided that the period of residence did not end more than one year before the court was seized, in so far as one of the spouses still resides in that state at the time the court is seized; or, failing that (c) of which both spouses are nationals at the time the court is seized; or, failing that (d) where the court is seized.” Cf. Ilaria Viarengo, “Il Regolamento UE sulla legge applicabile alla separazione e al divorzio e il ruolo della volontà delle parti”, Riv. dir. int. priv. proc. 47 (2011), 601-624 at p. 619: “cascata di collegamenti successivi”. 184 See Gonzáles Campos, Recueil des cours 287 (2000), 231 et seq. Article 8 of the European Divorce Regulation, see the previous footnote, uses this technique in letter (b) where the last common habitual residence of the spouses is only declared to matter if one of the spouses still resides in the same State at the time of the proceedings. Another example is given by Article 5 (1) (a) of the Rome II Regulation (EC) No. 864/2007 of the European Parliament and of the Council of 11 July 2007 on the Law Applicable to Non-contractual Obligations; under that provision the law of the country of the victim’s habitual residence, which would generally apply under Article 4, only governs product liability if the product was marketed also in that country. 185 See the explanations given by the European Court of Justice, supra footnote 179. 186 See Article 6 (1) (b) of the Rome I Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the Law Applicable to Contractual Obligations, OJ 2008 L 177/6, subjecting consumer contracts to the law of the country of the consumer’s habitual residence, “provided that the professional (a) pursues his commercial or professional activities in the country where the consumer has his habitual residence, or (b) by any means, directs such activities to that country or to several countries including that country …” A similar provision on jurisdiction with regard to consumer contracts is contained in Article 15 (1) (c) of the Brussels I Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ

Chapter 2 –Globalization and the Law

could be provided. All examples clearly demonstrate the widely felt need for flexible conflict rules allowing for an adjustment to factual situations which exhibit a growing variety of connections, sometimes with a multitude of States. 3.

Regulatory Competition

a) Private choice and State sovereignty 101. As the designation of unambiguous local connections with single States is becoming more difficult and the understanding of States about such links is diminishing, private actors are adopting an increasingly active role in the ordering of transnational processes and fact situations. They are no longer, as they used to be, exclusively the subjects of a single sovereign State designated as it were as the State having jurisdiction by rules of international law pertaining to private legal relations. It has been a long path from that internationalist understanding of private international law to what currently is sometimes called a competition of systems, sometimes also regulatory, legislative or institutional competition. 102. The conception of private international law as being part, at least in theory, of uniform principles of international law dates back to Ulrik Huber, who took the view in the late seventeenth century that States have a legal duty flowing from ius gentium to take account of foreign law under certain circumstances.¹⁸⁷ Writers of the nineteenth century such as Savigny or Mancini still adhered to similar ideas,¹⁸⁸ but the bell began to toll for the internationalist conceptions of the conflict of laws when more and more legislatures started in the nineteenth century to enact their own statutory provisions on choice of law. Ever since the early twentieth century, the prevailing opinion has considered private international law as national law subject to the political decision-making of national legislatures.¹⁸⁹ 2001 L 12/1; see now Article 17 (1) (c) of the recast Regulation (EU) No. 1215/2012 of 12 December 2012, OJ 2012 L 351/1; on the interpretation of that connecting factor see ECJ, 7 December 2010, Joined Cases C-585/08 and C-144/09 (Peter Pammer and Hotel Alpenhof), [2010] ECR I-2527. 187 See the discussion with ample references in Th. M. de Boer, “Living Apart Together: The Relationship between Public and Private International Law”, NILR 57 (2010), 183-207 at p. 188. 188 Savigny, p. 29, talks about the “völkerrechtliche Gemeinschaft unter unabhängigen Staaten” which brought about the reciprocal non-discrimination in the treatment of the conflict of laws. In Mancini’s conception, both public international law and private international law are inspired by the three basic principles of sovranità, nazionalità and libertà which flow from natural law. See further de Boer, supra footnote 187, NILR 57 (2010), 189-193. 189 See Alexander N. Makarov, “Völkerrecht und IPR”, in Symmikta Streit, Athens, 1939, pp. 535-555, describing the broad international debate up to his time and aiming at the identification of certain limits and minimum standards of private international

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103. A consequence of the national approach to private international law and of the existence of divergent conflict rules in the various States is the possibility for private actors to choose between the various systems of private international law and, thereby, between different substantive laws in force in the several countries involved. This choice can be put into effect at the time of litigation by what is generally called forum shopping when plaintiffs choose the court for their action out of a range of several competent courts.¹⁹⁰ Where such choice is made in a conscious way, the several court systems affected may be said to be engaged in judicial competition. But the choice may also attach outside of and before any litigation, when private actors adopt measures designed to make the law of State A applicable instead of the law of State B. In the course of globalization and the opening of frontiers, scholarly observers have become increasingly aware of this kind of regulatory, legislative or institutional competition.¹⁹¹ b) Theoretical underpinnings 104. Regulatory competition departs from the underlying idea that, in respect of legal frameworks, States may be considered as the producers and private actors as the consumers making use of the legal framework as a resource. Analogous to their attitude vis-à-vis other input factors, consumers will strive to optimize on the legal framework. To the extent that they can choose law flowing from international law; he concludes (at p. 553) that apart from some specific limitations “ist jeder Staat frei, beliebige Anknüpfungen zu wählen und sie für die Bestimmung des anwendbaren Rechts für maßgebend zu betrachten”. In a similar sense E. Balogh, “Einige neue Theorien über das Wesen des Internationalen Privatrechts und sein Verhältnis zum Völker- und Fremdenrecht”, ibid., 71-94, who considers the national character of the confl ict rule as undisputed, p. 81; Riccardo Monaco, L’efficacia della legge nello spazio (diritto internazionale privato), 2nd ed., Turin, 1964, p. 11; Paul Heinrich Neuhaus, Die Grundbegriffe des internationalen Privatrechts, 2nd ed., Tübingen, 1976, pp. 4, 73 et seq.; Wilhelm Wengler, Internationales Privatrecht, Vol. 1, Berlin, 1981, pp. 13 et seq.; Peter North and J. J. Fawcett, Cheshire and North’s Private International Law, 13th ed., London, 1999, p. 13; Henri Batiffol and Paul Lagarde, Droit international privé, Vol. 1, 6th ed., Paris, 1974, No. 2; de Boer, supra footnote 187, NILR 57 (2010), 185. 190 See Thomas Giegerich, “Wettbewerb von Rechtsordnungen”, in Gemeinwohl durch Wettbewerb, VVDStRL 69 (2010), 57-105 at p. 68. 191 See Muir Watt, Recueil des cours 307 (2004), 57 et seq.; de Miguel Asensio, Anuario Español de Derecho Internacional Privado 1 (2001), 57; Giegerich, previous footnote; Francisco Garcimartín Alferez, “Regulatory Competition: A Private International Law Approach”, European Journal of Law and Economics 8 (1999), 251-270; for the most thorough and comprehensive treatment see Eva-Maria Kieninger, Wettbewerb der Privatrechtsordnungen im europäischen Binnenmarkt, Tübingen, 2002; a critical assessment has been made by Simon Deakin, “Legal Diversity and Regulatory Competition: Which Model for Europe ?”, European Law Journal 12 (2006), 440-454, who prefers the model of “refexive harmonization” to the model of “competitive federalism”.

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between different legal frameworks in accordance with the respective conflict-of-laws provisions, they can increase efficiency in their use of resources. This approach was first explored in economic theory with regard to taxation and the production of public goods within the United States, where town lines, and – because of the Interstate Commerce Clause of the US Constitution – also State lines do not constitute impediments to the relocation of businesses and individuals.¹⁹² Later those views spread to other areas of law where the implementation of prescribed rules generates substantial costs to business; such areas include some sectors of private law and corporate law in particular.¹⁹³ As national frontiers became more permeable, similar considerations were also applied to choice of law in the international arena. 105. Some caution is appropriate, however, in the international context: The maximization of efficiencies, which is the yardstick for regulatory competition, presupposes that other input factors of the firm remain equal. In international relations, this ceteris paribus argument is however much less justified than in interstate or interlocal conflicts within a given federal State. In general, different nations are neither equipped with a common judiciary nor under the common roof of a constitution, both of which further assimilation in federal States. Moreover, in the international context, those other input factors include language and national habits and cultures, elements which, of course, do not remain unaltered when people move across frontiers. Therefore, such cross-border relocations to other countries will usually trigger a whole bundle or assortment of changes and, at any rate, many more changes than in the interstate context. The maximization of efficiencies has to be calculated on the whole bundle and not on a single component such as the law of corporations. c) Types of regulatory competition 106. Four different forms of regulatory competition have been identified by EvaMaria Kieninger.¹⁹⁴ Not all of them are significant for private international law, in particular not the competition of ideas which may be characterized as the weakest form of institutional competition: legislators and other rulemakers may or may not consider different regulatory models provided by comparative research as a source of inspiration.¹⁹⁵ 192 See Charles M. Tiebout, “A Pure Theory of Local Expenditure”, Journal of Political Economy 64 (1956), 416-424 at p. 422: “Spatial mobility provides the local public-goods counterpart to the private market’s shopping trip.” At p. 424 the author concludes: “If consumer-voters are fully mobile, the appropriate local governments, whose revenue-expenditure patterns are set, are adopted by consumer-voters.” 193 See Roberta Romano, “The State competition Debate in Corporate Law”, Cardozo L. Rev. 8 (1987), 709-757; id., “Competition for State Corporate Law”, in The New Pelgrave Dictionary of Economics and the Law, Vol. 1, London, 1998, pp. 364-370. 194 Kieninger, Wettbewerb, supra footnote 191, pp. 9-21; for a different phenomenology see Giegerich, supra footnote 190, pp. 66-81. 195 Kieninger, Wettbewerb, pp. 18-21.

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107. A second form relates to the ability of private parties to establish or change facts which are relevant, under the applicable conflict rules, for the designation of the substantive law that is to govern a case. For example, a person may move to a given country in order to change his or her habitual residence. He or she may do so with the view to a change of habitual residence, which is a connecting factor in the conflict rules of the relevant countries relating to issues of personal status or succession. Likewise, a producer of software or a supplier of information technology services may relocate its operations to a plant built for these purposes in India in order to benefit from conflict rules which connect the labour regime to the habitual working place of the employee, and thereby benefit from the application of working conditions under the laws of India which are more favourable to the employer than those of the country where the company’s headquarters are located. Similar choices can be made with regard to the selection of environmental standards or tax regimes, i.e. regulations of territorial application. The process described may be designated as an indirect choice of the applicable law. Kieninger further distinguishes between situations where the legislature of the country whose laws have been abrogated reacts with legislative amendments, and those where this is not the case;¹⁹⁶ in situations of the former type she recognizes the operation of traditional competitive cycles. But this distinction only matters for legislatures, not for the handling of transnational cases under existing law. 108. Finally, the fourth and most obvious type of regulatory competition can be identified where the private actors under the relevant conflict rules are free to directly choose the applicable law.¹⁹⁷ Where party autonomy is recognized in private international law, the private persons involved in transnational legal relations may in fact select the applicable law from an array of legal systems that is either limited or unlimited depending on the conflict system and the area of the law. While in contract law party autonomy is currently often considered as “a universal approach”,¹⁹⁸ the freedom of choice which is basically unlimited in Europe¹⁹⁹ is limited in the United States to 196 See Kieninger, Wettbewerb, pp. 12 and 16. 197 Kieninger, Wettbewerb, pp. 14-15. 198 Patrick J. Borchers, “Choice of Law in the American Courts in 1992: Observations and Reflections”, Am. J. Comp. L. 42 (1994), 125-146 at p. 135; see also Giesela Rühl, “Party Autonomy in the Private International Law of Contracts – Transatlantic Convergence and Economic Efficiency”, in Eckart Gottschalk, Ralf Michaels, Giesela Rühl and Jan von Hein, eds., Conflict of Laws in a Globalized World, Cambridge, 2007, pp. 157-183 at p. 157. 199 See Article 3 (3) of the Rome I Regulation, which reserves, for the choice of a foreign law in a case without any international element, the application of mandatory provisions of domestic law; this provision only makes sense if the choice of a law without any relations to the case is allowed under Rome I, see Martiny, in Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. 10, 5th ed., Munich, 2010, Art. 3 Rom I-VO No. 22; Cathérine Kessedjian, “Party Autonomy and Characteristic Per-

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the laws of States which have a substantial relationship to the parties or to the transaction.²⁰⁰ A limitation of the eligible laws to those that have specific connections with a case under dispute can also be ascertained elsewhere, in fields such as family law²⁰¹ or the law of succession,²⁰² both fields witnessing party autonomy gradually gaining ground. As State conflict rules offer more options, those private actors who make use of them may compare the substantive rules of the various laws involved and thereby render legislative competition effective. 109. In some areas private actors are not allowed to determine the applicable law by contract clauses or unilateral statements, but they may attain similar results by turning to State institutions which they believe will ensure the achievement of their respective objectives. This applies to the law of procedure. Where plaintiffs bring their lawsuits in the courts of a specific jurisdiction, they make a simultaneous choice of the law of procedure of the respective country. The application of the lex fori to procedural issues is of universal recognition and only subject to peripheral exceptions.²⁰³ There-

200 201

202

203

formance in the Rome Convention and the Rome I Proposal”, in Jürgen Basedow, Harald Baum and Yuko Nishitani, eds., Japanese and European Private International Law in Comparative Perspective, Tübingen, 2008, pp. 105-125 at p. 112-114; Mathias Reimann, “Was ist wählbares Recht ?”, in Bea Verschraegen, ed., Vienna, 2010, pp. 1-31 at p. 7; Richard Plender and Michael Wilderspin, The European Contracts Convention – The Rome Convention on the Choice of Law for Contracts, 2nd ed., London, 2001, No. 5-04. See the detailed treatment by Rühl, supra footnote 198, pp. 160-164; see also below para. 196. See Article 5 of the so-called Rome III Council Regulation (EU) No. 1259/2010 of 20 December 2010 implementing enhanced co-operation in the area of the law applicable to divorce and legal separation, OJ 2010 L 343/10, allowing for the choice of the law of the common habitual residence, the law of the last common habitual residence under some further conditions, the law of the home State of either spouse and the law of the forum, see Marc Fallon, “Le nouveau droit du divorce international selon le règlement Rome II: une évolution tranquille”, Revue trimestrielle de droit familial, 2012, 291-317 at pp. 297-299. See Article 17 of the Proposal of the European Commission for a Regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of decisions and authentic instruments in matters of succession and the creation of a European Certificate of Succession of 14 October 2009, COM (2009) 154, allowing a testator to choose his or her national law; in the final version of the instrument (Regulation 650/2012), the provision is numbered as Article 22. See, for an extension of the number of eligible laws, Max Planck Institute for Comparative and International Private Law, “Comments on the European Commission’s Proposal for a Regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of decisions and authentic instruments in matters of succession and the creation of a European Certificate of Succession”, RabelsZ 74 (2010), 522-720 at pp. 606-613. See for example for Egypt, Article 22 Civil Code; for Iran, Article 971 Civil Code; for Italy, Article 12 Law on the reform of private international law, 1995; for Venezuela,

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fore, the selection of a court by the plaintiff comes down to the choice of its procedural law, including for example the rules of evidence. A similar mechanism can be observed in corporate law: where incorporation depends, as it usually does, on the registration of an entity which will invariably be put into effect in accordance with the law of the country where the register is located, the selection, by the founders, of the commercial register of a specific country for the purpose of incorporation amounts to the choice of the law of the respective country as the law governing the company. This is reflected by the private international law of many States which subjects corporate matters to the law of incorporation, a conflict rule which is often considered to be the paradigm of institutional competition.²⁰⁴ d) Limitations 110. It is noteworthy that regulatory competition is considerably reduced or even excluded by certain connecting factors used in conflict rules. Thus, the use of nationality as a connecting factor for personal status, family relations and succession is usually praised for the stability represented by citizenship; this is due to the fact that States generally do not deprive their citizens of their nationality and that the acquisition of a new nationality is a lengthy process in most countries. The reverse side of this argument is the exclusion of regulatory competition in a hypothetical world where all countries refer to citizenship for certain legal relations. Of course, in the real world, dual nationality and statelessness, as well as a large number of countries preferring habitual residence to nationality as a connecting factor, disturb the beauty of the model. Where individuals relocate, from a country embracing the nationality principle to a jurisdiction where personal status is governed by the law of the habitual residence, they may be able to obtain what they desire in the courts and under the laws of their new residence. Regulatory competition thus functions even where conflict rules differ.²⁰⁵ Nevertheless, citizenArticle 56 Law on private international law, 1998; for the United States, § 122 Rest. Second, Conflict of Laws, Vol. 1, St. Paul, Minn., 1971; Miguel Virgós Soriano and Francisco Garcimartín Alferez, Derecho procesal civil internacional, 2nd ed., Pamplona, 2007, pp. 401 et seq.; Haimo Schack, Internationales Zivilprozessrecht, 5th ed., Munich, 2010, paras. 45 et seq.; Giuseppe Campeis and Arrigo de Pauli, La procedura civile internazionale, Padua, 1991, pp. 10-12; in the older literature see István Szászy, International Civil Procedure – A Comparative Study, Leidden 1967, pp. 203 et seq. 204 See Kieninger, Wettbewerb, p. 14: “Paradebeispiel”; see also the publications of Roberta Romano, cited supra footnote 193; Erin O’Hara and Larry Ribstein, The Law Market, Oxford, 2009, pp. 107 et seq.; for the former European views directed at the avoidance of legislative competition by harmonization see Hanno Merkt, “Das europäische Gesellschaftsrecht und die Idee des ‘Wettbewerbs der Gesetzgeber’ ”, RabelsZ 59 (1995), 545-568 at pp. 546-547. 205 A contrary proposition is voiced by Garcimartín Alferez, supra foot-note 191, European Journal of Law and Economics 8 (1999), 251 at p. 261, who postulates

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ship as a connecting factor is somehow contrary to the idea of legislative competition since the courts of the home State will disregard the move to the foreign country and continue to apply the national law of that individual to his personal status. 111. Not suited to regulatory competition is also the effects doctrine that applies to the ordering of markets, in particular as done by antitrust law and the law of unfair competition.²⁰⁶ Where a given law applies to market behaviour because the market of the respective country is affected by that conduct, economic actors have only slim prospects of avoiding its application. Not even the complete redirection of their activities to other markets can make them immune. Indirect effects conveyed through, for example, the distribution chain may still be perceptible on the market in question, and consequently the law of that country would apply. Thus, regulatory competition is of no significance in this area of the law governed by considerations of a sovereign ordering of the economy. 112. Another limitation of regulatory competition results from the actual mobility of the production factors in question.²⁰⁷ It is true that capital can easily be transferred to a foreign country, where the owner may set up a corporation under the domestic law of that State. Likewise, receivables or intellectual property are very mobile at an international scale. This is different, however, in respect of immovables: they can only be the subject of regulatory competition to the extent that party autonomy is permitted – which is rarely the case²⁰⁸ – but of course not through a transfer to another jurisdiction.

“that the market of legal products does not function well unless there is a uniform system of PIL that guarantees parties’ autonomy… . And the parties’ selection must be respected by all states that take part in that market.” From the side of public international law, one equally notices a call for a “meta-order constitive of legislative competition”, see Peters, supra footnote 150, p. 39; the author leaves it open whether such meta-order exists. 206 See Article 6 (1) and (2) for the Law of Unfair Competition; and for restrictions of competition Article 6 (3) of the Regulation (EC) No. 864/2007 of the European Parliament and of the Council of 11 July 2007 on the Law Applicable to Non-contractual Obligations (Rome II), OJ 2007 L 199/40; for a – slightly outdated – comparative assessment see Ivo Schwartz and Jürgen Basedow, “Restrictions on Competition”, in International Encyclopedia of Comparative Law, Vol. III, Chap. 35 (1995), Nos. 10-24 and 60-88; for unfair competition see Drexl, in Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. 11, 5th ed., Munich, 2010, pp. 1255 et seq., who points to a distinction between the reference to the market affected in unfair competition law and the effects doctrine of antitrust law, see pp. 1261 et seq.; in practice, these differences are unlikely to matter very often. 207 See de Miguel Asensio, Anuario español de derecho internacional privado 1 (2001), 56-57. 208 It follows from Article 4 (1) (c) of the 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 2008 L 177/6, that a contractual obligation relating to a

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113. Legislative competition has, finally, to be qualified by taking into account the search costs. In economic theory it is widely acknowledged that the unfolding of competition by itself generates costs which are usually encapsulated in the term of transaction costs. More specifically, they consist of information costs linked to the searching for the best offer and to negotiation costs.²⁰⁹ In respect of regulatory competition, only few very large economic actors are strong enough to negotiate with States over their legislation. While negotiation costs thus are not incurred in general, the costs of information about foreign law may be particularly high. Moreover, they do not only accrue prior to the decision for a specific national law. The costs generated by eventual litigation on the basis of that law must also be taken into account as well as the costs caused by subsequent amendments of the law chosen. Such considerations may explain why handbooks for practitioners do not deal with choice-of-law clauses as an instrument allowing for efficiency gains; instead they invariably recommend clauses subjecting the contract to the party’s own law.²¹⁰ 114. As compared with contract law, market participants appear to assess the benefits of regulatory competition in company law much higher and/or its costs much lower. This clearly emerges from the more recent development of corporate law in Europe. In 1999 the European Court of Justice began to enforce the freedom of establishment laid down in Article 49 TFEU also in favour of companies, applying Article 54 TFEU.²¹¹ As a consequence, in very right in rem in immovable property may be subject to a law chosen by the parties; but this is limited to the obligatory part of the contract. 209 See the seminal article of R. H. Coase, “The Nature of the Firm”, Economica NS, 4 (1937) 386-405 at 390-391: “The most obvious cost of ‘organising’ production through the price mechanism is that of discovering what the relevant prices are … The costs of negotiating and concluding a separate contract for each exchange transaction which takes place on a market must also be taken into account.” In a similar vein: Oliver E. Williamson, “The Economics of Governance”, The American Economic Review 95 (2005), 1-18 at p. 4: “the costs of operating competitive markets are not zero, as is usually assumed by our theoretical analysis”. 210 See the survey by Kieninger, Wettbewerb, supra footnote 191, pp. 288 et seq., and her conclusion (at p. 300): “Insgesamt lässt dieser Befund auch für den Bereich der zwingenden Vorschriften vermuten, dass die Freiheit der Rechtswahl nicht zur Optimierung des Rechtsrahmens von Transaktionen benutzt wird”; for some further information pointing to the same conclusion see Max Planck Institute for Foreign Private and Private International Law, “Comments on the European Commission’s Green Paper on the Conversion of the Rome Convention of 1980 on the Law Applicable to Contractual Obligations into a Community Instrument and Its Modernization”, RabelsZ 68 (2004), 1-118 at pp. 7-9. 211 The leading case is ECJ, 9 March 1999, Case C-212/97 (Centros v. Erhvervs- og Selskabbstyrelsen), [1999] ECR I-1459; in his opinion Advocate General La Pergola clearly pointed out that “in the absence of harmonization, competition among rules must be allowed free play in corporate matters”, see para. 20 and footnote 48 referring to

Chapter 2 –Globalization and the Law

large numbers continental investors established – especially under the laws of Great Britain where no minimum capital is required – so-called pseudo-foreign companies designed to conduct business in the investors’ home countries on the European mainland.²¹² This consequence of the regulatory competition triggered by the European Court of Justice only came to an end when continental legislatures adjusted their national company laws and abandoned the requirement of a minimum capital for closed corporations.²¹³ 115. To sum up these observations, it can be said that regulatory competition is an occurrence of growing significance in private international law. It goes together with the increasing permeability of frontiers. It is favoured by certain connecting factors, while others that are inspired by considerations of a sovereign ordering are rather opposed to regulatory competition. As in the economic model, competition is sometimes too costly. 4.

The Loss of Influence of Individual States and Their Reactions

a) National policy versus free trade 116. It is commonplace in the globalization debate that the progressive opening of frontiers reduces the ability of an individual State to shape its economic

the US experience. The case law has been further developed by ECJ, 5 November 2002, Case C-208/00 (Überseering BV v. Nordic Construction Company Baumanagement GmbH), [2002] ECR I-9919 and in ECJ, 30 September 2003, Case C-167/01 (Inspire Art), [2003] ECR I-10155; for a survey of the literature in several languages see Muir Watt, Recueil des cours 307 (2004), 103 et seq. 212 According to serious and well-reasoned estimates based on a variety of data, there were between 25,000 and 40,000 companies organized as limited liability companies under British law in Germany in 2006-2007, see Heribert Hirte and Thomas Bücker, eds., Grenzüberschreitende Gesellschaften, 2nd ed., Cologne, 2006, No. 35, indicating about 25,000 such companies with a bank account held in a German bank. On its website, a specialized consulting agency indicates about 40,000 such limited liability companies, see http://www.limited4you.de/die-limited-in-deutschland-2. html. 213 The French legislature reacted by lowering the minimum capital for a Société à responsabilité limitée to 1 Euro, see Art. 1 Loi n° 2003-721 of 1 August 2003 pour l’initiative économique, amending Art. L 223-2 Code du commerce; in Germany a new type of company not requiring a minimum capital, the “Unternehmergesellschaft (haftungsbeschränkt)” was created by the Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG) of 23 October 2008, BGBl. 2008, I-2026 introducing a new § 5 a into the law of limited liability companies (Gesetz betreffend die Gesellschaften mit beschränkter Haftung, GmbH-Gesetz); the imitation of the British model emerging in these statutes is a common occurrence in competitive processes, see Jürgen Basedow, “Liechtenstein im Wettbewerb der Rechtsordnungen”, Liechtensteinische Juristen-Zeitung 27 (2006), 5-10 at p. 10.

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and social order. This is the reverse side of the unfolding of regulatory or institutional competition. As put by US sociologist Saskia Sassen: “A basic proposition in discussions about the global economy concerns the declining sovereignty of states over their economies. Economic globalization does indeed extend the economy beyond the boundaries of the nation-state. This is particularly evident in the leading economic sectors. Existing systems of governance and accountability for transnational activities and actors leave much ungoverned when it comes to these industries. Global markets in finance and advanced services partly operate through a ‘regulatory’ umbrella that is not state-centred, but market-centred.”²¹⁴

Focusing on social policy, Elmar Rieger and Stephan Leibfried make a similar statement: “... with the establishment of global markets, companies and their investors are confronted with a vastly expanded range of choices in many realms. In this new environment, any government’s social policy initiative faces limits due to locational competition among states. This fragmented world of welfare states suffices on its own to limit the action horizon of social policy, for in planning any social policy expansion or new regulation, policy-makers must take into account the probable reaction of those who may be burdened by it.”²¹⁵

117. As pointed out by these authors, the limitation of sovereign powers does not flow from any legal restrictions, but from the factual reaction of companies and individuals who compare different legal regimes and, by their relocation, opt in favour of the one that appears less inconvenient or promises greater advantages. However, this description and conclusion conceals the significance of conflict rules which determine the applicability of the legal regimes involved. That significance clearly emerges from the following case decided by the German Federal Court in the early days of globalization: the defendant produced certain asbestos products needed for clutches and breaks in the automobile industry. Because of the risk of cancer caused by asbestos fine dust, German regulations required the defendant and other producers to take certain measures in order to reduce the fine dust exposure of the workers. At the relevant time, no corresponding regulations were in force in South Korea, and the defendant decided to import a portion of its automobile industry supplies from South Korea, thus enabling him to charge lower prices than the plaintiff, a competitor who maintained his whole production in Germany. The plaintiff brought a claim against the defendant for unfair

214 Saskia Sassen, Globalisation and Its Discontents, New York, 1998, p. xxvii. 215 Elmar Rieger and Stephan Leibfried, Limits to Globalisation, Cambridge, 2003, p. 194.

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competition; this claim was rejected by the Federal Court.²¹⁶ The decision essentially turned on the question, whether the exploitation of a regulatory disparity between two countries constituted an infringement of the standards of good faith which were employed at the relevant time as the yardstick in the general prohibition of unfair competition in the German statute. The underlying conflicts rule was not questioned and not even made explicit, namely that work safety regulations are of a strictly territorial application to plants located in the country of their enactment.²¹⁷ In combination with the principles of free trade, this conflict rule in fact reduces the ability of a State to effectively implement standards of social policy when costs above a certain threshold are generated providing an incentive to industry to relocate its production into foreign countries. b) Extraterritorial application of national law 118. A first possible reaction of a government that wants to preserve free trade while at the same time pursuing certain policy objectives of a welfare state could be the adoption of more expansive conflict rules ensuring the extraterritorial application of domestic regulations to foreign production intended to be imported at a later date. However, this would not make much sense in respect of foreign plants that produce only a small part of their output for the domestic market of the importing State and the rest for markets in countries where similar regulations are not in force. Thus, from a policy point of view, a great deal depends on the relative size of the demand generated by the regulating country and its share in the global production. If Germany, in the example cited above, had been the sole customer for the respective asbestos products, the extraterritorial application would have made sense. But since Germany’s share in the overall demand for those products was only rather small, the extraterritorial application of the German regulations would have interfered with competition on the German market and would, moreover, have deteriorated the competitive position of German companies without however changing the production methods in South Korea. 119. These considerations explain why the extraterritorial application of domestic laws has been effective only in very few areas of the law. A significant example is competition or antitrust law. In the United States, the first country to enact a statute on the matter, the courts initially stuck to the principle

216 BGH, 9 May 1980, NJW (1980), 1846 = IPRax (1980), 20. 217 See the critical annotation of Rolf Knieper and Hartmut Fromm, NJW (1980), 2020; see also Paul Katzenberger, “Inländischer Wettbewerb, ordre public und ausländisches Arbeitsschutzrecht”, IPRax (1980), 7-9 at p. 8, who characterizes the issue relating to the applicability of work safety regulations as an incidental question; see also Klaus-Georg Mook, Internationale Rechtsunterschiede und nationaler Wettbewerb – Rechtliche Möglichkeiten zur Abwehr von Wettbewerbsstörungen und ihre Grenzen, Berlin, 1986, pp. 127-133.

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of territoriality.²¹⁸ When the United States later became the target of international cartels agreed upon by foreign companies abroad, this narrow application of the antitrust laws was abandoned. In the famous Alcoa case, the court for the first time pointed out that under international law “any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the state reprehends; and these liabilities other states will ordinarily recognize.”²¹⁹

However, the court was not prepared to accept remote effects of such foreign agreements as triggering the application of the US antitrust laws, and a mere intention to restrict competition in the US was also held to be insufficient: “... the act does not cover an agreement, even though intended to affect imports or exports, unless its performance is shown actually to have had some effect upon them.”²²⁰

In the post-World War II period Alcoa became the leading authority in American antitrust law. Later cases have clarified the meaning of the required effects as being direct, substantial, and reasonably foreseeable; this specification was finally included by the Foreign Trade Antitrust Improvement Act in § 6 a of the Sherman Act.²²¹ Later decisions of the Supreme Court have refused to qualify the effects doctrine with a balancing of the interests of the various States involved,²²² but they have also refrained from extending the scope of application of US antitrust laws in an unlimited way.²²³ 120. The effects doctrine as espoused by the US courts has to be taken into account by all undertakings worldwide which want to serve the US market – a market which has ever since World War II represented the world’s biggest 218 American Banana Co. v. United Fruit Co., 213 US 347 at 356 (1909), where the court said that it was “the general and almost universal rule … that the character of an act as lawful or unlawful must be determined wholly by the law of the country where the act is done … For another jurisdiction, if it should happen to lay hold of the actor, to treat him according to its own notions rather than those of the place where he did the acts, not only would be unjust, but would be an interference with the authority of another sovereign, contrary to the comity of nations, which the other state concerned justly might resent.” 219 U.S. v. Aluminium Company of America, 148 F. 2d 416 at 444 (2nd Cir. 1945). 220 Ibid. 221 See 15 USC, § 6 a; the Foreign Trade Antitrust Improvements Act was adopted in 1982. 222 Hartford Fire Insurance Co. v. California, 509 US 764 at 798-799 (1993). 223 F. Hoff mann-La Roche Ltd. v. Empagran S.A., 542 US 155 (2004).

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single national market. Therefore, companies and their Governments in all countries have had to become acquainted with US antitrust law. As a consequence, antitrust or competition law has gradually taken root in several European countries as well as in the European Union and, since the collapse of the socialist regimes of Eastern Europe, virtually worldwide.²²⁴ Many of these jurisdicitons, including in particular large market economies such as the European Union²²⁵ and Germany,²²⁶ have explicitly adopted the effects doctrine or a similar approach amounting to extraterritorial application. It is particularly significant that the United Kingdom, which until the late 1970s had rejected the extraterritorial application of US antitrust laws as an infringement of international law,²²⁷ ultimately adopted an almost identical principle in its domestic legislation some 20 years later.²²⁸ 121. The general approval of the expansive application of competition law beyond strict territoriality would certainly not have been possible if the pioneer of that development had not been the country with the biggest market in the world. If a small country had taken the lead with competition law and the effects doctrine, the international reaction would have been similar to 224 The list of statutory material published in Schwartz and Basedow, IECL, Vol. 3 Sect. 35, pp. 134-139, contains statutes from 46 countries that featured competition acts in the early 1990s; the website of the International Competition Network, set up by the participating competition authorities in 2001, lists 104 competition agencies from 92 jurisdictions as members for the year 2009, see http://www.internationalcompetitionnetwork.orgaboutThe ICN factsheet and key messages. 225 According to the Wood Pulp decision of the European Court of Justice, ECJ, 27 September 1988, Joined Cases 89/85 (Åhlström Osakeyhtiö v. Commission – “Wood Pulp”), [1988] ECR 5193, 5233, cons. 14-15, the decisive factor for the connection of a cartel with the country prohibiting it is “the place where it is implemented”. According to cons. 16-18 of the judgment, this connecting factor is covered by the principle of territoriality, although the Court’s announced test will in most cases lead to the same results as the effects doctrine, i.e. extraterritorial application. See also below para. 758, fn. 1581. 226 See § 130 (2) of the German Act against restraints of competition, fi rst enacted in 1957: “This act shall apply to all restraints of competition having an effect within the scope of application of this act, also if they are caused outside the scope of application of this act.” An English translation of the Act can be found on the website of the German cartel office: http://www.bundeskartellamt.de/wEnglisch/index.phplegal bases. 227 British Embassy, Note No. 196 of the British Embassy at Washington to the United States Department of State of 27 July 1978, Brit. YBIL 49 (1978), 390; see also Jürgen Basedow, “Antitrust or Competition Law, International”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of International Law, 2009, Nos. 12-16. 228 The British Competition Act 1998 has adopted the implementation doctrine espoused by the European Court of Justice in the Åhlström case, supra footnote 225; see Richard Wish, Competition Law, 5th ed., London, 2003, p. 441, who maintains however that this is not equivalent to the effects doctrine; for mergers see Sections 22 (1) and 33 (1) of the Enterprise Act 2002 and Wish, p. 443.

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the one perceived by the chairman of the competition authority of a small African country in proceedings against Coca Cola Co. When his authority had initiated an investigation for unlawful resale price maintenance against Coca Cola, he allegedly received a telephone call from a board member of the international holding ending with the remarkable statement that Coca Cola could live without serving that African country, but that the chairman should consider whether his country could live without Coca Cola. c) International minimum standards 122. A second reaction of States to the progressive loss of their influence on their own social and economic order is the unification of laws or at least the creation of minimum standards. In the Asbestos-case reported above,²²⁹ the German Federal Court explicitly referred to that possibility. The court took account of the Occupational Cancer Convention No. 139 of the International Labour Organization, which in fact establishes certain minimum conditions for the prevention of occupational hazards caused by carcinogenic substances and agents such as asbestos.²³⁰ The court pointed out, however, that the standards laid down in the Convention cannot be considered as flowing from natural law and being binding on all nations including Korea irrespective of their adoption in black letter law since important industrial countries such as Canada, the Soviet Union and the United States had not ratified the Convention.²³¹ Consequently, non-ratification by South Korea could not be disregarded either; the court even explained Korea’s reluctance by pointing to the less-developed character of its national economy at that time and the need to benefit from the low cost structure of its industry.²³² Such an explanation illustrates the process of regulatory competition and demonstrates how Ricardo’s comparative advantage theory²³³ can be applied or even extended to advantages flowing from the regulatory framework of the various nations. But the judgment also sheds light on the limits of legal unification as a State tool for shaping the social and economic order. 123. Other examples allow for greater optimism. This applies in particular to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of 1974. This agreement was adopted as Annex 1C of the Marrakesh

229 See footnote 216. 230 Convention (No. 139) concerning Prevention and Control of Occupational Hazards Caused by Carcinogenic Substances and Agents, adopted by the General Conference of the International Labour Organization at its 59th session, Geneva, 24 June 1974, 1010 UNTS 5. 231 To date the Convention has only been ratified by 38 States, with Canada, Russia and the United States still not being contracting States. See the list of ratifications on the website of the International Labour Organization: http://www.ilo.org/ilolex/ english/convdisp1.htmC139see the ratifications for this Convention. 232 BGH, 9 May 1980, NJW (1980), 1846 = IPRax (1980), 20 at p. 22. 233 See supra, at para. 70.

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Agreement establishing the World Trade Organization.²³⁴ The basic mechanism of the TRIPS Convention is to oblige Member States to comply with pre-existing international conventions, Article 2(1), in particular the Paris Convention for the protection of industrial property and the Berne Convention for the protection of literary and artistic works, see Article 9.²³⁵ These Conventions had already been in force for many member States of the World Trade Organization before 1994. They establish certain minimum standards for the protection of intellectual property. Since the TRIPS Agreement is conceived as an annex and integral part of the WTO Agreement, it is binding on all members of the latter, see Article II (2) WTO Agreement. Consequently, member States have to accept the corresponding obligations with regard to the protection of intellectual property as a part of the overall WTO package. They are not entitled to the freedom of trade of their goods unless they are prepared to safeguard the minimum protection of intellectual property rights. Apparently, the benefit of free trade has been sufficiently attractive for the vast majority of countries to ratify.²³⁶ Even some countries which traditionally did not protect intellectual property yielded to the obligations under the TRIPS Agreement. 5.

Collaboration of States: Unification, Harmonization, Coordination, Cooperation

a) Purposes, institutions, history 124. The developments outlined in this section have led to an ever-growing collaboration of States at the levels of both legislation and enforcement. The collaboration may be considered as a counter-movement to regulatory competition.²³⁷ Its objective has sometimes been the establishment of minimum standards supplementing the various freedoms²³⁸ in order to prevent a race to the bottom; examples relating to labour conditions and the recognition of intellectual property rights have been given above.²³⁹ In other instances, with an eye to private legal transactions which make use of the existing liberties, States have rather aimed at creating a common legal framework designed to reduce transaction costs and to increase the confidence of private market participants in the legal regime governing their activities; a noteworthy example is the Convention on the International Sale of Goods, an 234 1867 UNTS 1; for TRIPS see 1869 UNTS 299 and also OJ 1994 L 3 at pp. 214-233. 235 The texts of both Conventions are available at the website of the World Intellectual Property Organization, see http://www.wipo.int/treaties/en. 236 According to the website of the World Trade Organization, www.wto.org, visited on 20 January 2011, the World Trade Organization had 153 Members on 23 July 2008. At that time 30 additional States, including the Russian Federation, had an observer status putting them under an obligation to start negotiations on accession. 237 Giegerich, supra footnote 190, p. 69. 238 See the survey in Section 4 (c) supra. 239 See paras. 122-123 supra.

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instrument which is both as a whole and with regard to its individual provisions dispositive.²⁴⁰ 125. States pursue these goals in some universal organizations, such as the UNIDROIT Institute in Rome,²⁴¹ the United Nations Commission on International Trade Law (UNCITRAL),²⁴² and the Hague Conference on Private International Law²⁴³ and in some more specific institutions, in particular the World Intellectual Property Organization,²⁴⁴ the International Maritime Organization²⁴⁵ and the International Civil Aviation Organization.²⁴⁶ Next to the universal institutions, several regional organizations have become productive platforms for such collaboration; this applies in particular to the European Union, but also to a lesser degree to the MERCOSUR in Latin America²⁴⁷ and the Organisation pour l’harmonisation du droit des

240 See Article 6, United Nations Convention on Contracts for the International Sale of Goods, done at Vienna on 11 April 1980, 1489 UNTS 3. 241 Herbert Kronke, “UNIDROIT”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 2, Oxford, 2012, pp. 1723-1727; also in German in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. II, Tübingen, 2009, pp. 1542 et seq. 242 Franco Ferrari, “UNCITRAL”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 2, Oxford, 2012, pp. 1705-1708; also in German in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. II, Tübingen, 2009, pp. 1531 et seq. 243 Jörg Pirrung, “Hague Conference on PIL”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 815-819; also in German under the heading “Haager Konferenz für IPR” in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen, 2009, pp. 793 et seq. 244 Axel Metzger, “World Intellectual Property Organization (WIPO)”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Oxford, 2012, pp. 1785- 1787; also in German in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. II, Tübingen, 2009, pp. 1797 et seq. 245 Nicolai Lagoni, “International Maritime Organization (IMO)”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 970-973; also in German in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen, 2009, pp. 893 et seq. 246 Alexander von Ziegler, “International Civil Aviation Organization”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 887-893; also in German in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen, 2009, pp. 887 et seq. 247 Jan Peter Schmidt, “MERCOSUR”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law, 2010, with many further references.

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affaires en Afrique (OHADA).²⁴⁸ The coexistence of regional and universal instruments, sometimes dealing with identical subjects, creates a number of legal problems, but gives at the same time evidence of the need felt by the international community for uniform rules that provide a reliable legal framework of transactions in a globalized economy.²⁴⁹ 126. The unification of private law started in the second half of the nineteenth century, perhaps as a consequence of the wave of globalization following the industrial revolution. Ever since it has developed into a highly complicated area of legal development and legal research.²⁵⁰ For a detailed treatment of the numerous aspects of uniform law, the present study has to refer to the literature just cited; even a survey of its general features would be beyond the scope of this work. The unification of substantive law must be mentioned in this context, however, in order to make the reader aware of the intense efforts made by the international community to raise law-making from the traditional national level, which is no longer adequate in the era of globalization, to an international or supra-national level. Due consideration given to the unification of private law also puts into perspective the traditional understanding of private international law as being a discipline rooted in the sovereignty of the nation-State and dealing exclusively with the choice between different national laws. This perspective on private international law is increasingly inadequate,²⁵¹ although its traditional issues do not lose their significance. 248 Joseph Issa-Sayegh, “Quelques aspects techniques de l’intégration juridique: l’exemple des actes uniformes de l’OHADA”, Unif. L. Rev. (1999), 5 et seq.; Kwawo Lucien Johnson, “L’OHADA et la modernisation du droit des affaires en Afrique”, Unif. L. Rev. (2003), 71 et seq. 249 This coexistence is treated more thoroughly in Jürgen Basedow, “Worldwide Harmonisation of Private Law and Regional Economic Integration – General Report”, Unif. L. Rev. (2003), 31-49; that issue of the Unif. L. Rev. (2003, pp. 1-593) contains a large number of contributions to the congress to celebrate the 75th Anniversary of UNIDROIT which was dedicated to the subject “Worldwide harmonisation of private law and regional economic integration, dealing with various specific areas such as contracts, the sale of goods, the carriage of goods, secured transactions, civil procedure and cultural objects”. 250 For an early treatment see René Demogue, L’unification internationale du droit privé, Paris, 1927; René David, “The International Unification of Private Law”, IECL, Vol. 2, Chap. 5 (1971); Jan Kropholler, Internationales Einheitsrecht, Tübingen, 1975; Stefania Bariatti, L’interpretazione delle convenzioni internazionali di diritto uniforme, Padua, 1986; Urs Peter Gruber, Methoden des internationalen Einheitsrechts, Tübingen, 2003; Marco Torcello, Common Features of Uniform Commercial Law Conventions, Munich, 2004; the most comprehensive survey and commentary of instruments relating to business law can be found in Roy Goode, Herbert Kronke, Ewan McKendrick and Jeff rey Wool, Transnational Commercial Law – International Instruments and Commentary, Oxford, 2004. 251 The need for an understanding of private international law “au sens large ayant pour objet la réglementation sustantielle des rapports privés comportant un élément per-

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b) Forms of legal unification and harmonization 127. The production of common substantive rules by the collaboration of States has mainly affected certain sectors of commercial law: intellectual property, transport, payment instruments, the sale of goods, maritime and aviation law. It occurs in various different forms. It may cover all transactions of a specific kind, whether domestic or international; see the examples of the Convention on the Limitation of Liability for Maritime Claims²⁵² or the Geneva Conventions on checks and bills of exchange.²⁵³ More common is the limitation of uniform law to fact situations having some kind of crossborder element and some kind of contact with a contracting State; several conventions on the carriage of goods²⁵⁴ and passengers²⁵⁵ or the Convention on the International Sale of Goods²⁵⁶ may be mentioned in this context. The extent of substantive regulation undertaken by the various instruments differs likewise. While the Sales Convention is of a rather comprehensive nature dealing with most issues that may arise in a regular contract for the international sale of goods, other conventions such as the so-called Hague Rules indicate by their very title that the drafters only intended a partial regulation.²⁵⁷ Within the European Union, the so-called approximation of laws by means of Directives issued under Article 114 TFEU and other provisions of the Treaty do not even purport to generate uniform texts at the national level. The Directives are not directly applicable and have to be implemented

252 253

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256

257

tinent d’extranéité” has most ably been underlined in the course of Charalambos Pamboukis, “Droit international privé holistique: droit uniforme et droit international privé”, Recueil des cours 330 (2007), 9-474 at pp. 49-50. Convention on Limitation of Liability for Maritime Claims, 1976, done at London on 19 November 1976, 1456 UNTS 221, see Art. 15. Convention providing a Uniform Law for Bills of Exchange and Promissory Notes, signed at Geneva on 7 June 1930, 143 LNTS 257; Convention providing a Uniform Law for Cheques, signed at Geneva on 19 March 1931, 143 LNTS 355. See for example the United Nations Convention on the Carriage of Goods by Sea, done at Hamburg on 31 March 1978 (so-called Hamburg Rules), 1695 UNTS 3; see Article 2 limiting the application essentially to contracts indicating that either the port of loading or the port of discharge is located in a contracting State. See for example the Convention for the Unification of Certain Rules for International Carriage by Air, done at Montreal on 28 May 1999, 2245 UNTS 309 at 350; under Article 1 (2) the Convention essentially applies only where both the place of departure and the place of destination, according to the contract of carriage, are situated in a contracting State. See Article 1, CISG, supra footnote 240, with a solution that can be characterized as a compromise between the narrow approach of the Montreal Convention, see the previous footnote, and the much wider approach of the Hamburg Rules, see supra footnote 254. International Convention for the Unification of Certain Rules relating to Bills of Lading, with Protocol of Signature, signed at Brussels, 25 August 1924, 120 LNTS 155 (emphasis added).

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by the Member States; as a consequence, the addressees of their legal rules may not even realize the common European background. 128. Even less effective in ensuring harmonization are techniques such as the principles²⁵⁸, model laws²⁵⁹ and legislative guides²⁶⁰ which have increasingly often been formulated in recent years by international organizations and other bodies. While these instruments do not establish any obligation for the States to adjust their laws accordingly, many countries have nevertheless accepted guidance from those texts when revising or adopting their national legislation on the respective matter. Such spontaneous harmonization equally gives evidence of the widespread feeling that the present world is in need of more uniform rules governing global transactions. c) Coordination by common rules on private international law 129. Starting towards the end of the nineteenth century, States have also aimed at what may be called a better coordination of their national laws, not by harmonization in substance but by the adoption of uniform rules on choice of law, jurisdiction and the recognition of decisions. If the destiny of law, as it seemed to be, was national codification with inevitable divergences between the resultant national laws, it became the more important to apply, in the courts of all countries involved in a given cross-border case, one and the same national law. Since this Savignyan or international approach to private international law²⁶¹ was widespread and since positivism was predominant in legal thinking and scholarship at the time, the codification of choice-oflaw rules in international treaties appeared an attractive idea.²⁶² This was 258 See for example UNIDROIT, UNIDROIT Principles of international commercial contracts 2004, Rome, 2004. 259 See for example the UNCITRAL Model Law on International Commercial Arbitration 1985, with amendments as adopted in 2006, Vienna, 2008. 260 See for example the UNCITRAL Legislative Guide on Secured Transactions, New York, 2010. 261 See supra, paras. 11 and 91. 262 Cf. the programmatic title of the article of Mancini in the first annual volume of Clunet, cited supra footnote 171; and see T. M. C. Asser, “Droit international privé et droit uniforme”, Revue de droit international et de legislation comparée 12 (1880), 1-22 at p. 11: “La tâche du droit international privé consiste à trouver la solution des conflits des lois, tout en respectant et en maintenant la diversité des lois nationales. On peut même considérer cette diversité comme la raison d’être du droit international privé. – Cependant l’étude même de cette dernière science doit nous convaincre qu’une législation uniforme est nécessaire ou désirable par rapport à plusieurs parties du droit.” After deploring the difficulties of unifying substantive law, Asser continues at p. 13: “Ceci explique pourquoi nous recommanderions de provoquer d’abord l’adoption de règles uniformes pour assurer la décision uniforme des conflits de législations; – c’est-à-dire, de donner au droit international privé une base plus solide et adoptée par tous les pays civilisés”.

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even more so as the national civil codes contained few if any rules on private international law, and treaties on the matter could expect a broad acceptance. Beginning in 1893, the Hague Conferences on private international law were convened as ad hoc platforms for this purpose; only after World War II was a permanent international organization set up to carry on that business. 130. With regard to enforcing existing laws in transnational civil litigation, a trend towards collaboration can equally be ascertained. Until the 1960s and with the notable exception of the Hague Convention on civil procedure of 1905,²⁶³ almost all international instruments dealing with issues of civil procedure have been bilateral treaties.²⁶⁴ Most bilateral treaties focused on the mutual recognition of judgments in civil and commercial matters, sometimes under the heading of legal assistance and including some other aspects of civil procedure.²⁶⁵ The basic notion underlying almost all bilateral enforcement treaties of that time was the complete autonomy of the contracting States with regard to direct jurisdiction: A court addressed in the first State would decide on its jurisdiction exclusively on the basis of its own autonomous law of procedure. The rules on jurisdiction contained in the bilateral treaties would only be employed in the second State of recognition or enforcement if the judge had to check whether there was a sufficient link between the case and the court of the first State that had given judgment. These conventions were therefore addressed as “conventions simples”. 131. It is telling that Article 220 of the 1957 Treaty on the establishment of the European Economic Community only provided for negotiations on the recognition and enforcement of foreign judgments within the Common Market, but not on the harmonization of rules on direct jurisdiction. The effect of the conventions simples was that not all judgments rendered in the first Mancini later became minister of foreign affairs of the Kingdom of Italy, see Jayme, supra footnote 170, and Asser, who equally left academia for diplomacy, became the most influential promoter of the first Hague conferences; see the introduction by Jürgen Christoph Gödan in T. M. C. Asser, Grundrisse des Internationalen Privatrechts – Nachdruck [of the original treatise in Dutch with a French and a German translation] mit einer Vorbemerkung des Herausgebers [Gödan], Stockstadt, 2008, pp. vii-xxiii at pp. xiii-xvi. 263 The text of the Convention du 17 juillet 1905 relative à la procédure civile is available at the website of the Hague Conference: http://www.hcch.net. 264 See the survey of the treaties on the matter in Erwin Riezler, Internationales Zivilprozessrecht, Berlin/Tübingen, 1949, pp. 24-42; see also István Szászy, International Civil Procedure – A Comparative Study, Leiden, 1967, pp. 42-49; both authors also refer to some multilateral conventions, particularly in areas such as transport law which also deal with some specific issues of international civil procedure. 265 A survey of the bilateral treaties which preceded the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters concluded between the initial 6 Member States of the European Union in 1968, is provided by Martha Weser, Convention communautaire sur la compétence judiciaire et l’exécution des décisions. Complétée par l’étude des droits internes et des traités bilatéraux des états contractants, Brussels, 1975.

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State could actually be enforced in the second State; some were rendered by courts which had jurisdiction under national law but not under the recognition treaty. The step from the conventions simples to the 1968 Brussels Convention, which was the first multilateral convention double establishing also rules on jurisdiction, was not commanded by the Rome Treaty, but occurred during the negotiations leading to the Brussels Convention. It indirectly put the judge of the first State under an obligation to consider the later recognition or enforcement in the second State and thereby reduced the jurisdictional claim flowing from the lex fori in other cases.²⁶⁶ d) Procedural cooperation 132. Even under the regime of the Brussels and Lugano Conventions,²⁶⁷ the principle of mutual consideration is implemented by legislatures and not by the courts themselves, the latter merely following the instructions given by the Conventions, i.e. instructions drafted by the respective legislatures. Even under the two conventions, mutual consideration was limited to issues of jurisdiction and enforcement, no further interaction between the courts in the first and second State being required. In the more recent development of international civil litigation, however, an emerging trend suggests that the courts and other bodies from different countries which are involved in a case are prompted to directly communicate with each other to solve issues including sometimes those of jurisdiction. The more recent Hague Conventions relating to children are prominent illustrations of this tendency.²⁶⁸ Thus, the 1980 Child Abduction Convention, the 1993 Adoption Convention and the 1996 Parental Responsibility Convention all command contracting States to designate a central authority; these authorities, in turn, are put under a general obligation of cooperation which is specified for certain activities and with regard to certain measures.²⁶⁹ While the conventions deal 266 See the list of excluded heads of competence in Article 3 of the original Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, done at Brussels on 27 September 1968, OJ 1972 L 299/32. 267 The Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, done at Lugano on 16 September 1988, OJ 1988 L 319/9, replaced by the revised Convention done at Lugano on 30 October 2007, OJ 2007 L 339, extends the Brussels regime to relations with Iceland, Norway and Switzerland. For these three countries, additional heads of competence are listed in Article 3, Lugano, 1980, and Annex 1 to the Lugano 2007 Convention; see Felix Dasser, in Felix Dasser and Paul Oberhammer, eds., Kommentar zum Lugano-Übereinkommen (LugÜ), Berne, 2008, Art. 3, Nos. 13 et seq. 268 See Bucher, Recueil des cours 341 (2009), 477 et seq.; Dagmar Coester-Waltjen, “Das Zusammenspiel von Rechtsquellen und Institutionen bei internationalen Kindesentführungen”, International Journal of Procedural Law 2 (2012), 12-35. 269 See Articles 6 and 7 of the Hague Convention on the Civil Aspects of International Child Abduction of 25 October 1980, in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, pp. 280 et seq.; Arti-

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with central authorities, they permit some of their functions to be delegated to accredited bodies, i.e. private organizations.²⁷⁰ The Hague Conference on Private International Law has initiated a programme to convene judges and other persons competent for issues of child law to meetings at The Hague and to foster direct communication between them.²⁷¹ The private international law of children appears to be particularly well-suited for developing such judicial cooperation. As the yardstick of the judge’s decision is usually the well-being or best interest of the child, there is a risk that this vague notion could be interpreted in a nationalist sense unless judges collectively reflect on the matter and build up confidence in the judicial systems of other States. 133. Other sectors where such direct communication of enforcement agents is particularly helpful and therefore likely to evolve can be found in complex proceedings, in particular insolvency proceedings. Insolvencies with a multinational dimension usually give rise to insolvency proceedings in several States, each with a territorial limitation; conducting a single insolvency proceeding with multinational effects is desirable, but exceptional.²⁷² Against this backdrop the need for the coordination of actions of the several liquidators and courts involved becomes more and more urgent. The European Insolvency Convention of 1995²⁷³ which was later transformed

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cles 6 et seq. of the Hague Convention on Protection of Children and Co-operation in Respect of Inter-country Adoption of 29 May 1993, ibid., pp. 375 et seq.; Articles 29 et seq. of the Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children of 19 October 1996, ibid., pp. 396 et seq. See J. H. A. van Loon, “International Co-operation and Protection of Children”, Recueil des cours 244 (1993), 191-456 at pp. 350-363, describing this co-operation for inter-country adoptions; Linda Silberman, “Co-operative Efforts in Private International Law on Behalf of Children: The Hague Children’s Conventions”, Recueil des cours 323 (2006), 261-477 at pp. 383 et seq., with an ambivalent, although basically positive assessment of the legal practice under the Abduction Convention; see also pp. 425 et seq. for the Protection Convention and pp. 439 et seq. for the Adoption Convention; see also Coester-Waltjen, supra at footnote 268. See the progress report on the International Hague Network of Judges (IHNJ) in Hague Conference on Private International Law, Annual Report 2010, The Hague, 2011, p. 35; see also Hans van Loon, “News from The Hague – The Hague Conference on Private International Law: Work in Progress (2008-2010)”, YBPIL 12 (2010), 419433 at p. 422. See Alexander Trunk, Internationales Insolvenzrecht, Tübingen, 1998, p. 345, who refers to some bilateral treaties providing for such a one-stop-shop insolvency: the German-Austrian Bankruptcy Treaty of 1979 and the treaties on jurisdiction and the enforcement of judgments concluded by Belgium with France in 1899 and with the Netherlands in 1925. Convention on Insolvency Proceedings of 23 November 1995, see the German text in ZEuP (1996), 325; the Convention never took effect.

Chapter 2 –Globalization and the Law

into Regulation 1346/2000²⁷⁴ therefore provides in considerable detail for the coordination of the main insolvency proceedings with the secondary insolvency proceedings conducted in other Member States of the European Union; in particular the liquidators are subjected to specific duties of information and consultation.²⁷⁵ In a similar vein, numerous other private and public institutions have tackled the issues of international insolvencies; the American Law Institute, for instance, has adopted non-binding guidelines applicable to court-to-court communications in transnational insolvency proceedings.²⁷⁶ As shown by this example, court-to-court communication may be more easily implemented in a regional context, and we may expect that the European Judicial Network established by the European Union will favour such communication in further areas.²⁷⁷ Additional evidence of the emerging trend is provided by a resolution of the International Law Association. In the framework of a more comprehensive study – essentially dealing with transnational group actions – on international civil litigation and the interests of the public, the ILA recommends that judges from different countries cooperate with one another to best manage transnational group

274 Council Regulation (EC) No. 1346/2000 of 29 May 2000 on insolvency proceedings, OJ 2000 L 160/1. 275 See especially Articles 31 to 33 of Reg. 1346/2000, previous footnote; see also the comments by Gerald Mäsch in Thomas Rauscher, ed., Europäisches Zivilprozessrecht – Kommentar, Vol. 2, 2nd ed., Munich, 2006, pp. 1764 et seq. 276 The American Law Institute in association with the International Insolvency Institute, Guidelines Applicable to Court-to-Court Communications in Cross-border Cases, as Adopted and Promulgated in Transnational Insolvency: Principles of Cooperation among the NAFTA Countries, Washington, DC, 2000, and New York, 2001, available on the website of the American Law Institute: http://www.ali.org/ doc/guidelines.pdf. For an interesting survey of the various activities in the international arena, see Catherine Kessedjian, “Codification du droit commercial international et droit international privé – De la gouvernance normative pour les relations économiques transnationales”, Recueil des cours 300 (2002), 79-303 at pp. 169-183, who characterizes the resulting mix of legal rules as a “complexification de le norme juridique”, see p. 183. 277 See Matteo Fornasier, “European Judicial Network in Civil and Commercial Matters”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 607-611; also available in German under the heading “Europäisches Justizielles Netz in Zivil- und Handelssachen” in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen, 2009, pp. 536 et seq.; the Network was created by Council Decision of 28 May 2001 establishing a European Judicial Network in Civil and Commercial Matters, OJ 2001 L 174/25 as amended by decision No. 568/2009 EC of the European Parliament and of the Council of 18 June 2009, OJ 2009 L 168/35.

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actions; this recommendation is further specified and elaborated and subject to certain limitations.²⁷⁸ Section 3: Outlook 134. This chapter has shed some light on the philosophical basis of the increasing permeability of national frontiers and has outlined the major factual aspects of the process of globalization. Turning to law-making and policy-making, we have subsequently looked into the legal underpinnings of globalization in public international law and explored some major consequences for the field of private international law. We have seen that private rule-making has acquired a much stronger position in the overall normative framework of international transactions. Due to the loss of State knowledge regarding the connections private actors maintain or may build up with certain States, private rule-making may even gain dominance in the overall normative framework of international transactions. Yet, it will not entirely supersede State law as could be observed in the previous section of this chapter in particular. Private actors will not always make use of their rights to order their relations, and there are other instances where private ordering is detrimental to the parties involved, to third persons or to the public and therefore has to be restricted. For the further course of this enquiry, we should however first turn to the various forms of private rule-making which are more numerous than generally assumed, and to their theoretical foundation (Part II), before we turn to the remaining role of State regulation in private international law (Part III).

278 The International Law Association, Report of the 73rd Conference held in Rio de Janeiro, Brazil, 17-21 August 2008, London, 2008, pp. 534-576 at pp. 561-564, and the Draft Guidelines at pp. 575-576.

Part II

Private Ordering

135. While law as a tool for the administration of justice is generally regarded as a necessary concomitant of State power, namely in its adjudicatory function, private actors are not inhibited from taking the initiative when it comes to the prevention or the settlement of disputes. Our previous analysis has shown that private initiative is even taking the lead as national frontiers are becoming more permeable and cross-border contacts increase in number.²⁷⁹ Private actors are driven by the desire to overcome the problems which are inherent in international exchange and arise from the multitude of jurisdictions involved. They need a frame of orientation for their cross-border transactions and relations. The solutions are manifold. Conflict lawyers usually focus on party autonomy, which is particularly interesting from a theoretical point of view and because of its extension in recent years. But this approach is too narrow. It restricts the analysis to a direct choice out of the limited array of existing State laws, excluding the choice of a non-State body of rules²⁸⁰ and other private arrangements. 136. The traditional private international law approach has been criticized as being the cause of the problems it purports to solve.²⁸¹ In fact it disregards 279 See supra, paras. 89 et seq. 280 In the legislative proceedings preceding the issue of Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the Law Applicable to Contractual Relations (Rome I), OJ 2008 L 177/6, the possibility of choice of a body of non-State rules as the applicable law was explicitly suggested by the Commission, but the proposal did not make it into the final version of the instrument, see Article 3, para. 2, of the Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I), COM (2005) 650 of 15 December 2005, which ended in what is now Recital 13 of the final Regulation. This Recital is often interpreted as permitting the incorporation of nonState law on the basis, and within the framework of mandatory provisions, of the State law applicable to the contract, see e.g. Plender and Wilderspin, The European Private International Law of Obligations, London, 2009, No. 6-012. 281 Dieter Schmidtchen, “Territorialität des Rechts, Internationales Privatrecht und die privatautonome Regelung internationaler Sachverhalte”, RabelsZ 59 (1995), 56-112 at p. 89: “Das IPR ist die Ursache von Problemen, für deren Lösung es sich hält.”

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the approach of the individual who departs from a given substantive problem arising in international transactions and who usually seeks a practical, down-to-earth solution. That solution may be found in the selection of one applicable State law, but other tools of private ordering may indeed promise a more efficient outcome. Whoever wishes to explore the role of private ordering in international relations should start from the enduring attempts to avoid issues of private international law by different kinds of substantive and allegedly “anational” private arrangements, see below, Chapter 1. Other solutions are directly related to the traditional understanding of private international law: private actors may choose the applicable law out of the range of available laws and within the limits of party autonomy. This raises the basic question as to the theoretical foundation of a choice made by individuals between different laws flowing from the sovereignty of the respective States, see below, Chapter 2. That theoretical enquiry is all the more important as we are currently witnessing a growing approval of party autonomy in areas where it was unknown before, see below, Chapter 3. Further evidence of the growing significance of private ordering is provided where State law, in particular the law of the European Union, offers – in addition to existing national laws – regulatory schemes which private actors are allowed to select for their transaction instead of the national law of the forum or of any other State that would be applicable in accordance with choice-of-law rules, socalled optional instruments, see below, Chapter 4. Finally, individuals and companies may also influence the applicable law by factual arrangements that create links to certain jurisdictions which are relevant as connecting factors in private international law, see below, Chapter 5.

Chapter 1

Substantive “Anational” Private Arrangements

Section 1: The International Transaction Dilemma 1.

Legal Pluralism and Its Economic Effects

137. Even in the era of globalization, the mobility of production factors – capital and human resources – in cross-border relations is lower than within any given country. This is generally attributed, inter alia, to divergences that exist between the laws involved, including procedural law and the rules on private international law. The divergences are perceived as impediments to international economic exchange. They give rise to what lawyers call the dilemma of the applicable law²⁸² and to what economists refer to as the international transaction dilemma.²⁸³ This designation encapsulates the finding that parties may refrain from cross-border transactions which would be mutually beneficial because of the uncertain legal framework. Specifically, every party anticipates that the enforcement of contractual claims in the event of a breach of contract may fail because of the legal divergences and that the other party, who equally anticipates the imperfection of the legal framework, receives an incentive to actually breach the contract. Thus, each party, expecting the other’s breach and acting in a rational way, may desist from making the contract despite the positive welfare effects it would likely generate. 138. These disincentives are further reinforced by the fact that duties under a cross-border contract are usually not to be performed simultaneously and that therefore one of the parties runs the full risk of the advanced perfor282 See Klaus Peter Berger, Formalisierte oder “schleichende” Kodifizierung des transnationalen Wirtschaftsrechts, Berlin, 1996, p. 15: “Rechtsanwendungsdilemma”; in the English edition of his book, the author refers to the “dilemma of the international legal process”, see id., The Creeping Codification of the Lex Mercatoria, The Hague, 1999, p. 17; in a similar vein, the “dilemma of the forum” is deplored by Ursula Stein, Lex Mercatoria, Frankfurt am Main, 1995, p. 29. 283 Hans-Jörg Schmidt-Trenz, Außenhandel und Territorialität des Rechts, BadenBaden, 1990, 144, 267 et seq.; Dieter Schmidtchen, RabelsZ 59 (1995), 56-112 at p. 90; see also Giesela Rühl, Statut und Effizienz – Ökonomische Überlegungen zum internationalen Privatrecht, Tübingen, 2011, pp. 29 et seq.

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mance of its own obligation. That risk is reduced in domestic transactions by the existing homogeneous institutions of the respective jurisdiction: If, after an advanced performance by one party, the other party does not perform its corresponding duty, the contract will be enforced by the court applying the law of the forum. In cross-border transactions, however, that homogeneous framework is lacking, and the anticipation of the risk connected to an advanced performance, i.e. the non-performance by the other party, unfolds its full disincentive on the debtor of the obligation requiring the advanced performance; thus, that debtor may a priori refrain from entering such contracts. This description may carry a very theoretical tinge, but it adequately reflects what is experienced by many economic actors in the international arena, and in particular by consumers or small and medium enterprises which are more risk-averse because of their reduced financial capacities. 2.

Public and Private Remedies

139. From the analysis above, it would follow that the costs of legal uncertainty which give rise to the international transaction dilemma can be outweighed by the expectation of a high profit resulting from such a transaction. Alternatively, the legal uncertainty may be reduced by the creation of a reliable legal framework, either in the form of uniform substantive law or the adoption of common choice-of-law rules, i.e. by measures to be taken by the collaboration of States in the political process. Many attempts have been made in that direction,²⁸⁴ but the objective is not easily attained for various reasons inherent in the political mechanisms: the unwillingness of States to give up familiar rules of their national laws; the official negotiators’ limited knowledge of commercial practice; the need for a subsequent ratification by national legislatures of agreements reached in diplomatic conferences; the risk of petrification of uniform law once it has taken effect; the fragmentary character of uniform law resulting from the variety of uncoordinated international conventions and from their limited scopes of application; etc.²⁸⁵ 140. A further and much older effort to reduce the legal uncertainty of cross-border transactions departs from private initiative. In economic theory several strategic courses of action have been described that may help to overcome the international transaction dilemma. The first consists in the replacement of the transaction by intra-firm relations: A merger of the parties substitutes a horizontal and consent-dependent exchange relation with a vertical and hierarchical transnational undertaking; the risk of non-compliance is usually considered lower in such a hierarchy than in a horizontal relation of

284 See supra, paras. 124 et seq. 285 See the critical assessment by Hein Kötz, “Rechtsvereinheitlichung – Nutzen, Kosten, Methoden, Ziele”, RabelsZ 50 (1986), 1-18.

Chapter 1 – Substantive “Anational” Private Arrangements

contracting parties.²⁸⁶ Whereas this is not a very likely scenario, a second strategy of iteration appears to be more realistic and common: raising the probability of repeat transactions, i.e. of contracting with the same foreign party again; as the likelihood of repeat business grows the incentive to take advantage of the other party decreases.²⁸⁷ Hand-in-hand with iteration goes the building of reputation, an effort that serves a parallel end. A third way to cope with legal uncertainty through private arrangements is what economists sometimes call the procurement of hostages: a party provides, for instance, securities such as a bank guarantee on first demand or an export credit insurance.²⁸⁸ 141. More specific private tools designed to overcome the barrier of legal uncertainty can be ascertained in numerous forms and sectors. One of them, an example of the strategy of iteration and reputation-building, is the employment of a commercial agent established in the customer’s country. A similar technique that has more recently developed in capital markets is the central counterparty (CCP) which performs clearing functions for investors who buy and sell securities at exchanges or in over-the-counter (OTC) transactions. Other private arrangements reducing legal uncertainty and thereby encouraging private actors to engage in international transactions have received more attention in legal literature; they can be found both in the commercial world and in consumer transactions. With regard to the former, the most ingenious arrangements can be found in the export trade, see below, Section 2. With regard to the latter, the emergence of package tour operators after World War II can be given as an example, see below, Section 3. 142. The arrangements mentioned above and treated in greater detail below are designated here as “anational”. This is true in the sense that the parties do not primarily want to allocate their relation and dispositions within a clearly identified jurisdiction, but instead try to exclude reference to, and reliance on, any specific State law as much as possible; they want their arrangements to unfold their full effect irrespective of the applicable State law. “Anational” does not mean, however, that State law never has any impact on the legal relations subject to those private arrangements. Upon a closer inspection we shall indeed discover a number of interactions between the anational tools of private ordering and State law. As a consequence, the anational arrangements do not really oust private international law from its role in the regulation of private cross-border relations; rather, its significance is merely 286 Schmidtchen, RabelsZ 59 (1995), 56 at pp. 103-105; Gralf-Peter Calliess and Jens Mertens, “Privatrecht und Wettbewerbspolitik in der Globalisierung”, RabelsZ 74 (2010), 463-492, in particular pp. 479-487. 287 Schmidt-Trenz, pp. 258 et seq.; Schmidtchen, RabelsZ 59 (1995), 56 at p. 97; Rühl, pp. 51 et seq. 288 Oliver Williamson, “Credible Commitments: Using Hostages to Support Exchange”, American Economic Review 73 (1983), 519-540; Schmidtchen, RabelsZ 59 (1995), 56 at pp. 98-100; Rühl, pp. 55 et seq.

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diminished and sometimes shifted to a different area of the law, see below, Section 4. Section 2: The Export Trade 1.

Balancing Manifold Interests – the Lex Mercatoria

143. In medieval times, there was no separation of transport and trading activities. For safety reasons, merchants would accompany their goods to trading places, either a fair or a city of destination. At these places they would sell the goods in direct exchange against remuneration; the risk of advanced performance did not exist.²⁸⁹ As safety increased and the growing businesses of the merchants required their presence at their home establishments, they would give up travelling with their goods and entrust the transport to the emerging profession of the carriers. This development first occurred in inland transport and much later in maritime transport.²⁹⁰ The separation of trading and transport activities gave rise, however, to new commercial risks. 144. As shippers of the merchandise, sellers would lose control over the goods before the price was paid. How could they ensure payment by the buyer ? Cash on delivery arrangements were not always an adequate solution since the risks of a transfer of money back to the seller by the carrier were quite different from the risks inherent in the carriage of goods, and carriers of goods were not always apt to carry money. Hence, over time, this function was assumed by a third group of economic actors: the banks. It is their role to ensure by appropriate mechanisms that the seller has sufficient confidence in the payment of the price to deliver the goods to the carrier. In the interest of the buyer on whose behalf they are acting, they must on the other hand avoid payment to the seller until he has relinquished control over the goods and despatched them to the buyer. The most sophisticated instrument that has evolved over time in this regard is the letter of credit. A further problem connected to the chronological separation of delivery and payment relates to the risk of damage to or loss of the goods, a risk which has to be absorbed by insurance for the benefit of the parties carrying that risk in the course of the performance; the transaction, therefore, has to include evidence of a transferable insurance policy. 145. All these arrangements form part of a close interaction between the various groups of professionals involved in the export trade. In order to make this interaction more transparent, business associations and various private 289 See Henri Pirenne, “La civilisation occidentale au Moyen Age du milieu du 15e siècle – Le mouvement économique et social”, in G. Glotz, Histoire du Moyen Age, Vol. VIII, 2nd section of l’Histoire générale, Paris, 1933, here cited from the 4th edition of the German translation, Munich, 1976, pp. 95-96; Hermann Kellenbenz, Deutsche Wirtschaftsgeschichte, Vol. I, Munich, 1977, pp. 70-71. 290 Pirenne, previous footnote, p. 97.

Chapter 1 – Substantive “Anational” Private Arrangements

bodies have created business standards which, taken as a whole, are often referred to as the lex mercatoria.²⁹¹ Some of them are employed at a worldwide scale and are considered, in many countries, as commercial usages that might be given effect even in the absence of an express incorporation by the parties into their respective contracts. Some authors have even considered the lex mercatoria as an autonomous legal system of universal acceptance that requires application owing to its own de facto recognition and because of the insufficiencies of State law.²⁹² Others have pointed out that the lex mercatoria neither consists of legal precepts nor forms a system reaching out beyond its single components, and that it has not been created by bodies that can claim any law-making rights.²⁹³ We shall not delve into the doctrinal discussions about the lex mercatoria here; what is controversial among legal scholars is neither the great significance nor the sociological reality of private rule-making, but only whether the lex mercatoria can be addressed as a legal system of its own.²⁹⁴ What matters in our context is to realize the broad practical effect of private ordering and at the same time its embeddedness in State law.

291 The most comprehensive comparative treatment of the subject, its doctrinal discussion in several countries, its historical background, its alleged autonomy and some alternative approaches can probably be found in Filip de Ly, De lex mercatoria – inleiding op de studie van het transnationaal handelsrecht, Antwerp, 1989; the English edition of the book omits large portions of the theoretical discussions contained in the Dutch original, see Filip de Ly, International Business Law and Lex Mercatoria, Amsterdam, 1992; influential publications on the matter that have fostered the idea of an anational body of transnational commercial law at an early stage after World War II include Clive Schmitthoff, “Das neue Recht des Welthandels”, RabelsZ 28 (1964), 47-77; id. “The Unification or Harmonization of Law by Means of Standard Contracts and General Conditions”, Unification of Law – Year-Book 1967-1968, Vol. II, 93-117; Berthold Goldman, “La lex mercatoria dans les contrats et arbitrage internationaux: realité et perspectives”, Journal du droit international (Clunet) 106 (1979), 475-505. 292 Goldman, previous footnote, Clunet 106 (1979), 475, relies on the “réalité” of the lex mercatoria, pp. 477 et seq., and specifically refers to “l’inaptitude des droits nationaux à régir seuls les relations économiques internationales …”, at p. 503; according to Schmitthoff, previous footnote, RabelsZ 28 (1964), 47, the new law of world trade emerges from the autonomy of the parties’ will (“beruht … auf der Autonomie des Parteiwillens”), see p. 68. 293 See in particular Paul Lagarde, “Approche critique de la lex mercatoria”, in Le droit des relations économiques internationales – Etudes offertes à Berthold Goldman, Paris, 1982, pp. 125-150 at pp. 130, 131 and 139. 294 See Kessedjian, Recueil des cours 300 (2002), 165-166, for a survey of the debate and its present state.

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2.

Private Ordening

Sellers and Buyers (Incoterms)

a) Multifarious constellations 146. The law on the sale of goods as emerging from State legislation and the case law of various jurisdictions’ State courts usually deals with what may be called pathological situations associated with the sales transactions: the passing of the risk of an accidental loss or destruction of the goods; breaches of the sales contract; the seller’s express and implied warranties including the buyer’s remedies in case of delivery of defective goods, non-payment of the purchase price. Other details of the transaction are left to the parties’ arrangements. This applies in particular to the distribution of the various ancillary responsibilities arising in the course of the transaction, such as for example the packaging and transport of the goods, and to the costs incurred for their performance. While it is clear that the parties may establish an interface between the seller’s and the buyer’s duties in this respect, State law does not address these points in detail.²⁹⁵ 147. For the export trade, differentiated and detailed provisions are necessary, however, since the costs of performance of the contract account for a significant part of the overall costs of the transaction. Take the example of the place of performance: under State law, it is usually situated at the seller’s habitual residence or at the place where the goods are located at the time of contracting; the costs incurred to take the goods from there elsewhere and, in particular, to the buyer’s place have to be borne by the latter, who is also responsible for the transport. In the export trade, this solution may be inappropriate where, for example, the seller’s country requires all export goods to be carried by vessels flying its national flag; in such situations the seller will be better placed to conclude the contract of carriage. As between the seller and the buyer, the transport obligation should therefore be incumbent on the seller. Where the costs of carriage under such conditions of national flag protection exceed the market level, the parties may also agree on a place of performance outside, but close to, the seller’s country where the goods would then be transhipped to another vessel charging lower freight rates and carrying them to their final destination in the buyer’s country. 148. Depending on the government regulations of the States involved concerning certificates of origin, export licences, import licences, quarantine certificates and other documents, contractual arrangements taking into account the circumstances of the particular case will also be necessary. A further subject of negotiations about export transactions is the duty to insure the goods in transit. The successful accomplishment of an export transaction 295 The French Civil Code simply points out that the costs of delivery, unless agreed otherwise, are incumbent on the seller and those of the receipt of the goods on the buyer, Article 1608; analogous provisions can be found in Article 1465 of the Spanish Civil Code and in § 448 (1) of the German Civil Code; similar is Article 1510 of the Italian Civil Code.

Chapter 1 – Substantive “Anational” Private Arrangements

thus is the result of numerous activities of both parties involved which generate costs amounting to a significant share of the overall sales price. 149. In theory, the points discussed in the previous paragraphs could be addressed by individual negotiations and agreements. Over time, however, a number of standard situations have emerged from commercial practice, each being connected to a specific bundle of obligations with some being incumbent on the seller and others incumbent on the buyer. Parties started to refer to these bundles in their negotiations by using abbreviations such as “free on board” or “cost insurance freight” which were further abridged to symbolic letter combinations like FOB or CIF when the use of telegraphy became habitual in contracting and every additional character increased costs. Thus, the reference to FOB or CIF in a contract was meant to incorporate a whole bundle of rules on the mutual rights and obligations of seller and buyer. As long as the exact meaning of the abbreviation employed was not clearly spelt out, it could occur, however, that the interpretation settled upon in a later dispute varied depending on the court and on the country of litigation. b) The Incoterms 150. Between World Wars I and II the resulting situation of divergent interpretations was characterized as a State of lawlessness.²⁹⁶ Accordingly, one of the tasks of the International Chamber of Commerce (ICC), founded after World War I consisted in clarifying and harmonising the interpretation of the common trade terms, and corresponding efforts started in those years. The national committees of the ICC carried out enquiries among the companies involved in foreign trade and in 1936 established, on that basis, a list of national definitions. From this list the ICC drafted transnational definitions which were published for the first time after World War II in 1953. They were designated as International Commercial Terms, or Incoterms, and have been revised six times subsequently; the most recent edition, the Incoterms 2010, have been recommended for use in commercial transactions entered into after 1 January 2011. 151. The present version of the Incoterms contains definitions for 11 trade terms.²⁹⁷ Seven of these terms can be used for carriage by different modes of transport.²⁹⁸ The other four trade terms are more traditional and, by their 296 Hans Grossmann-Dörth, Das Recht des Überseekaufs, Vol. I, Mannheim, 1930, p. 47. 297 International Chamber of Commerce, Incoterms 2010, English-German Version, Berlin 2010; for a concise survey see Ulrich Magnus, “Incoterms”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 855-860, also available in German under the same heading in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen, 2009, pp. 844-848. 298 This applies to the following terms: ex works (EXW); free carrier (FCA); carriage paid to (CPT); carriage and insurance paid to (CIP); delivered at terminal (DAT); delivered at place (DAP); delivered duty paid (DDP).

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very definitions, relate to carriage by sea or by inland navigation.²⁹⁹ For the transport route leading from the initial location of the goods to their destination, these clauses identify diverse intermediate points as interfaces between the obligations of the seller and those of the buyer. As soon as the seller has carried out all obligations laid down in the Incoterms definition of the respective trade term, he has performed his obligations under the sales contract. 152. For example, under the FAS term the seller has to deliver the goods alongside the vessel designated by the buyer. All further steps that have to be taken for the carriage of the goods to their final destination, for example the loading of the goods on board the ship and their insurance, are incumbent on the buyer. If they are not undertaken by the buyer, the sales contract will nevertheless be considered as performed and give rise to the seller’s claim to the purchase price. However, where the parties have agreed on an FOB delivery term, the seller would also have to load the goods aboard the ship and, since the crossing of the tackle is considered as the crucial moment for the export operation, would have to provide the export licence. Since the FOB seller has to deliver the goods on board the ship, he would also have to give evidence of that delivery to the buyer. This can be done by any document including a sea waybill or a bill of lading, although the seller is under no obligation to make a contract of carriage to secure delivery.³⁰⁰ But again, it would be up to the buyer to insure the goods in transit or to abstain from such action.³⁰¹ 153. The role and significance of the Incoterms under State law has been the object of a long debate which cannot be continued here in depth. There is no doubt that the parties’ explicit agreement on a specific trade term forms a part of their contract; the “meeting of the minds” relates, inter alia, to that trade term. Recourse to the Incoterms is meant to shed light on the meaning of the trade term agreed. That recourse can be the consequence of an express reference in the contract, but also of an implied agreement which could follow from usages to which the parties have agreed and by practices they have established between themselves.³⁰² But what about parties who have not yet been in commercial relations with each other ? Would they be bound by the Incoterms as well ? Depending on the State law applicable to the sales contract, this might follow from the characterization of the Incoterms as commercial custom. Article 9 paragraph 2 CISG in fact establishes a presumption that the parties have impliedly made applicable to 299 This applies to the following clauses: free alongside ship (FAS); free on board (FOB); cost and freight (CFR); cost insurance and freight (CIF). 300 See FOB clause A (3). 301 As explicitly laid down in FOB clause B (3) (b). 302 Roy Goode, Herbert Kronke, Ewan McKendrick and Jeff rey Wool, Transnational Commercial Law – International Instruments and Commentary, Oxford, 2004, p. 209 with reference to Article 9 (1), CISG.

Chapter 1 – Substantive “Anational” Private Arrangements

their contract or its formation a usage of which they “knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.” It would appear that this opens the door for the incorporation of the Incoterms to the extent that they can actually be considered as being widely known and regularly observed. This condition is probably fulfilled with regard to most definitions of the “old” trade terms used in shipping,³⁰³ but not necessarily with regard to the more recent terms. In particular, the regular revision of the Incoterms constitutes a certain danger to their recognition as international trade usages. 154. At first sight, the characterization of the Incoterms as a trade usage under national law or international conventions may appear to be the only connection between international sales contracts and State laws. But there are others. The Incoterms do not deal with the seller’s warranties and the buyer’s remedies in case of the delivery of defective goods, nor do they address other forms of breach of contract. These pathological situations of the sales transactions are thus left to State law. While the export trade is often addressed as the major field governed by the lex mercatoria, this proposition only applies to the said distribution of responsibilities and costs relating to the performance of the contract, but not to pathological situations where we are in the realm of State law. A further interference of State law with the export trade consists in the mandatory regime of carrier liability which is an essential element for both the transfer of the goods and the transfer of payment, see below. 3.

Carriers and Their Liability

a) The significance of transport documents 155. Subsequent to the functional separation of trade and transport activities, the emerging profession of carrier has acquired a central role in the export trade. Depending on the trade term agreed in the sales contract, the carrier is either employed by the seller (for example in a CIF contract) or by the buyer (for example in an FOB contract). In any event the carrier is the person who connects seller and buyer in the regular case. Since he takes the goods into his custody, he has to make sure that the seller, who may receive the purchase price after delivery of the goods to the carrier, effectively loses control over the goods and is unable to redirect them by subsequent instruc303 See the references to several arbitration awards and court decisions in Franco Ferrari, “The Draft UNCITRAL Digest and Beyond: Cases, Analysis and Unresolved Issues in the U.N. Sales Convention”, Munich, 2004, p. 203; according to that author’s view, the decisions which correspond to the prevailing view in legal literature are incorrect as they do “not take into account that in various countries abbreviations such as FOB, CIF, etc., do not always have the meaning ascribed to them by the INCOTERMS”.

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tions given to the carrier. On the other side, the buyer as the consignee of the goods must be excluded from receiving them until he has made all necessary arrangements for the payment of the price and can prove that he is entitled to receive the goods. 156. This key function of the carrier is ensured by the issue of certain documents upon receipt of the goods from the shipper/seller: in former times, this used to be a negotiable bill of lading in maritime transport; currently sea carriers will usually issue a sea waybill and land carriers a consignment note. These documents differ in several respects. Their common effect is, however, that the carrier, once they have been issued, is no longer entitled to comply with subsequent instructions given by a person alleging a right of disposal unless these documents are presented to him. Where such a document, containing the unaltered initial instructions, identifies the buyer as the consignee of the goods to whom they have to be delivered on arrival, the seller may therefore convey the document to the buyer or his bank in exchange for the purchase price. 157. For the functional context outlined above, it is essential that the document issued by the carrier is accurate in respect of the receipt of the goods, their quantity and quality and with regard to the time of receipt. Where the transport document is incorrect on one of these points, the buyer or his bank may be misled and suffer loss by, for instance, paying the price for the whole quantity of the goods purchased while the shipper has only delivered part of it to the vessel. It is not uncommon that carriers issue so-called clean documents that do not refer to any defects in quality or quantity of the goods in exchange for the shipper’s promise to reimburse the carrier for any loss he suffers because of the wrong description of the goods in the transport document. It is a matter of national law whether such arrangements between shipper and carrier are considered as valid or void.³⁰⁴ Here again, State law – which may differ from country to country – plays an important role for the overall framework of the export trade arrangements; where national laws differ, the determination of the applicable law is of the essence. b) The carrier’s liability 158. Where the goods are stolen or damaged while they are in the carrier’s custody, the arrangement outlined above is not helpful unless the seller/shipper or the buyer/consignee (or his bank) can hold the carrier liable for the loss suffered. Without the carrier’s liability none of the involved parties can trust in his promise to deliver the goods at destination. During the nineteenth century, European shipowners had increasingly turned to the use of farreaching exemption clauses in their bills of lading “to a point where it could be said that the carrier accepted the goods to be carried when he liked, as he 304 See the references to the court decisions and comments in legal literature of several countries in Jürgen Basedow, Der Transportvertrag, Tübingen, 1987, p. 377 at footnote 137.

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liked, and wherever he liked.”³⁰⁵ As a consequence, the value of the transport documents became doubtful and it was said “that the negotiability of the bill of lading … was gravely imperilled.”³⁰⁶ Confidence in the overall arrangement of the export trade was reduced because buyers tendering payment could not be sure that they would get the goods or corresponding compensation as a reward. Again, the intrusion of State law into the contractual arrangements turned out to be indispensible for preserving the functioning of the export trade mechanism. 159. Finally, State legislatures intervened, first in the United States where the Harter Act was passed in 1893 and prohibited a contractual exoneration from liability for negligence.³⁰⁷ After World War I the Hague Rules containing similar mandatory provisions were adopted at a conference of the International Law Association as a model bill of lading which was recommended to the international shipping community.³⁰⁸ When it turned out, however, that shipowners preferred to stick to the traditional exoneration clauses, the Belgian Government convened the Brussels Diplomatic Conference of 1924, where the Hague Rules were formally adopted as a binding international convention.³⁰⁹ Ever since, conventions on the carriage of goods (and passengers) have been adopted for all modes of transport and have implemented mandatory provisions on the carrier’s liability.³¹⁰ Here again, the interaction 305 Arnold W. Knauth, The American Law of Ocean Bills of Lading, 4th ed., Baltimore, 1953, p. 116. 306 Knauth, previous footnote, p. 120 307 See the so-called Harter Act of 13 February 1893, 27 Stat. 445, codified in 46 USC §§ 30702 et seq. (2011). 308 See Knauth, supra footnote 305; see also Rolf Stödter, Geschichte der Konnossementsklauseln, Hamburg, about 1954, pp. 56 et seq. 309 International Convention for the Unification of Certain Rules Relating to Bills of Lading, signed at Brussels on 25 August 1924, 120 LNTS 155; see also for later amendments the Protocol of 23 February 1968, the so-called Hague-Visby Rules, 1412 UNTS 127, and the further Protocol of 21 December 1979, 1412 UNTS 146, on the use of the Special Drawing Right as the unit of account for the calculation of liability caps. 310 See for road transport, the Convention on the Contract for the International Carriage of Goods by Road (CMR), signed at Geneva on 19 May 1956, 399 UNTS 189; for air transport, the Convention on the Unification of Certain Rules for International Carriage by Air, signed at Montreal on 28 May 1999, 2242 UNTS 309; for inland navigation, see the Convention on the Contract for Carriage of Goods by Inland Waterway (CMNI), done at Budapest on 22 June 2001, available on the website of the Central Commission for the Navigation of the Rhine: http://www.ccr-zkr.org/ ®Documents for downloading®Conventions; for carriage by rail, see the Convention concerning International Carriage by Rail (COTIF), concluded at Berne on 9 May 1985, 1397 UNTS 2, Appendix B: Uniform Rules concerning the Contract for International Carriage of Goods by Rail (CIM), 1397 UNTS 112; the COTIF has been amended by a Protocol, done at Vilnius on 3 June 1999 that took effect on 1 July 2006; the Uniform Rules CIM as amended are available on the website of the Intergovern-

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between the private organization of the export trade and supplementary State action becomes very clear. And since the Hague Rules, in accordance with their Protocol of Signature, were adopted in the various contracting States in largely different forms and with divergent content, the choice-oflaw analysis has remained a significant although disputed preliminary step for the application of that convention in at least in some countries.³¹¹ 4.

Banks and Payment (Uniform Customs and Practices for Letters of Credit)

a) Evolution of the letter of credit 160. The third pillar of the export trade arrangements deals with the transfer of the purchase price. In theory, the parties to the sales transaction could have employed the carrier for that purpose, too; the seller/shipper could have made delivery of the goods to the consignee/buyer conditional on the payment of the price, charging the latter to carry the money back to the seller on his return journey. But such cash on delivery arrangements have always been exceptional for various reasons. Firstly, carriers are slow. Their journeys are much longer than those of messengers sent out to convey the money directly. And a long journey means a long exposure to theft, which is high anyway since money may be obscured more easily than merchandise and since it is more attractive for thieves, being apt for manifold uses. A further reason is the “improbity (improbitas)” of carriers and their personnel as already underlined by the Roman jurist Ulpian³¹². 300 years ago the English Justice Lord Holt pointed out that, “these carriers might have an opportunity of undoing all persons that had any dealing with them, by combining mental Organisation for International Carriage by Rail (OTIF): http://www.otif.org/ en/about-otif/conventions-cotif.html. 311 See Vita Food Products Inc v. Unus Shipping Co. Ltd., [1939] AC 277 (PC), where a bill of lading had been issued in Newfoundland – then separate from Canada at the time and a contracting party to the Hague Rules – for transport from Newfoundland to New York. The Hague Rules would therefore have applied under their Article 10; however, the internally implemented British Carriage of Goods by Sea Act provided for the application of the Hague Rules only where the port of loading was located in Britain; consequently, the Privy Council considered the contractual abrogation of the Hague Rules contained in a choice-of-law clause of the bill of lading as valid. Numerous contracting States have enacted conflict rules for their respective implementing provisions; in a comparative survey, Peter Mankowski, Seerechtliche Vertragsverhältnisse im Internationalen Privatrecht, Tübingen, 1995, p. 309, identifies no less than seven groups of such specific conflict rules; see also the recent discussion in Sergio Carbone, “Conflits de lois en droit maritime”, Recueil des cours 340 (2009), here cited from the pocket-book edition, Leiden, 2010, pp. 53 et seq., 123 et seq. 312 D.4.9.3.1 (Ulpianus); see also Jürgen Basedow and Reinhard Zimmermann, “Der Prätor, Simbabwe und die Mafia”, ZEuP (1997), 221-223.

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with thieves etc. and yet doing it in such a clandestine manner as would not possible to be discovered”.³¹³ Finally, traders would often prefer to keep the money in the buyer’s country instead of transferring it home. To cope with these interests and concerns a banking industry involved in all kinds of credit operations evolved already in medieval times, first in Italy, later north of the Alps.³¹⁴ A deposit of the purchase price in a foreign bank would be evidenced by a letter of credit. 161. It was only a small step from these operations to what is currently known as documentary credit. As against the buyer, the bank undertakes to make payment of the purchase price of the goods imported by the buyer who is its customer on presentation of specified documents.³¹⁵ The undertaking of the bank, which is called the issuing bank, is laid down in a letter of credit and is irrevocable, thereby providing the seller a sufficient guarantee of being paid such that he can consign the goods to the carrier’s custody. Payment is made conditional on the presentation, by the seller, of specified documents before the expiry date stated in the letter of credit. The documents to be presented generally include a transport document which proves that the goods have been taken over by the carrier and whose presentation is necessary to effectuate instructions subsequently given to the carrier to redirect the goods towards a different destination; a commercial invoice; a certificate of origin; further certificates of weight and/or of quality; and often – under CIF contracts – a policy or certificate of insurance. Provided that the documents presented comply with the specifications in the letter of credit, these details to be checked very carefully by the bank, the seller of the goods is entitled to claim payment from the issuing bank as the beneficiary of the letter of credit. 162. Where the issuing bank has no representation in the seller’s country, it will avail itself of the services of a so-called advising bank that informs the seller and beneficiary of the credit at the request of the issuing bank; the advising bank does not incur any obligation vis-à-vis the beneficiary. The issuing bank may also employ the services of a bank in the seller’s country to receive, examine and accept the documents presented by the seller; such a bank is usually called the nominated bank. Neither an advising nor a nominated bank will incur any obligation vis-à-vis the seller/beneficiary to make payment on their own account. Where the seller requires such security in addition to the obligation of the issuing bank, the latter may avail itself of the services of another bank, often in the seller’s country, to confirm the

313 Coggs v. Bernard, (1703) 92 ER 107 (KB) at p. 112. 314 See for the thirteenth and fourteenth centuries: Hermann Kellenbenz, Deutsche Wirtschaftsgeschichte, Vol. 1, Munich, 1977, pp. 134-138. 315 Roy Goode, Herbert Kronke, Ewan McKendrick and Jeff rey Wool, Transnational Commercial Law – International Instruments and Commentary, Oxford, 2004, pp. 332, 334.

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obligation of the issuing bank. The confirming bank will thereby become an additional debtor. b) The Uniform Customs and Practice for Documentary Credits 163. These arrangements first evolved in individual transactions. Over time, recurring problems led to a certain standardization, which however was not consistent in all countries. The International Chamber of Commerce started its harmonizing work on these matters in the 1920s and adopted the first version of the Uniform Customs and Practice for Documentary Credits in 1933, without ensuring, however, a worldwide acceptance at this very early stage.³¹⁶ Only revisions of this instrument after World War II were universally approved by banks and grew to what may be called the global normative framework of letters of credit. The current version is called UCP 600 and came into effect on 1 July 2007.³¹⁷ The UCP contains a detailed regulation of (i) definitions and interpretation, (ii) some underlying principles, (iii) the obligations of the various banks involved, in particular relating to the opening of the credit, inter-bank relations and the examination of documents presented and (iv) some additional matters including limitations of liability. 164. A remarkable change relates to the application of the UCP 600. Previous versions claimed application unless they had explicitly been excluded by the parties; as a result of this far-reaching claim and their near-universal adoption in international trade, they allegedly “achieved such universal effect that in some countries the UCP is recognized as having the force of law, or at least that of a strong trade custom.”³¹⁸ This view was underpinned, inter alia, by the recommendation of UNCITRAL in 1975 that the 1974 revision of the UCP should be applied to all letters of credit.³¹⁹ Thus, it is the more surprising that the UCP 600 in Article 1 now requires that “the text of credit expressly indicates that it is subject to these rules”. This would appear to exclude their application not only as part of an international commercial custom, but even by virtue of an implied incorporation. However, commentators rather interpret the amendment as a declaratory advisement of the 316 E. P. Ellinger, Documentary Letters of Credit – A Comparative Study, Singapore, 1970, pp. 1-2. 317 International Chamber of Commerce, Commentary on UCP 600 – Article-by-Article Analysis by the UCP 600 Drafting Group, Paris, 2007; for the German version see Klaus Hopt and Hanno Merkt, Baumbach/Hopt, Handelsgesetzbuch, 34th ed., Munich, 2010, Annex (11) at pp. 1973 et seq. 318 Roy Goode, Herbert Kronke and Ewan McKendrick, Transnational Commercial Law – Texts, Cases and Materials, Oxford, 2007, p. 358 at No. 9.11; in a similar vein: Klaus Hopt and Hanno Merkt, Baumbach/Hopt, Handelsgesetzbuch, 31st ed., Munich, 2003, Annex (11) at p. 1667. 319 See Frédéric Eisemann and Rolf Eberth, Das Dokumenten-Akkreditiv im internationalen Handelsverkehr, 2nd ed., Heidelberg, 1979, pp. 40-41, citing literally the UNCITRAL recommendation.

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parties involved and not as a constitutive requirement for the incorporation of the UCP into the letter of credit; accordingly, a tacit incorporation would still be possible.³²⁰ 165. The UCP contains a fairly detailed regulation of numerous issues that may arise in the course of the regular letter of credit business. They may therefore be regarded as a self-sufficient instrument of private ordering, and there are indeed not very many published court decisions dealing with letters of credit. This is due to the revision of the UCP at regular intervals which allows for an adjustment to novel technologies and business practices such as electronic authentication, see Article 3 UCP 600, or the multimodal transport documents, see Article 19 UCP 600. Yet, the UCP, too, have been agreed upon “in the shadow of state law”. While they contain precise regulations of what the banks have to do in the various situations covered, they do not regulate the consequences of a breach of those obligations. Article 36 excludes the banks’ liability for force majeure, but does not deal with the basis of such liability as it is left to the national law applicable to the specific legal relation in question. Thus, State law and also choice-of-law rules form the legal basis for the UCP 600, although the practical significance of State law appears to be minor as compared to the law of transport. 5.

Insurance

166. A final element of the overall regulatory framework of the export trade is the insurance of the relevant goods. The willingness of the buyer to make an irrevocable promise of payment for the goods depends on how likely it is that he receives full consideration. This is intended to be the merchandise and, where it is lost or damaged, compensation from the carrier or insurance proceeds. Since the carrier’s liability is subject to various exceptions under the relevant laws and international conventions and since it is more and more perceptibly limited, an applicable insurance policy has become increasingly important for the approval and processing of the whole transaction. The insurance will be taken out by the buyer himself if the sales transaction has been concluded on the basis of an FOB term or under similar conditions. Where, however, the underlying export transaction is based on a CIF or similar term, it is up to the seller to insure the goods. 167. Because this cargo insurance has to fit the requirements established by the sales contract on the one side and the letter of credit on the other, numerous details of the insurance cover are determined beforehand. Thus, the insurance must be taken out for the benefit of the buyer or any other person 320 See the official commentary supra at footnote 317: “where this express indication is not made and an indication of other rules is not present, the rules may be applied as descriptions of custom applicable to documentary credits”. On a similar note Klaus Hopt in Klaus Hopt and Hanno Merkt, Baumbach/Hopt, Handelsgesetzbuch, 34th ed., Munich, 2010, p. 1979.

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having an insurable interest in the goods, and it must provide for a certain minimum cover as defined by a certain type of policy laid down in the Institute Cargo Clauses.³²¹ The insured sum must amount to at least 110 per cent of the CIF value of the goods.³²² The period of cover must begin no later than the date of shipment.³²³ These and other details give evidence of the sophisticated coordination between the sales contract, the letter of credit and the insurance contract. 168. Apart from these aspects of the private arrangement, the insurance contract itself is subject to the State law governing insurance contracts, either for land transport insurance or marine insurance, depending on the circumstances of the case. Both the insurance of land transport and marine insurance are characterized by a very far-reaching freedom of contract; the mandatory provisions governing land transport in general are usually not applicable to these branches.³²⁴ Making use of this freedom of contract, private institutions have drafted detailed lists of general conditions of transport or marine insurance which in practice supersede State law to a very large extent. State law is redundant in most instances and the pertinent provisions of the German commercial code dealing with marine insurance were even deleted some years ago for that reason.³²⁵ Nevertheless, State law as emerging from general contract law and case law remains applicable.

321 322 323 324

See Incoterms, CIF Clause A (3) (b). Incoterms CIF Clause A (3) (b), para. 3; UCP 600, Article 28 (f) (ii). UCP 600, Article 28 (e). See the Principles of European Insurance Contract Law, Article 1:101, Comment C 7 and Article 1:103, para. 2, see Jürgen Basedow, John Birds, Malcolm Clarke, Herman Cousy and Helmut Heiss, Principles of European Insurance Contract Law (PEICL), Munich, 2009, pp. 31-32 with further references in Notes N 3-N 5. 325 The former §§ 778-900 and 905 of the German Commercial Code (Handelsgesetzbuch, HGB) dealing with marine insurance were abrogated by Article 4, para. 1, of the Law for the Reform of Insurance Contract Law (Gesetz zur Reform des Versicherungsvertragsrechts) of 23 November 2007, BGBl. 2007, I-2631; since § 209 of the new Law on the insurance contract (Versicherungsvertragsgesetz) adopted on the same day explicitly excludes its application to marine insurance, no State law for that branch of insurance is currently in force in Germany; this has been explained by the fact that marine insurance is almost completely covered by private sets of rules, see Roland Michael Beckmann in Horst Baumann, Roland Michael Beckmann, Katharina Johannsen and Ralf Johannsen, eds., Bruck/Möller, Versicherungsvertragsgesetz – Großkommentar, Vol. 1, 9th ed., Berlin, 2008, Einf. A, Nos. 18 and 121 with reference to the legislative materials.

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Section 3: International Tourism: Package Tour Operators 1.

Emergence and Specific Demand

169. Tourism is a fairly recent phenomenon. While people have travelled to foreign countries throughout history, those journeys were individual undertakings until the nineteenth century. Only in the later part of that century did tourism evolve as a consequence of several key factors: cities growing to mass agglomerations depriving their inhabitants from access to nature, the construction of railways, the establishment of scheduled shipping services and, later on, regular air transport. Apart from the physical impediments to long-distance travel, the development of tourism required overcoming the innate aversion that many otherwise interested – but risk averse – people had for the uncertainty associated with the unknown conditions of life found in foreign countries. 170. This latent demand was satisfied by a new profession, the travel agent. Initially, these professionals primarily provided information about the foreign country, about possible sightseeing goals and about the touristic resources; as agents of hotels and service providers in the foreign country, they would receive bookings and thereby help tourists to organize their journey. The pertinent contracts were, however, made between the travellers and the foreign service providers. It was only after World War II that travel agents began to put together, in advance, whole bundles of touristic services, including flights, hotel accommodation, ground transfers, sightseeing excursions, bookings for entertainment, etc., and offer them to the public for a single price. This business model “set the travel agents firmly on the road to success” and turned the travel agent into a “promoter of the tourist industry” who “can decide to ‘launch’ a seaside resort”.³²⁶ 171. The success of package tours is partly due to the opportunity for operators to offer the package for an inclusive price below the aggregate of the prices that would be charged for the single components of the package if purchased separately. But package tour operators also meet travellers’ demand for an advisor who understands the average expectations of people in the tourist’s home country as well as the specific interests of his customers; someone who can not only compare these expectations and interests to the quality of the services offered abroad, but who can also be contacted before, during and after the journey with all kinds of wishes and complaints. Especially risk-averse tourists who anticipate something going wrong during their trip to the foreign country are pleased to know that a travel guide will be present during the journey and that afterwards a travel agent will exist with whom complaints can be lodged. 326 Explanatory Report of the Draft International Convention on the Travel Agency Contract (CCV), Unification of Law – Yearbook 1967-1968, Vol. I, pp. 66-139 at pp. 75 and 71-73.

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172. Yet as long as the travel agent acted only as an intermediary promoting the contractual relations between the tourist and the local service provider, only the latter was the right addressee for formal legal complaints, and potential claims had to be brought against the service provider in the courts of the foreign country. Needless to say, tourists would in most cases abstain from bringing a lawsuit abroad, and the enforcement of their rights was often imperilled. Anticipating such difficulties, especially risk-averse customers would refrain from booking a tour that they otherwise would find very attractive and stay in their home country. It was therefore in the interest of travel organisers to clarify the legal relations at issue³²⁷ and, in particular, to turn the complex cross-border framework of contractual relations underlying an international tour into a quasi-domestic relation. 2.

Increasing Certainty through Regulation

173. In the early years, travel agents extended their services to the organization of package tours, but stuck to the traditional view that they only helped foreign service providers and tourists to make a contract to which they were alien themselves. It was thus left to State law to take account of the factual changes and impose liability on travel agents when they were acting as package tour operators.³²⁸ The law became uncertain, and certainty was not restored by the International Convention on Travel Contracts (CCV) that was concluded under the auspices of UNIDROIT in 1970.³²⁹ This Convention did not receive the expected approval; out of the seven contracting States, only four can be considered as countries of tourist origin, i.e. as countries where the Convention will actually govern the relations between tourists and tour operators. The main reason for this lack of success is probably that the Convention tries to address both the traditional travel agent acting as an intermediary as well as the tour operator who concludes an “organized travel contract”. Such a contract is defined not only by the combination of services promised to the tourist, but also by the charge of an inclusive price and by the undertaking of the operator to provide the travel services “in his own name”. Both criteria may open loopholes to the operator to contract out of his personal liability by splitting up the inclusive price or by putting an agency clause into the contract. 327 Otto Riese, “Der Entwurf eines internationalen Abkommens über den Reisevertrag und die Haftung der Reisebüros”, RabelsZ 32 (1968), 651-674 at pp. 656-657. 328 Riese, previous footnote, RabelsZ 32 (1968), 654-656, reports a number of French judgments from the 1950s and 1960s awarding damages to tourists against travel agents and rejecting the latters’ allegations of being mere intermediaries; on the development of German case law see Eike von Hippel, Verbraucherschutz, 2nd ed., Tübingen, 1979, pp. 206-212 at p. 208 with many references. 329 International Convention on Travel Contracts (CCV), concluded at Brussels on 23 April 1970, 1275 UNTS 540.

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174. Later legislative measures, in particular the European Directive on Package Travel, have avoided opening such floodgates which might immunize operators from liability.³³⁰ The Directive essentially draws the borderline between a travel agent and a tour operator by referring to the pre-arrangement of a combination of different travel services.³³¹ The Directive has now been implemented in the 27 Member States and establishes a vast array of information duties for operators and, in case of their failure to perform the contract or parts of it after a tourist’s departure, to ensure the return journey at no additional cost; it also provides for a traveller’s right to transfer the whole package to another tourist before departure, for an operator’s liability upon non-performance of the contract, and for an operator’s obligation to provide sufficient evidence of security for both the refund of a prepaid travel price and the repatriation of the consumer in the case of insolvency. 175. Of particular note is the geographical scope of application of these rules. Neither the CCV nor the European Directive exclusively deals with crossborder tours; these instruments are applicable to both domestic and international journeys. The CCV applies to all contracts concluded by travel organisers established or domiciled in a contracting State, and the European Directive to all packages sold or offered for sale in the territory of the European Union.³³² The comprehensive application to both domestic and cross-border travel can be explained from a purely legal perspective: the obligations of tour operators vis-à-vis tourists are essentially the same, irrespective of a domestic or foreign destination. From a psychological and economic perspective, however, the operator of an international tour provides services exceeding those supplied and expected in a domestic tour: he helps to minimize – to the benefit of the traveller – the uncertainty inherent in a trip to a foreign country. It does not follow, however, that the operator must be established in the traveller’s country of residence; while this is typically the case in package tours, cross-border contracts concluded by the 330 Council Directive 90/ 340 EEC of 30 June 1990 on package travel, package holidays and package tours, OJ 1990 L 158/59. 331 See Article 2, para. 1, of the Directive, previous footnote; see also Hans SchulteNölke, Christian Twigg-Flesner and Martin Ebers, EC Consumer Law Compendium: The Consumer Acquis and Its Transposition in the Member States, Munich, 2008, pp. 108 et seq., 127 et seq.; Ansgar Staudinger, “Package Travel Contracts (Package Tours)”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, Max Planck Encyclopedia of European Private Law, Vol. 2, Oxford, 2012, pp. 1234-1238; in German available under the heading “Reisevertrag (Pauschalreisen)” in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. II, Tübingen, 2009, pp. 1287 et seq. 332 See Article 1, Dir. 90/314/EEC; Article 2, CCV. Article 40, para. 1 (a), CCV, allows contracting States to reserve the application of the Convention to international travel contracts to be performed totally or partially within a State other than the State in which the contract was made or from which the traveller departed; only Italy has entered that reservation.

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consumer with a foreign tour operator also occur, being concluded in particular through an intermediary in the traveller’s home State.³³³ Irrespective of their country of origin, operators play a particularly significant role in international package tour operations; this also emerges from Article 7 of the European Directive which puts operators under an obligation to ensure “repatriation of the consumer in the event of insolvency”. The term “repatriation” would not be used for domestic tours and clearly refers to a return journey departing from a foreign country.³³⁴ 176. It follows from the preceding explanations that the emergence of a package tour industry resulted in the first instance from the commercial initiative of travel agents who invented a new type of private arrangement to satisfy an emerging demand for international travel under pseudo-domestic conditions. Two sources served to ultimately meet the unique combination of customer expectations at play: whereas private initiative made international travel available for large portions of the population, it was the public sector, i.e. State law, that implemented the additional safety precautions which served to further reduce the uncertainty consumers inherently felt in respect of travel to foreign nations. Section 4: Conclusion – The Domestication of International Transactions 177. The arrangements for the export trade and for package tours outlined in sections 2 and 3 above have four aspects in common: first, the original parties to the transaction take recourse to the services of third parties experienced in that field, usually professionals. Second, such recourse helps to reduce the complexity of the relation between the original parties. Third, the professional creates a pseudo-domestic environment which encourages the customers to engage in cross-border transactions. Fourth, the complexity does not, however, disappear; it is rather shifted to the professional third parties who step in. 178. In the export trade operations, the third parties intervening between sellers and buyers are essentially the banks and the carriers. In an economic sense they are intermediaries, although they are not agents as understood in legal terminology. In package tourism, it is the tour operators who step in between the traveller and the service provider in the foreign country. Here as 333 See e.g. the facts of ECJ, 20 September 2001, Case C-168/00 (Simone Leitner v. TUI Deutschland GmbH & Co. KG), [2002] ECR I-2631: the Austrian plaintiff had booked a package tour to Turkey offered by a German tour operator. 334 The Directive employs the term repatriation (rapatriement, rimpatrio, repatriación, repatriëring etc.) in various authentic languages, but not for example in German (Rückreise des Verbrauchers) and Danish (hjemtransport). These latter phrasings would encompass any return trip, whether from a domestic or a foreign place of vacations.

Chapter 1 – Substantive “Anational” Private Arrangements

well, the tour operators may be addressed as intermediaries in an economic sense, but they are not agents in a legal sense, although they attempted to act in that capacity for a considerable time. At an earlier stage of this enquiry, reference has already been made to the intercession of intermediaries as a technique that helps to overcome the legal uncertainty inherent in international relations.³³⁵ In business life the employment of commercial agents is indeed a very popular tool for the penetration of foreign markets. In the eyes of potential customers in those markets, the intercession of a domestic agent for a foreign principal may change the risky character of an import transaction, which actually always is a cross-border contract, into a quasi-domestic transaction. The reputation of the domestic agent may be an additional ground for the customer to enter into contracts with the foreign principal. It is this mechanism that induced the European Union already at a very early stage to implement the basic freedoms for commercial agents³³⁶ and subsequently to harmonize their minimum protection under national laws.³³⁷ The activities of commercial agents foster the conclusion of crossborder contracts and thereby help to integrate markets. 179. What the different arrangements further have in common is the reduction of complexity as between the original parties to the economic transaction. Where a commercial agent is employed by the principal/seller in the customer’s country, the latter can negotiate with that agent as if they were involved in a domestic transaction. The 1955 Hague Convention on the Law Applicable to the International Sale of Goods takes account of those pseudo-domestic trading conditions for the buyer by declaring, in the absence of a choice-of-law clause, the buyer’s law applicable to the sales contract if that contract has been concluded through an agent in the buyer’s country.³³⁸ Where the buyer in an export trade operation entrusts, as he will often do, the payment of the purchase price to his bank through a letter of credit to the benefit of the seller, a similar reduction of complexity results. The buyer and his bank are usually established in the same country or even at the same place; their relation is a domestic one governed by the law of that country. 335 See supra, para. 141. 336 Council Directive 64/224/EEC of 25 February 1964 concerning the attainment of freedom of establishment and freedom to provide services in respect of activities of intermediaries in commerce, industry and small craft industries, Official Journal (English Special Edition), Series I, Chapter 1963-1964, p. 126. 337 Council Directive 86/653/EEC of 18 December 1986 on the co-ordination of the laws of the Member States relating to self-employed commercial agents, OJ 1986 L 382/17. 338 See Article 3, para. 2, on the Convention on the Law Applicable to International Sales of Goods, done at The Hague on 15 June 1955, English translation of the French authentic text in 1964 UNTS 148: “Nevertheless, a sale shall be governed by the domestic law of the country in which the purchaser has his habitual residence, or in which he has the establishment that has given the order, if the order has been received in such country, whether by the vendor or by his representative, agent or commercial traveller.”

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On the other side, the foreign seller will usually be advised by a bank in his country that a letter of credit has been issued, and often the same bank will also act as a nominated bank to which the seller may present the specified documents. Finally, the situation is similar in respect of the package tour: the traveller makes the contract with an operator who is usually established in his country or who at least makes his offers in the traveller’s language. In case of any breach of the package tour contract, the tourist may address the operator in his country and need not go to court in a foreign jurisdiction and apply for a decision to be taken under foreign law. Again, the effect of the private arrangements is what may be called the domestication of international contractual relations and the reduction of complexity. 180. This does not amount, however, to a complete disappearance of all international aspects of the overall transaction. Rather, it is the intermediary who takes over the burden of that complexity. His relations with the foreign supplier of goods and services have a cross-border dimension. This holds true for the relation between the tour organizer and, for example, the foreign hoteliers, and it also applies to the relation between agent and principal mentioned earlier. Finally, in the case of the letter of credit issued in the context of an export trade operation, the issuing bank needs an agent in the exporting country who can advise the seller of the issue of the letter of credit – the advising bank – and who is authorized and commissioned to receive and examine the documents specified under the letter of credit. The inter-bank relations clearly have a cross-border dimension. Thus, the international character of the overall transactions is not suppressed. It is rather transferred or channelled to professionals who permanently deal with the respective risks, who can negotiate at arm’s length over their distribution with the foreign partners and who can distribute the risk among their numerous customers; they thereby adopt the role of insurers. 181. The process of domestication of international fact situations has been initiated by private actors; it is the fruit of innovative private arrangements. But it cannot be said to replace the public regulation of the respective sectors. It is rather the result of a new division of labour between private and public ordering. Throughout this chapter, we have seen that even the most ingenious private ordering needs the support of State law. In some areas, for example marine insurance, this may be considered as a matter of gapfi lling. However, as could be observed in respect of tour operators and the liability of carriers in the context of export trade operations, State laws are also necessary components of the overall arrangements that guarantee their functioning. As long as State laws differ from country to country, choice of law remains indispensable even in areas of extensive private ordering. 182. It is sometimes said that recourse to arbitration makes State law redundant, but it cannot genuinely be regarded as an extra-public device. Arbitrators usually apply the law of a specific State to the dispute and they perform their functions also in other respects in the shadow of State law. It is sufficient in this context to refer to the limits of arbitrability, to annulment proceedings

Chapter 1 – Substantive “Anational” Private Arrangements

in State courts which allow for a limited review of arbitration awards,³³⁹ to the obligation of arbitration panels affirmed by State jurisdictions to comply with mandatory provisions,³⁴⁰ and to the ultimate dependence of arbitration on State enforcement proceedings. Thus, State law maintains its influence even where the settlement of disputes is left to arbitration; and as long as State law differs from one country to the next, choice of law will remain indispensable. Yet this does not mean that for the conflict of laws, private ordering becomes insignificant, quite to the contrary. Party autonomy is the paramount vehicle for private ordering in private international law. The following chapters will inquire into its theoretical foundations and investigate the role it actually plays in various areas of the law.

339 Under Article V (1) (c) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, signed at New York on 10 June 1985, 330 UNTS 3, the recognition and enforcement of an arbitral award may be refused if “the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration …”. For applications to State courts for setting aside arbitral awards, a similar rule is contained in Article 34 (2) (a) (iii) of the UNCITRAL Model Law on International Commercial Arbitration, 1985, with amendments as adopted in 2006, Vienna, 2008. The review outlined in these provisions also relates to the legal basis of the award. In some countries, that review may uphold awards based on the lex mercatoria, see Cour d’Appel de Paris 13 July 1989, Journal du droit international (Clunet) 117 (1990) 430 with an annotation by Berthold Goldman; but that decision did not deal with mandatory State rules. 340 See for the United States Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 US 614 (1985); and for Europe ECJ, 1 June 1999, Case C-126/97 (Eco Swiss China Time Ltd. v. Benetton International NV), [1999] ECR I-3055; cf. Natalya Shelkoplyas, The Application of EC Law in Arbitration Proceedings, Groningen, 2003, 359 et seq., 370; see the general analysis and proposals by Jan Kleinheisterkamp, “Eingriffsnormen und Schiedsgerichtsbarkeit – Ein praktischer Versuch”, RabelsZ 73 (2009), 818-841; in English id., “The Impact of Internationally Mandatory Laws on the Enforceability of Arbitration Agreements”, World Arbitration and Mediation Review 3 (2009), 91-120.

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183. Party autonomy is generally considered as a universally accepted bedrock principle of the international law of contractual obligations despite the fact that its theoretical foundations continue to remain elusive. This shortcoming has, nonetheless, done little to hinder its triumphant march forward. Consequently, some authors have characterized it as a “stopgap solution”, i.e. a second best which, notwithstanding its scholarly imperfection, is preferable in light of its practical benefits.³⁴¹ In the meantime, party autonomy continues its advance into new legal fields with little reflection dedicated to its actual justification. In general, one has been content with brief references to the Western conception of individual liberty and the principle “in dubio pro libertate”. Conversely, one can consistently observe a much greater degree of interest in the specific limitations and manifestations of choice of law.³⁴² 184. As important as it is to understand this phenomenon in its particulars, it can hardly be comforting to observe the entire field of conflicts of law increasingly fall sway to a principle which is theoretically unresolved. This is particularly true when one notices that, contrary to what many believe, freedom of choice has failed to universally prevail in its very place of origin, i.e. the international law of contractual obligations. This chapter is, therefore, essentially dedicated to exploring the theoretical foundations of party autonomy. It will begin with an appraisal of its role in international contract law with particular focus on those jurisdictions which exclude party autonomy or restrict its bearing on contract law (Section 1) before offering a clarification of concepts (Section 2). The analysis will then turn towards the objections posited against choice of law in legal theory and to their critique 341 See the early comment of Kegel in his textbook, see Gerhard Kegel, Internationales Privatrecht, 3rd ed., Munich, 1971, p. 255: “Verlegenheitslösung”. 342 An exemplary reference here would be the comprehensive review by Stefan Leible, “Parteiautonomie im IPR – Allgemeines Anknüpfungsprinzip oder Verlegenheitslösung ?”, in Heinz-Peter Mansel, Thomas Pfeiffer, Herbert Kronke, Christian Kohler and Rainer Hausmann (eds.), Festschrift für Erik Jayme, Vol. 1, Munich, 2004, pp. 485-503.

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(Section 3). Finally, we shall examine the theoretical underpinnings of party autonomy (Section 4). Section 1: Party Autonomy in International Contract Law 1.

Worldwide Recognition of Party Autonomy

185. According to Article 3 paragraph 1 of the Rome I Regulation and to Article 7 of the Inter-American Convention, a contract shall be governed “by the law chosen by the parties”,³⁴³ and according to the Rome I recitals “[t]he parties’ freedom to choose the applicable law should be one of the cornerstones of the system of conflict-of-law rules in matters of contractual obligations.”³⁴⁴ Thereby, the Regulation merely restates what was already firmly established for EEC Member States in the Rome Convention on the Law Applicable to Contractual Obligations.³⁴⁵ The principle would, at first glance, not seem to present anything of particular surprise, and, indeed, in 1990 Axel Flessner stated with an air of finality: “Party autonomy in the conflict of laws is globally recognized for the law of obligations: the parties themselves may choose the applicable law and this choice includes in principle the mandatory law of the chosen legal system and excludes that of the ‘deselected’ legal system”.³⁴⁶

343 Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17.6.2008 on the Law Applicable to Contractual Obligations (Rome I), OJ 2008 L 177/6; see further Ole Lando and Peter Arnt Nielsen, “The Rome I Regulation”, Com. Mkt. L. Rev. 45 (2008) 1687, 1698 et seq., on party autonomy. See also Article 7 of the Inter-American Convention on the Law Applicable to International Contracts, done at Mexico on 17 March 1994, available at the website of the Organisation of American States. The Convention has taken effect for Mexico and Venezuela; for a closer analysis see Friedrich Juenger, “The Inter-American Convention on the Law Applicable to International Contracts – Some Highlights and Comparisons”, Am. J. Comp. L. 42 (1994), 381-393 at pp. 383-384, on party autonomy. 344 See preceding footnote, Recital 11. 345 See Article 3, para. 1, of the Rome Convention of 19.6.1980 on the Law Applicable to Contractual Obligations, consolidated version in OJ 2005 C 334/1. 346 “Die kollisionsrechtliche Parteiautonomie ist für das Schuldrecht weltweit anerkannt: Die Parteien können das anwendbare Recht selbst wählen, und diese Rechtswahl schließt prinzipiell das zwingende Recht der gewählten Rechtsordnung ein und das der anderen, ‘abgewählten’ Rechtsordnungen aus.” Axel Flessner, Interessenjurisprudenz im internationalen Privatrecht, Tübingen, 1990, p. 97; English translation in text provided by author. Similarly Stefan Leible, “Parteiautonomie im IPR – Allgemeines Anknüpfungsprinzip oder Verlegenheitslösung ?”, in Heinz-Peter Mansel et al., eds., Festschrift für Erik Jayme, Munich, 2004, 485-503 at p. 486 with further references.

Chapter 2 – Theory of Choice of Law and Party Autonomy

186. In fact the parties’ freedom to choose the applicable law is hardly so selfevident. The principle applies in Europe as well as many of the world’s industrialized nations,³⁴⁷ such as the United States,³⁴⁸ Australia³⁴⁹ and Japan.³⁵⁰ Also in China party autonomy is recognized in various sources of law.³⁵¹ The world map, however, is not without nations which reject the principle of free choice of law, at least insofar as described by Flessner. Statutory examples in this regard can be found, above all, in Latin America and in the Middle East. 2.

Exclusion of Party Autonomy in Latin America³⁵²

a) Brazil 187. A particularly noteworthy example is offered in Brazilian law. Article 9 of the Introductory Act to the Civil Code of 1942 provides that “to characterize and regulate obligations, the law of the country in which they are constituted shall be applied”.³⁵³ In contrast to the corresponding provision of Ar347 Even if occasionally outdated by the 30 years which have passed since its completion, the comprehensive comparative study by Ole Lando remains a seminal work: “Contracts”, IECL, Vol. 3, Chap. 24, Tübingen, 1976, pp. 14-32. 348 See §§ 1-105 of the Uniform Commercial Code; see also Giesela Rühl, “Party Autonomy in the Private International Law of Contracts – Transatlantic Convergence and Zconomic Efficiency”, in Eckart Gottschalk, Ralf Michaels, Giesela Rühl and Jan von Hein, eds., Conflict of Laws in a Globalized World, Cambridge, UK, 2007, pp. 153, 157 et seq. 349 Nygh, No. 19.6, p. 389. 350 Yuko Nishitani, “Party Autonomy and Its Restrictions by Mandatory Rules in Japanese Private International Law: Contractual Conflicts Rules”, in Jürgen Basedow, Harald Baum and Yuko Nishitani, eds., Japanese and European Private International Law in Comparative Perspective, Tübingen, 2008, pp. 77, 80 et seq.; see also Article 7 of the Act on General Rules for Application of Laws, No. 78 of 2006, ibid., pp. 405, 407; the law is also found in YBPIL, VIII (2006), 427 et seq.; on this topic Yasuhiro Okuda, “Reform of Japan’s Private International Law: Act on the General Rules of the Application of Laws, ibid., pp. 145, 148 et seq. 351 Baoshi Wang, “Neue Entwicklung im IPR der VR China”, IPRax (2007), 363 at pp. 367 et seq.; see also § 3 of the “Bestimmungen des Obersten Volksgerichts zu einigen Fragen der Rechtsanwendung bei der Behandlung von zivil- und handelsrechtlichen Vertragsstreitigkeiten mit Außenberührung”, IPRax (2008), 67, and on this point Lutz-Christian Wolff, “VR China: Neue IPR-Regeln für Verträge”, IPRax (2008), 55, 56 et seq.; see now Article 41 of the Law of the People’s Republic of China on the Laws Applicable to Foreign-Related Civil Relations of 28 October 2010. 352 The subject has recently been treated in a comprehensive way by Naiara Posenato, Autonomia della volontà e scelta della legge applicabile ai contratti nei sistemi giuridici latino-americani, Padua, 2010; see also in English María Mercedes Albornoz, “Choice of Law in International Contracts in Latin American Legal Systems”, Journ. Priv. Int. L. 6 (2010), 23-58, dealing with the countries restricting party autonomy at pp. 43-48. 353 English translation of text in Paul Garland, Bilateral Studies. American-Brazilian Private International Law, New York, 1959, pp. 111 et seq.; see Jan Kleinheisterkamp,

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ticle 13 of the antecedent Civil Code of 1916, Article 9 does not contain any reference to a deviating agreement of the parties. Accordingly, this rule is construed as prohibiting the parties from selecting the law to be applicable to a contractual obligation. Whereas in arbitral proceedings a choice of law is expressly provided for by Law 9307/1996,³⁵⁴ the sole and decisive connecting factor before State courts is the place of contracting.³⁵⁵ 188. Nevertheless, to the extent that it relates to dispositive provisions of law, the selection of a foreign law will likely be recognized. It is, however, not entirely clear whether this should be understood as incorporation at the level of substantive law; where a choice of law is limited exclusively to dispositive provisions, the practical effects are identical.³⁵⁶ Furthermore, a contractual election of the applicable law has also been considered in those instances when the contract has been concluded in a foreign country that, for its part, recognizes the principle of choice of law;³⁵⁷ yet this exception is better explained as a recognition of renvoi rather than an express endorsement of a choice of law. b) Uruguay 189. The matter is treated similarly in the concluding title of the Uruguayan Civil Code. Pursuant to Article 2399 legal transactions are subject to the law of the place of contractual performance; the law makes a specific reference to Articles 34-38 of the 1889 Treaty on International Private Law of Montevideo.³⁵⁸ These provisions lay down objective criteria for ascertaining the law

354 355

356

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358

International Commercial Arbitration in Latin America, Dobbs Ferry, NY, 2005, pp. 322 et seq. Ley No. 9.307, de 23 de setembro de 1996 – dispõe sobre a arbitragem, Coleção das Leis da República Federativa do Brasil 188 (1996), 4271; see Art. 2, § 1. Luiz Otávio Pimentel, Patrícia de Oliveira Areas and Michele Copetti, “Brazil”, in Carlos Esplugues Mota, Daniel Hargain and Guillermo Palao Moreno, eds., Derecho de los contratos internacionales en Latinoamérica, Portugal y España, Madrid, Buenos Aires und Montevideo, 2008, pp. 135, 137; reaching a similar conclusion in a thorough analysis of the academic literature and jurisprudence: Nadia de Araujo, Contratos internacionais: Autonomia da vontade, Mercosul y convenções internacionais, 2nd ed., Rio de Janeiro and São Paolo, 2000, p. 109; see also Jürgen Samtleben, “Das Internationale Privatrecht des MERCOSUR”, RabelsZ 63 (1999), 1 at p. 59. See Wilson de Souza Campos Batalha, Direito internacional privado, Vol. II, 2nd ed., São Paolo, 1977, p. 248; João Grandino Rodas, “Elementos de connexão do direito internacional privado brasileiro relativamente ás obrigações contratuais”, in João Grandino Roda and Calixto Salomão Filho, Contratos internacionais, 3rd ed., São Paolo, 2002, pp. 19, 32. Irineu Strenger, Da autonomonia da vontade em direito internacional privado, São Paolo, 1967, pp. 205 et seq., based upon Oscar Tenório, Ley de introdução ao código civil brasileiro, 1943, see also the 2nd ed., Rio de Janeiro, 1955, para. 610. Tratado de Derecho Civil Internacional, Montevideo, 12.2.1889, see e.g. http://normas.diprargentina.com/2007/06/tratado-de-derecho-civil-internacional.html; a German translation of the conflict of laws provisions of the Uruguayan Civil Code can

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applicable to various types of contracts; an election of the place of contractual performance for the purpose of determining the applicable law is ruled out.³⁵⁹ Under Article 2403 of the Civil Code, the provisions on legislative and judicial competence are excluded from the reach of the parties. The inclusion of legislative competence has the effect of depriving the parties of a choice of law. It is only when Uruguayan international private law prescribes a national law which permits a choice of law that Uruguay will – in a fashion of renvoi – also respect such a choice.³⁶⁰ While the notion of allowing the parties a right of election has in recent years won more and more converts and in the meantime has even found expression in the Uruguayan foreign ministry’s proposal for a general conflict of laws regulation,³⁶¹ under the current state of international private law a choice of law remains without effect. 3.

Exclusion of Party Autonomy in the Middle East

190. The concept of choice of law also meets with a degree of rejection in the Middle East. Thus, Article 968 of the Iranian Civil Code of 1935 states:³⁶² “Obligations arising out of contracts are subject to the laws of the place where the contract was concluded, except where the contracting parties are foreign nationals and have expressly or impliedly subjected the contract to another law”. A choice of law is consequently only relevant in those rare instances where an Iranian court is presented with a contractual dispute stemming from a contract which was executed exclusively between two foreign citizens. In contrast with earlier drafts wherein a choice of law was more broadly embraced, the subsequent legislative proceedings resulted in the more constrictive configuration presently observed.³⁶³

359 360

361

362 363

be found in Kropholler, Krüger, Riering, Samtleben and Siehr, supra footnote 168, pp. 908 et seq. Daniel Hargain and Gabriel Mihali, “Uruguay”, in Esplugues Mota, Daniel Hargain and Palao Moreno, eds., supra footnote 355, pp. 765, 766, with reference to case law. See further Hargain and Mihali, preceding footnote, p. 773; offering a comprehensive look at the case law, also Cecilia Fresnedo de Aguirre, La autonomía de la voluntad en la contratación internacional, Montevideo, 1991, pp. 70 et seq. Ministerio de Relaciones Exteriores, Ley General de Derecho Internacional Privado, presently in legislative proceedings (the proposal is on file with the author), see Article 48. In support of party autonomy, see e.g. Hargain and Mihali, supra footnote 359, pp. 773 et seq.; for a comprehensive discussion, see also Jorge Talice, “La autonomía de la voluntad como principio de rango superior en el derecho internacional privado uruguayo”, in Liber amicorum Didier Opertti Badán, Montevideo, 2005, pp. 527 et seq. Translation from Taleghany, The Civil Code of Iran, Littleton, 1995, p. 136. See Nadjma Yassari, “Das Internationale Vertragsrecht des Irans”, IPRax (2009), 451456.

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191. As concerns the connecting factor in relation to contractual agreements, the conflict of laws provisions of several Arab nations share a basic configuration which was likely first laid down in the Egyptian Civil Code of 1948. Pursuant to its Article 19, the applicable law is (1) the law of the domicile when such domicile is common to the contracting parties or, otherwise, (2) the law of the place where the contract was concluded; (3) contracts related to immovable property are governed by the law of the place in which the property is situated. Rules (1) and (2) can be waived by a choice of law.³⁶⁴ While some Arab countries and in particular Saudi-Arabia do not appear to honour choice of law agreements at all,³⁶⁵ the Egyptian triad of rules can be found, for example, in Yemen,³⁶⁶ Jordan³⁶⁷ and Iraq.³⁶⁸ It is unclear, however, if the choice-of-law exception in these successor legal systems applies to all contracts other than realty contracts or only to contracts between parties who have their domicile in different countries.³⁶⁹ If the choice of law is only permitted for parties not sharing the same domicile, the most significant cases would concededly be captured but the limitation would be nonetheless noticeable. Contracts concluded between parties domiciled in the same country can also have a very pronounced international character; suppose for example that the agreement envisions performance in a foreign location 364 Translation from Perrot and Sims, The Egyptian Civil Code, Alexandria, 1952, p. 8. For a thorough treatment see Holger Jung, Ägyptisches internationales Vertragsrecht, Tübingen, 1999, in particular pp. 7-20. 365 See Hilmar Krüger, “Der Grundsatz der Parteiautonomie in den Kollisionsrechten der arabischen Staaten”, in Karl-Heinz Böckstiegel, ed., Vertragspraxis und Streiterledigung im Wirtschaftsverkehr mit arabischen Staaten, Cologne, 1981, pp. 95-100 at p. 100; for a comprehensive comparative survey covering the law of a large number of states of the Middle East, see id., “Zur Parteiautonomie im internationalen Schuldvertragsrecht im orientalischen Umfeld der Türkei”, in Prof. Dr. Gülören Tekinalpe Armağan, Milletlerarası Hukuk ve Milletlerarası Özel Hukuk Bülteni 23 (2003), 539-564 at pp. 552-553 concerning Saudi Arabia. 366 Hilmar Krüger, “Allgemeiner Rechtszustand und internationales Privatrecht der Republik Jemen”, RIW (1993), 28, with a German translation of the pertinent Article 30 of the Civil Code on p. 31. 367 Hisham Hashem, The Jordan Civil Code of Moslem Jurisprudence including the translation of the pertinent Article 20 of the Civil Code on p. 4. 368 S. H. Amin, Legal System of Iraq, Glasgow, 1989, with a discussion of the pertinent Article 25 on p. 163. 369 Translations of the Yemeni, Jordanian and Iraqi provisions (footnotes 366-368) are not formulated identically to the corresponding Egyptian provision. However, it is quite clear from the Egyptian Government’s official French translation of the code that the parties may always – with the exception of realty contracts – select the applicable law. The grammatical formulation encountered in the other three translations suggests a limitation to cases where the parties do not share the same domicile. However, Krüger, supra footnote 366, p. 30, comments that Article 30 of the Yemeni Civil Code embodies the principle of party autonomy within the international law of contractual obligations.

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or that the contract is embedded within an international contractual network. 4.

Limitations on the Power to Choose the Applicable Law

192. Thus, there are undeniably countries which continue to deny the parties a choice of law in respect of contractual obligations, and many others in which the breadth of such choice is by all accounts uncertain. Furthermore, alongside the complete exclusion of the option to select a law, one also finds firmly established limitations based upon the internationality of the contract such that party autonomy is in all events excluded for contracts having a purely domestic nature in the eyes of the respective lex fori. For the purposes of this discussion it is also worth briefly mentioning some additional choice-of-law restrictions related to either the selected law or the subject matter of the contract. a) Choice of non-State law – lex mercatoria 193. A widespread limitation relates to the selection of non-State law. Where the parties agree that the “lex mercatoria”, or “general principles of international commerce” or – more specifically – that the “UNIDROIT Principles for International Commercial Contracts”³⁷⁰ will govern their transaction, what is the significance of such a clause ? For the time being, legislatures are not inclined to honour such a term as an agreement on the applicable law as far as litigation in State courts is concerned. In the legislative proceedings leading to the adoption of the Rome I Regulation, the European Commission had in fact suggested to admit the parties’ agreement on “the principles and the rules of the substantive law of contract recognized internationally or in the Community” as an agreement on the applicable law.³⁷¹ The proposal met with strong opposition in the European Council and was finally deleted; recital 13 of the definitive Regulation now only refers to the possible incorporation of a non-State body of law into the contract within the framework of the applicable law, i.e. not at the level of private international law. Put in 370 UNIDROIT, UNIDROIT Principles for International Commercial Contracts, Rome, 2004; see Michael Joachim Bonell, An International Restatement of Contract Law, 3rd ed., Ardsley, NY, 2005; Stefan Vogenauer and Jan Kleinheisterkamp, eds., Commentary on the UNIDROIT Principles of International Commercial Contracts (PICC), Oxford, 2009; on their role in choice of law see Maud Piers and Johan Erauw, “Application of the Unidroit Principles of International Commercial Contracts in Arbitration”, Journ. Priv. Int. L. 8 (2012), 441-472. 371 See Article 3, para. 2, of the Commission Proposal, COM (2005) 650 final of 15 December 2005, also printed in Max Planck Institute for Comparative and International Private Law, “Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I)”, RabelsZ 71 (2007), 225-344 at pp. 241 et seq. with a basic endorsement of the Commission Proposal.

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other words, the parties are confined to the selection of one of the 200 or 250 State contract laws that exist in the jurisdictions of the world. 194. In the absence of such express rejection by the legislature, the Federal Court of Switzerland has likewise refused to recognize a contractual reference to the rules of an international sports association as an agreement on the applicable law. According to the court, such rules can only be incorporated into the contract within the limits drawn by mandatory provisions of the applicable national law.³⁷² However, additional weight can be given to non-State rules of law in countries such as France, where a court, if so authorized by the parties, may decide a case as amiable compositeur, i.e. under principles of fairness and equity, and where the parties would consequently be permitted to bind the judge by a procedural agreement relating to a body of rules that might serve as guidance, see Article 12 paragraph 3 of the Code of Civil Procedure.³⁷³ 195. Is the recognition afforded to an agreement on non-State bodies of law any wider in the realm of arbitration ? What matters in the present context, is not so much the application of non-State rules by the arbitral tribunal itself,³⁷⁴ but the effect given to that application by State law and by municipal courts, in particular in annulment or enforcement proceedings. Article 28 of the UNCITRAL Model Arbitration Law which has been adapted in numerous countries across the globe permits the parties to designate the “rules of law” governing the decision of their dispute, and the Explanatory Note makes clear that by using this term instead of referring to the choice of a “law”, the range of options for the parties is meant to be broadened; they may agree on rules of law that have been elaborated by an “international forum” but have not yet been incorporated into any national legal system.³⁷⁵ On this basis, 372 See BG, 20 December 2005, BGE 132 III 285, concerning the reference to the pertinent FIFA Rules in a contract between the agent of a professional soccer player and a Greek soccer club. The judgment has been reported and approved de lege lata by Ivo Schwander, “Rechtsprechung zum internationalen Sachen-, Schuld- und Gesellschaftsrecht”, SZIER 16 (2006), 335-353 at pp. 346-350; cf. also the critical comments by Gino Lohri, Wählbarkeit nichtstaatlicher Regelwerke nach Art. 116 Abs. 1 IPRG, Zurich, 2010, Nos. 244 et seq. 373 See Bénédicte Fauvarque-Cosson, “Les contrats du commerce international, une approche nouvelle: les Principes d’UNIDROIT relatifs aux contrats du commerce international”, Rev. int. dr. comp. (1998), 463-489 at pp. 477-478; Ralf Michaels, in Vogenauer and Kleinheisterkamp, Preamble I, No. 35. 374 On this issue see Matthias Scherer, in Vogenauer and Kleinheisterkamp, Preamble II; Anton K. Schnyder and Pascal Grolimund, “ ‘Opting in’ oder ‘Opting out’ ? Anwendung der UNIDROIT Principles of International Commercial Contracts in schiedsgerichtlichen Verfahren”, in Ingeborg Schwenzer and Günter Hager, eds., Festschrift für Peter Schlechtriem, Tübingen, 2003, pp. 395-411 with references to ICC arbitration awards. 375 Uncitral Model Law on International Commercial Arbitration, 1985, with Amendments as Adopted in 2006, Vienna, 2008, p. 33, No. 39; a similar wording has been adopted in Article 3 of the Draft Hague Principles on the Choice of Law in Interna-

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under the specific statutes of some countries, for example Brazil,³⁷⁶ and according to the prevailing view in many others, a choice of the UNIDROIT Principles or other non-State bodies of law is considered a valid agreement on the applicable law.³⁷⁷ b) Relation between the contract and the law selected 196. Further limitations relating to the law that may be chosen by the parties concern the relation between the contract under scrutiny in the pending case and the designated law. Such limitations are frequent in areas of the law such as family law or succession law, two fields where party autonomy is disputed or a newcomer. In contract law they are rare, however. An example could formerly be found in Spanish private international law: under Article 10 paragraph 5 of the Spanish Civil code the law chosen by the parties governed a contract “provided that it ha[d] some connection with the contract in question”.³⁷⁸ More recent publications point to the admissibility of the selection of a neutral and unrelated law under Article 3 Rome I in contrast to the previous state of the law under Article 10 paragraph 5.³⁷⁹ A further example can still be studied in the United States. Pursuant to § 187 paragraph 2 of the Restatement Second, Conflict of Laws, a transaction must have a “substantial relationship” to the country of the law selected. § 1-105 UCC that is still effective in most States requires a “reasonable relationship”; in

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tional Contracts, reproduced on the website of the Hague Conference on Private International Law: www.hcch.netWork in ProgressInternational Contracts, Prel. Doc. No. 6 of February 2013: “rules of law … generally accepted on an international, supranational or regional level as a neutral and balanced set of 31 rules”. See Ley 9307/1996, supra footnote 354, Art. 2, § 2; Pimentel, de Oliveira Areas and Copetti, supra footnote 355, p. 143; Welber Barral Oliveira and Adriana Silva Maillart, “Brasil”, in Adriana Zapata de Arbeláez, Silvia Barona Vilar and Carlos Esplugues Mota, El arbitraje interno e internacional en Latinoamerica, Bogotà, 2010, pp. 183-210 at p. 200. See e.g. Carlos Esplugues Mota, “Lineas generales de la regulación del arbitraje en Europa en las últimas décadas: parallelismos y divergencias con el proceso latinoamericano”, in Zapata, Barona and Esplugues, previous footnote, pp. 37-57 at p. 55 with particular reference to Spain; for Venezuela, see Eugenio Hernández Bretón and Ivette Esis Villaroel, Venezuela, in Zapata, Barona and Esplugues, previous footnote, pp. 719-748 at p. 735; for some other Latin American countries, see Kleinheisterkamp, pp. 326 et seq.; for Germany, see Peter Schlosser in Stein and Jonas, Kommentar zur Zivilprozessordnung, Vol. 9, 22nd ed., Tübingen, 2002, § 1051, No. 6. “siempre que tenga alguna connexión con el negocio de que se trate”. On the interpretation of that rule see Julio Gonzalez Campos et al., Derecho internacional privado – parte especial, 5th ed., Madrid, 1993, pp. 212-213. See in particular José Carlos Fernández Rozas, Rafael Arenas Garcíaand Pedro Alberto de Miguel Asensio, Derecho de los negocios internacionales, 2nd ed., Madrid, 2009, p. 319; see also Javier Carrascosa Gónzalez, in Alfonso Calvo Caravaca and Luis Fernández de la Gándara, eds., Contratos internacionales, Madrid, 1997, p. 82.

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the new – and so far unsuccessful³⁸⁰ – version of the UCC, § 1-301(c)(2) and (e)(1) still maintain that requirement, although limited to consumer transactions. Yet in practice the courts have continually lowered this threshold such that a perceptible limitation on the range of laws to choose from would no longer seem to exist; the absence of such a limitation now clearly emerges from Article 2, paragraph 4 of the Draft Hague Principles on the Choice of Law in International Contracts.³⁸¹ c) Restrictions for specific contracts 197. Restrictions on the choice of law for specific types of contract are numerous and are particularly common as concerns legal areas in which the freedom of contract itself is subject to material restrictions; in the Rome I Regulation this occurs above all in employment contracts, consumer contracts, insurance contracts and to a lesser extent in contracts of carriage.³⁸² While there are no categorical exceptions of this kind in US conflict of laws, American courts may often achieve similar results on the basis of a more case-related assessment of public policy.³⁸³ The sector-specific treatment not only fashions a bridge to the substantive law, it also advances the trend in which party autonomy is granted an ever-increasing role in areas outside of contractual obligations such as family law and succession law.³⁸⁴ d) Conclusion and outlook 198. While subject to intensive academic debate, these differentiations need not be further addressed here. Worthy of emphasis, however, is the basic under380 In 2008, the Virgin Islands were the only US jurisdiction that had adopted the new § 1-301, see Patrick Borchers, “Categorical Exceptions to Party Autonomy in Private International Law”, Tulane L. Rev. 82 (2008), 1645-1661 at pp. 1656-1657; while adopting the new numbering of the provisions of Article 1, UCC, many states have confirmed the previous wording of § 1-105, thus requiring a reasonable relation between the contract and the law elected by the parties. 381 See supra at footnote 375; for the United States see Rühl, supra footnote 348, pp. 161, 163: “It seems that American courts consider almost any relationship to the foreign law as a substantial relationship …”; Hay, Borchers and Symeonides, p. 1093: “cases that have actually struck down a choice-of-law clause on this ground are few and far between”. 382 See Articles 5-8 of the Rome I Regulation, supra footnote 343; for a broader discussion see infra, paras. 609 et seq., 644 et seq. 383 See Borchers, Tulane L. Rev. 82 (2008), 1658-1659, pointing, however, to the basic aversion of American courts to regulatory interference with party autonomy. 384 See Leible, supra footnote 346, pp. 493-501; Jürgen Basedow, “The Recent Development of the Conflict of Laws – Some Comparative Observations”, in Basedow, Baum and Nishitani, pp. 3, 15 et seq.; Erik Jayme, “Die Kodifi kationsidee am Beispiel der kollisionsrechtlichen Parteiautonomie”, in Brigitta Jud, Walter H. Rechberger and Gerte Reichelt (eds.), Kollisionsrecht in der Europäischen Union, Vienna, 2008, pp. 63, 65 et seq. with numerous references; see infra, Chapter V, for a more detailed treatment.

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lying assumption that private individuals are generally conceded the power of choosing the law applicable to their legal relations. That this choice is granted by a majority of today’s nations may indeed suggest a trend, but is in itself hardly a convincing argument addressing the merits of the debate being waged between proponents and opponents of such choice. The following considerations are dedicated to the theoretical foundations of party autonomy and adopt as their starting point the contentions of its challengers. Section 2: A Priori and Derivative Conceptions of Party Autonomy 199. The principle of party autonomy serving as the foundation of conflicts jurisprudence can be understood in two ways. First, one can view party autonomy as reflecting the natural capacity of individuals to determine the applicable law for themselves irrespective of the confines of any legal system. Alternatively, a second understanding sees in party autonomy the capability of individuals to create commitments for themselves and/or others according to the parameters laid down in a given system of conflict of laws. Where this legal order allows individuals to subject themselves to a different legal system through a choice of law, one might also speak of party autonomy. The former a priori concept was characterized by Frankenstein as a primary connection, the latter as a secondary connection.³⁸⁵ 200. The fundamental difference between the two approaches is that the second – derivative – understanding of party autonomy presupposes the existence of a positive law regime which is separately ascertained and, consequently, cannot simply reflect the individual’s subjective intentions. Just how this legal system is to be determined remains open. The reference to the private international law of a particular country is of no avail since its rules determining the applicable law are only relevant for the courts and agencies of that country. Insofar as the claimant can choose between courts in different jurisdictions which may be available to him in various countries, the individual’s subjective desires will in fact, albeit by a circuitous route, ultimately determine whether a conflict-of-laws regime recognizing party autonomy has application. 201. The derivative conception of party autonomy would only be internally consistent if there were objective rules, binding upon every court of the world, 385 See Ernst Frankenstein, Internationales Privatrecht, Vol. 2, Berlin, 1929, pp. 159 and 162; on Frankenstein’s conception of primary and secondary bases see id., Internationales Privatrecht, Vol. 1, Berlin, 1926, pp. 49 and 50. The same division of the concept of party autonomy into an a priori understanding and a derivative understanding has in fact been contemplated by many authors, see e.g. for Uruguay Quintín Alfonsín, “La teoria de la autonomia de la voluntad aplicada al régimen internacional de los contratos”, in id., Escritos jurídicos, Vol. II/2, Montevideo, 1977, p. 351; see also Henri Batiffol, Aspects philosophiques du droit international privé, réédition de l’ouvrage paru initialement en 1956, Paris, 2002, pp. 65 et seq., 70.

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which prescribed whose conflict-of-laws regime was applicable. Such a meta-regime would thus assign one and only one conflict-of-laws regime to each legal relationship; to the extent that regime recognized party autonomy, it would – independent of the appealed upon court – be predetermined whether an election of law by the parties was to be given effect. It was such a meta conflicts-of-law regime that Frankenstein had in mind with his conception of a “primary connection”; in his view the “nationality for individuals” and “the physical location for property” were the “two individual connecting factors which were independent of legislative caprice and flowed from the essence of law insofar as one can, in general, make an a priori declaration as regards the relationship of men and property to the legal order”. These “primary (original, a priori) connecting factors refer to a legal order which can exhaustively arrange the legal relationships”; they can “however also limit themselves to indirect control and on the basis of expedience or other legal considerations through an act, which we will label a secondary (derivative) connection, subject the person or property for its part to yet another legal order…, that then for its part asserts direct control”.³⁸⁶ 202. Such a meta-regime of primary connections does not, however, exist. Although it is true that the world’s conflict-of-laws regimes are in virtual consensus as to the applicability of lex situs in regards to rights in immovable property, the notion that nationality should serve as a connecting factor for all other legal matters was by no means universally accepted in Frankenstein’s era and is today an idea in retreat. Accordingly, party autonomy in its derivative conception is susceptible to the pointed objection that – through the back door of jurisdictional competence – the subjective desires of the claimant are indeed bestowed considerable influence in the determination of the applicable law in international disputes. The notion is, thus, hardly free of contradictions. 203. The a priori conception of party autonomy is not vulnerable to the criticism of inconsistency. Rather, its authority derives from meta-legal considerations of natural liberty, see below, Section 4, which are characteristic of a 386 He considered “für den Menschen die Staatsangehörigkeit, für die Sache ihre räumliche Lage [für die] beiden einzigen Anknüpfungen, welche aus dem Wesen des Rechts unabhängig von jeder gesetzgeberischen Willkür sich ergeben, das einzige, was man überhaupt a priori über Beziehungen von Menschen und Sachen zur Rechtsordnung auszusagen vermag. [Diese] primäre[n] (originäre[n], aprioristische[n]) Anknüpfungen verweisen auf eine Rechtsordnung, welche die Rechtsverhältnisse erschöpfend ordnen könne; [sie könne] sich aber auch auf eine mittelbare Beherrschung beschränken und aus Gründen der Zweckmäßigkeit oder anderen Erwägungen durch einen Akt, den wir sekundäre (derivative) Anknüpfung nennen, die Person oder Sache ihrerseits wieder einer anderen Rechtsordnung unterwerfen …, die dann erst ihrerseits die Herrschaft unmittelbar ausübt.” See Frankenstein, preceding footnote, Vol. 1, pp. 49-50; English translation in text provided by author.

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general principle on which both legislators and courts ought to orient themselves. The theoretical questions which consequently arise are: (1) What is the origin of such a liberty principle ? (2) What position should this principle be accorded in respect of conflict-of-laws regimes in which party autonomy finds either little or no recognition ? See below, Section 4. Before turning to these theoretical questions our enquiry should however address some of the basic objections raised against party autonomy. Section 3: Theoretical Objections to Party Autonomy 204. The most extensive and detailed treatment of the arguments for and against party autonomy is likely the work of Cecilia Fresnedo de Aguirre from Uruguay.³⁸⁷ In a comprehensive comparative and legal-historical survey she elaborates eight rationales posited by the proponents of party autonomy and subjects each to a critical appraisal.³⁸⁸ In part, the examination focuses upon justifications having a distinctly practical dimension, in particular the general reverence for international commercial practice or the quest for greater legal certainty to be achieved by party autonomy. But her investigation also identifies the basic theoretical objections which at their core call into question the legitimacy of conferring a choice-of-law option on the parties; the following discussion is limited to those considerations. 1.

Sovereignty

a) Choice of law as an impairment of sovereignty 205. The contractual deselection of a law otherwise applicable by virtue of an objective connecting factor can be understood as conceding private actors the power to curtail the right of policy-makers to prescribe the lex causae through reliance on objective connecting factors. This concern is of particular prominence when – pursuant to the forum State’s conflict-of-laws regime – the connecting factor of the contract indicates the substantive rules of the lex fori as applicable. In this situation the selection of a foreign law may be regarded as limiting the scope of application of the forum State’s own law and, since this law is an expression of the forum State’s legislative competence, also the scope of its own sovereignty. 206. This apprehension was unmistakably present in the thoughts of the Uruguayan legislator; in the materials accompanying Article 2403 of the Civil Code,³⁸⁹ the law’s draftsman comments on “the [legislative and adjudicatory] international competences which are foundations of the public order since they affect, in their legislative or judicial spec387 See supra footnote 360. 388 Fresnedo de Aguirre, supra footnote 360, pp. 115 et seq. 389 See text supra in paragraph 189.

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The rules on jurisdiction and the applicable law “are determined by reasons which are superior to the will of the parties involved in a legal relation”.³⁹⁰ This concern is echoed as well by European scholars; for example, Henri Batiffol, echoing the teachings of Jean-Paul Niboyet writes: “It is certainly shocking to think that the judicial solution of the choice of the applicable law by the parties, as generally understood, would mean that the empire of each law would depend on the parties’ will: Such a view appears to be incompatible with the notion that the law exercises binding authority accompanied by coercive sanctions.”³⁹¹ And Joseph Beale, the Reporter for the – first – Restatement of the Conflict of Laws points to the “fundamental objection” against party autonomy which “involves permission to the parties to do a legislative act.”³⁹²

b) Objective conception of the law 207. From a legal theory perspective, this position is based upon a purely objective understanding of the law. It is similar to the one posited by Georg Friedrich Wilhelm Hegel identifying law with legislation, i.e. positive law.³⁹³ Accordingly, the individual can only be conceded rights – subjective rights 390 See Alvaro Vargas Guillemette, Codificación nacional del derecho internacional privado, Montevideo, 1943, p. 22: “las competencias internacionales [legislativas y judiciales] que son fundamentalmente de orden público porque afectan en su faz legislativa o judicial la soberanía del país en que se localiza la relación juridica y están por lo tanto por encima de sus individuales voluntades. [Las competencias jurisdiccionales y legislativas] se determina[n] por razones superiores a la voluntad de las partes comprometidas en una relación jurídica” (emphasis added); the author gratefully acknowledges the help of Prof. Gonzalo Lorenzo Idiarte, Montevideo, for the reference to this source. The English translation in the text has been provided by the author. 391 “Il est certes choquant de penser que la solution jurisprudentielle dans le sens généralement reçu du choix par les parties de la loi applicable signifierait que l’empire de chaque loi dépendrait de la volonté des parties: une pareille vue semble peu conciliable avec la notion que la loi exerce une autorité assortie de sanctions coercitives.” See Batiffol, supra footnote 385, pp. 83-84. On a similar note, see already Jean-Paul Niboyet, “La théorie de l’autonomie de la volonté”, 16 Recueil des cours (1927), 1-116 at p. 51, who refers to that “vérité première, que la volonté des parties n’est jamais supérieure, ni même parallèle à la loi, mais qu’elle doit toujours se mouvoir dans le cercle admis par le législateur compétent”. 392 Joseph Beale, “What Law Governs the Validity of a Contract ? (Part 3)”, Harvard L. Rev. 23 (1910), 260-272 at p. 260. 393 Georg Wilhelm Friedrich Hegel, Grundlinien der Philosophie des Rechts, ed. von Helmut Reichelt, Frankfurt am Main, 1972, p. 186 (§ 211), English translation by Al-

Chapter 2 – Theory of Choice of Law and Party Autonomy

– to the extent that the objective system confers them upon him or her. In his Pure Theory of Law (Reine Rechtslehre), Hans Kelsen goes even further: “From the standpoint of the objective system or that of the community constituted by it, there is no independent individual at all. … In dissolving the socalled subjective right in all its forms as an entity different from the objective law and understanding it simply as a particular manifestation of the objective law, the Pure Theory renders ineffectual that subjective attitude toward the law, the attitude served by the concept of subjective right. It is the advocate’s view, which considers the law only from the standpoint of the individual’s interest, only in terms of what the law means for the individual, to what extent it is of use to him by serving his interests …”.³⁹⁴

208. The exclusive focus on sovereignty and the objective system of the State as the source of law raises the further question of where, for their parts, that objective system and sovereignty are derived from. Hegel characterizes the State as “the actuality of the ethical idea, ... it is the rational in and for itself, ... the actuality of concrete freedom.”³⁹⁵ Thus, the development and absoluteness of the State according to Hegel is not based on prior human action; in particular he rejects the emergence of contractual relations as the State’s raison d’être.³⁹⁶ The origin and development of the State entity hinge on the cognition of one idea alone: morality or the ethical idea.

lan Wood and H. B. Nisbet, Elements of the Philosophy of Right, Cambridge, 1991, 2008. 394 “Vom Standpunkt der objektiven Ordnung oder der durch sie konstituierten Gemeinschaft gibt es überhaupt kein selbständiges Individuum… . Indem die reine Rechtslehre das so genannte subjektive Recht in allen seinen Erscheinungsformen … als vom objektiven Recht verschiedene Wesenheit auflöst und nur als besondere Gestaltung … des objektiven Rechts begreift, hebt sie jene subjektivistische Einstellung zum Recht auf, in deren Dienst der Begriff des Rechts im subjektiven Sinne steht: jene advokatorische Auffassung, die das Recht nur unter dem Gesichtspunkt des Parteiinteresses, das heißt im Hinblick darauf betrachtet, was es für den Einzelnen bedeutet, inwiefern es ihm nützt …” Hans Kelsen, Reine Rechtslehre, Studienausgabe der 1. Auflage, 1934, p. 59 and 60, quoted here from the new edition by Matthias Jestaedt, Tübingen, 2008, pp. 70-71 (author’s translation); for a similar, but not identical English translation see Bonnie Paulson and Stanley Paulson, Introduction to the Problems of Legal Theory: A Translation of the First Edition of the Reine Rechtslehre or Pure Theory of Law, Oxford, 1992, pp. 52-53. 395 “Der Staat ist die Wirklichkeit der sittlichen Idee, … das an und für sich Vernünftige, … die Wirklichkeit der konkreten Freiheit.” Hegel, Grundlinien der Philosophie des Rechts, supra footnote 393, pp. 214 et seq., 221 (§§ 257, 258 and 260). English translation from Wood and Nisbet, supra footnote 393, pp. 275, 280. 396 Hegel, supra footnote 393, p. 80 (§ 75).

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c) Criticisms and countervailing contractual theories of State and law 209. However, cognition as such need not necessarily lead to a corresponding action. Just why affected individuals should translate this cognition into the cooperative effort of declaring and developing both State and legal order remains unidentified and unanswered by Hegel. In addition to the cognition of the ethical idea, such an endeavour demands action buttressed by will, that is, finally, the endorsement of the citizenry concerned. 210. From this insight and regardless of Hegel’s opposition, it is but a short path to the philosophers who see in the will and action of individual citizens the basis for a legally constituted body politic, i.e. a State and corresponding legal order. This is particularly true in respect of John Locke, who already at the close of the seventeenth century wrote: “The only way whereby anyone divests himself of his Natural Liberty, and puts on the bonds of Civil Society is by agreeing with other Men to join and unite into a Community, for their comfortable, safe and peaceable living one amongst another in a secure Enjoyment of their Properties, and a greater Security … When any number of Men have so consented to make one Community or Government, they are thereby presently incorporated, and make one Body Politick wherein the Majority have a Right to act and conclude the rest.”³⁹⁷

Several decades later Jean-Jacques Rousseau propounded a similar approach. The roots of the body politic is according to his theory the social contract whose binding character stems from the free will of the citizens: “For civil association is the most completely voluntary of acts; each man having been born free and master of himself, no one, under any pretext at all, may enslave him without his consent.”³⁹⁸

211. The contract-based philosophical theories of State do not purport to give a realistic description of the historical cycles which have led to the establishment of the State and its legal orders. Rather they are intended to explicate why the modern State entity, no longer premised upon interpersonal feudal ties, concentrates all State power inclusive of legislative competence in an anonymous corporation that is in this respect characterized as sovereign. 397 John Locke, Two Treatises of Government, London, 1698, quoted here from the new edition by Peter Laslett, 17th printing, Cambridge, 2005, pp. 330-331 (§§ 95 of the Second Treatise). 398 “L’association civile est l’acte du monde le plus volontaire; tout homme étant né libre et maître de lui-même, nul ne peut, sous quelque prétexte que ce puisse être, l’assujettir sans son aveu.” Jean-Jacques Rousseau, Du contrat social, 1762, quoted here from the edition by Bruno Bernardi, Paris, 2001, Book IV, Chap. 2, p. 146; English translation here from Christopher Betts, Jean-Jacques Rousseau, Discourse on Political Economy and the Social Contract, Oxford, 1994, 2008, p. 137.

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Thus, they are ultimately using the will of the individual to substantiate the sovereignty of the State and, thereby, the existence of objective law. If this is so, the will of the individual must then also be accorded a binding character independent from, and before the emergence of, statehood. d) Conclusions 212. The first set of conclusions for party autonomy in private international law can be drawn from this discussion. If State sovereignty for its part can be attributed to the will of the individual, the exercise of this will as regards the applicable law in a conflict-of-laws scenario cannot be attacked as an infringement on the sovereignty of the State. At least from a theoretical standpoint, it cannot be ruled out that an individual may retract the expression of will establishing the State or that subsequent to its exercise, a portion of this will is nevertheless retained and can under certain conditions be asserted in order to – effectively – steer clear of the sovereignty of the State and legal order which the individual has himself established. 213. However, broader conclusions are not in order as the contractual theorists of political philosophy focus upon the origins of the State’s monopoly on power in itself, i.e. the power of an individual State and not on the interrelationships between various States and legal regimes. Thus, the sources discussed only make reference to the individual’s deliberate move towards the State and not, in contrast, to the actus contrarius, i.e. the intentional deselection of its law or – going even further – to a dissolution contract or to the unilateral denunciation of membership. 2.

Ordre public

214. A variant of the sovereignty argument contends that a choice-of-law option allows the parties to set aside the ordre public, i.e. the very foundations of the legal order governing the contract were choice not permitted.³⁹⁹ Batiffol, in any event, indirectly emphasises this choice-of-law effect for purely domestic contracts: “Any mandatory legislation becomes futile if those who feel disturbed by its provisions may simply declare their contract, although relating to a purely domestic transaction, to be subject to a different law.”⁴⁰⁰

399 See Quintín Alfonsín, supra footnote 385, pp. 355 et seq., and the quote from Vargas Guillemette, found supra in the text preceding footnote 390; see also Fresnedo de Aguirre, supra footnote 360, p. 70. 400 “Toute législation impérative devient inutile s’il suffit à ceux que ces dispositions dérangent de déclarer leur contrat soumis à une autre loi, ce contrat serait-il purement interne.” Batiffol, supra footnote 385, p. 69; English translation here provided by the author.

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a) Specifications of the ordre public 215. Since the time of these assertions, the doctrine of ordre public has evolved in a manner that undercuts the premise of these objections. Not only must one distinguish between domestic and international ordre public, as some of the above-mentioned authors indeed have done, one also needs to recognize the territorial limitations which have increasingly often been accepted as being imposed on the international ordre public in many cross-border transactions. Concerning the first point, it is universally acknowledged that the domestic ordre public – understood as the entirety of all the mandatory laws of a legal system – is in the first instance controlling for all domestic cases; accordingly, its implementation demands the application of domestic law. If, in cases with foreign elements, this law has no application, one only implements those mandatory rules and principles necessarily having validity regardless of the otherwise applicable law. The other mandatory provisions – which may be designated as “simple” mandatory rules of the law that would be applicable in the absence of a contractual choice of law – share the destiny of the abrogated law.⁴⁰¹ 216. For its part, the international ordre public can be subdivided as well. On one side of the ledger are the rules and principles which – tels quels – unconditionally demand implementation inclusive of those cases having foreign contacts. This is the positive international ordre public. On the other side are the mandatory principles of a legal system that, while opposing the application of wholly irreconcilable foreign rules, can nonetheless tolerate substantive deviations within certain limited margins, i.e. rules and principles

401 See the citation from Flessner, supra in paragraph 185. Within the European Union, the result follows from Article 3, para. 3, of the Rome I Regulation, which invalidates the abrogation of “simple” mandatory provisions only where all the other elements relevant to the situation at the time of the choice are connected with one country only, see Plender and Wilderspin, Contracts Convention, Nos. 5-25-5-27, pp. 105-107. In Switzerland, Article 13 of the Federal Law on Private International Law of 18 December 1987, BBl. 1988 I 5, AS 1988, 1776, English translation in Am. J. Comp. L. 37 (1989), 193, explicitly provides that all pertinent provisions of the law designated by the Swiss conflict rule will apply; under Article 18 only the overriding mandatory provisions – and not all mandatory provisions – of Swiss law claim application, see Monica Mächler-Erne in Heinrich Honsell, Nedim Peter Vogt and Anton K. Schnyder, eds., Kommentar zum schweizerischen Privatrecht – Internationales Privatrecht, Basel, 1996, Art. 18, No. 10; Kurt Siehr, Das Internationale Privatrecht der Schweiz, Zurich, 2002, p. 236, advocates an interpretation of Swiss conflicts law in accordance with Article 3, para. 3, Rome I Regulation. In the United States, § 187 Rest. Second, Confl ict of Laws extends a choice of law to mandatory provisions if the parties could resolve the relevant issue by agreement, see Peter Hay, Patrick Borchers and Symeonides, Conflict of Laws, 5th ed., St. Paul, Minn., 2010, pp. 1088 et seq.; see also pp. 1099 et seq. for an application of the public policy limitation which is based on the law that would have been applicable in the absence of a contractual choice of law and not on the law and public policy of the forum.

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which do not unconditionally demand implementation. This is the negative international ordre public. b) Domestic contacts 217. The invocation of both the negative and the positive ordre public requires that the matter in dispute manifests a sufficient domestic connection.⁴⁰² How close the connection must be and on which elements of the dispute they must be linked depends on the specific provisions and legal principles which are being implemented. Additionally, one finds a number of express overriding mandatory provisions which establish so-called lois de police, lois d’application immédiate, Eingriffsnormen or leggi di applicazione necessaria, i.e. rules that lay down the contacts required for their own application and that have to be applied irrespective of the law governing the contract otherwise. Thus § 130 of the German Act against Restraints on Competition (GWB) prescribes the so-called effects doctrine (Auswirkungsprinzip) for German competition law,⁴⁰³ and various consumer law Directives of the European Union stipulate that protective rules remain applicable notwithstanding the choice of the law of a non-Member State country if the contract has a close connection with the territory of the Member States.⁴⁰⁴ 218. Where such specific conflict rules are lacking, it is the role of the court to determine whether the aim and rationale of mandatory rules or principles do – or do not – envelope a given legal dispute.⁴⁰⁵ It is not only for applications of the positive ordre public that such an analysis must be undertaken; where foreign law is to be fended off with the negative ordre public, the judge must similarly ascertain whether the domestic contacts of the case are close enough such that the forum’s own legal principles should in view of their 402 First postulated by Franz Kahn, Die Lehre vom ordre public (Prohibitivgesetze), new printing in id., Abhandlungen zum internationalen Privatrecht, Munich, 1928, pp. 161, 171; on the international acceptance of this view, see further Paul Lagarde, “Public Policy”, IECL, Vol. 3, Chap. 11, Tübingen, 1994, pp. 22-38; see also infra, paras. 720 et seq. 403 See already in a different context supra, para. 120 and footnote 226 with the text of that provision. 404 See Article 6, para. 2, of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993 L 95/29; for an identical example see Article 7 para. 2 of Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees, OJ 1999 L 171/12. 405 Illustrative in this regard is the (concededly disputed) decision of the ECJ of 9 November 2000, Case C-381/98 (Ingmar v. Eaton Leonard Technologies) [2000] ECR I-9305, where, pursuant to its purpose and rationale, the European Court of Justice extended the provisions of the European Commercial Agent Directive 86/653/EEC to a contract between a British commercial agent and a US company which was subject to California law. Advocate General Léger referred to the concept of lois de police in the French version of his opinion, see para. 89.

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purpose and rationale be brought to bear against the application of foreign law. c) Conclusions for choice of law 219. The doctrine of ordre public has over the course of the decades witnessed a noteworthy process of differentiation. The permission of a free choice of law must, accordingly, be contemplated in this light. Rejecting choice of law on its merits as a threat to ordre public would fail to recognize this evolution and falls short of the mark. A better analysis may be accomplished by inverting the enquiry: does a – sanctioned – choice of law in a specific instance result in the evasion of rules and principles which can be attributed to ordre public ? This result is theoretically ruled out where an overriding mandatory provision exists which specifies its own scope of application. 220. Where the scope of application is not defined by statute, it is incumbent on the court to determine whether the case has so close a domestic relation and whether the significance of a mandatory provision is so great that it must be implemented in a legal dispute having foreign elements. This differentiating ex-post review of the ordinary choice-of-law process that is also applicable to choice of law by the parties’ agreement is reflected in various rules of the Rome I Regulation.⁴⁰⁶ Thus, the contractual deselection of lex fori rules – otherwise applicable by virtue of objective connecting factors – cannot ultimately interfere with the implementation of these rules as regards their internationally mandatory core. Consequently, the protection of the forum’s public policy is not a valid argument that would militate a priori against the admission of choice-of-law agreements. 3.

No Binding Effect of Contracts outside a Legal Order

a) The conclusion of a contract as a result of the applicable law 221. A further argument against the free choice of law derives from the notion that agreements can only achieve a binding effect within the framework of a legal order. Petitioning a court for the enforcement of a private agreement necessarily introduces the role of State compulsion, an act which is only possible in the context of the applicable law. It is argued that when pursuant to the French Code Civil – and the other legal orders which follow suit – “Agreements lawfully entered take the place of the law for those who made them” (“les conventions légalement formées tiennent lieu de loi à ceux qui les ont faites”, Article 1134), this private accord can only be given legal effect 406 See Articles 3, paras. 3, and 4, 6, para. 2, 8, para. 1, and 9 of the Rome I Regulation; on the preceding legal policy discussion, see the comments in Max Planck Institute for Foreign Private and Private International Law, “Comments on the European Commission’s Green Paper on the Conversion of the Rome Convention of 1980 on the Law Applicable to Contractual Obligations into a Community Instrument and Its Modernization”, RabelsZ 68 (2004), 1, 53-59.

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within the framework of the applicable law. While this law must not necessarily be the forum State’s own substantive law, it should however be the law designated by the objective factors laid down in the forum State’s private international law.⁴⁰⁷ 222. This reasoning has logical appeal. In order for any contractual agreement – choice-of-law agreements included – to be given legal effect, it must be ascertained that the contract was lawfully concluded; whether or not this is the case depends on the rules of a legal system. A specification of the applicable law consequently has logical priority over any contractual choice of law. Therefore, while an expression of “natural” human will disconnected from any legal system whatsoever may generate consequences in the social sphere, it cannot be given a binding effect in law. b) The core and corona of the agreement 223. In reality, however, the logic underlying this syllogism is by no means immune from attack. It certainly is the case that, in respect of the formation of contracts, national legal systems exhibit differences which would seem to require an assessment of the applicable legal regime without which one could not definitively ascertain the binding effect of the contract. The differences in positive law, however, only impact the peripheral aspects of contract formation, for example the details of offer and acceptance or flawed situations of consent such as mistake or duress.⁴⁰⁸ Yet these are marginal matters which emerge as the law is being applied more and more often and which result in a progressive differentiation of the legal rules. These differences cannot however conceal the commonly shared principles of law. 224. That the agreement as such produces a binding effect is nowhere disputed and flows from the universal legal principle of pacta sunt servanda,⁴⁰⁹ recognized as a doctrinal cornerstone for the binding effect of agreements long before its codification in Article 26 of the Vienna Convention on the Law of Treaties.⁴¹⁰ While it is clear that the principle neither regulates the legal 407 Batiffol, supra footnote 385, pp. 75 and 76; similarly as to Article 1291, para. 1, of the Código Civil in Uruguay: Quintín Alfonsín, supra footnote 385, p. 357. 408 Batiffol, supra footnote 385, p. 76, relying on differences in the law regarding an absence of contractual intent in order to justify the necessity of objectively determining the issue of contractual formation. 409 See e.g. Article 1.3 of the UNIDROIT Principles of International Commercial Contracts, Rome, 2004. 410 In respect of international law, Ian Brownlie, Principles of Public International Law, 6th ed., Oxford, 2003, pp. 591 et seq., makes reference to a “general principle of international law”. Even in the absence of its specification in Article 26 of the Vienna Convention on the Law of Treaties, 1155 UNTS 331, the principle results from the nature of contracts, see Dominique Carreau, Droit international, 7th ed., Paris, 2001, p. 151, No. 355; similarly Antony Aust, Modern Treaty Law and Practice, Cambridge, 2000, p. 144; Ian Sinclair, The Vienna Convention on the Law of Treaties, 2nd ed., Manchester, 1984, p. 83: “Article 26 of the Convention reproduces, in lapidary

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framework of contracts nor the scope of a contractual bond in all its details, it does embody a ground rule giving expression to the legally binding effect of contracts and requires, therefore, no further positive expression. Accordingly, one is not merely dealing with an extra-legal principle of societal coexistence which obliges adherence to agreements not otherwise premised on a legal obligation, as for example in an agreement to go to the cinema or to share a rendezvous. 225. In accordance with this principle, the agreement of two parties to subject their contractual relationship to Brazilian or German law produces, at its core, a legally binding effect even if establishing the actual details – which effectively form the bond’s corona – ultimately requires reference to a specific legal order. Against this background, a determination of the law to be applied in assessing contractual formation will also give deference to the intent of the parties instead of considering appropriate objective factors. The Rome I Regulation allows for this by specifying that the law selected by the parties will provide the basis for assessing the existence and validity of the contract including the choice-of-law clause.⁴¹¹ It thereby acknowledges the binding force of the individual intent irrespective of the determination of a law applicable by virtue of objective connecting factors. 4.

Protection of Weaker Parties

a) Freedom of choice and power 226. Every form of contractual freedom, including choice of law, ultimately relinquishes to the parties themselves the determination of what is applicable between them, thereby deferring not only to their respective preferences but also to the balance of power existing between them. Where the position of a stronger party is not regulated by competitive market forces, it can be expected that imbalances in power will be exploited through raised prices or the unilateral determination of favourable contractual terms.⁴¹² language, the basic principle pacta sunt servanda”; also Alfred Verdross and Bruno Simma, Universelles Völkerrecht, 2nd ed., Berlin, 1981, pp. 293 et seq. observing in the principle the normative basis of the law of international contracts, inseparably linked with the principle of bona fides; Karl Doehring, Völkerrecht, Heidelberg, 1999, Nos. 7-12 and 741 identifies the principle as being empirically ascertainable, but not justifiable. 411 See Article 3, para. 5, and Article 10 of the Rome I Regulation. This solution has been defended by Lando against criticisms of faulty logic, IECL, Vol. 3, Chap. 24, p. 44, sec. 83. 412 Batiffol, supra footnote 385, p. 73, ignoring however the corrective effect of competition when he writes: “the freedom of contract as between persons who are economically unequal amounts to the suppression of the weak by the strong” (translation provided by the author). For a similar position see Fausto Pocar, “La protection de la partie faible en droit international privé”, Recueil des cours 188 (1984), 339-417 at p. 372.

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227. This finding is put forward quite convincingly as an argument against freedom of choice by Uruguay’s author Fresnedo de Aguirre. She makes reference to the monopolistic liner shipping conferences known to maritime navigation that deny all options to shippers from countries such as Uruguay which do not have their own commercial fleet. In respect of the standardized bills of lading containing choice-of-law and jurisdictional agreements which routinely specify the courts and laws of industrialized nations having strong maritime interests, the ban on such clauses found in Article 2403 of its Civil Code affords Uruguay a means of protecting its own interests.⁴¹³ With international trade being ever more frequently dominated by boilerplate contracts which refer to the laws and courts of the northern hemisphere, an authorization of party autonomy would from a Uruguayan perspective effectively amount to forbearing on the application of its own law in its own courts, even when the contract is performed in Uruguay.⁴¹⁴ b) Neutralization through competition 228. This course of arguments is questionable to the extent that it is premised on the specific example of liner shipping conferences and generalises the findings made in that field. It is true that liner conferences have ever since the emergence of liner shipping and until recent years, indeed, exercized monopolistic power in many international shipping markets.⁴¹⁵ Nonetheless, where competition functions effectively, as is now the case in many domestic and international markets for goods and services, customers in developing nations as well can realize their contractual preferences and, when important, insist on the deletion of choice-of-law provisions from the form contracts of suppliers established in industrialized countries. The more intensive the competition, the greater their chances for success. The disparity of power between an individual strong supplier and an individual weak customer can be balanced where competition between several strong suppliers unfolds its effects. Curbing economic power is one of the main purposes of competition. c) Imbalances in motivation 229. In reality, however, customers have few if any interests which are as comparably strong as the interest of the suppliers in incorporating their choiceof-forum and choice-of-law clauses. This can be attributed to the fact that a supplier who concludes contracts with customers in many countries will 413 Fresnedo de Aguirre, supra footnote 360, p. 100. 414 Fresnedo de Aguirre, supra footnote 360, p. 129. 415 On liner shipping conferences see Jürgen Basedow, Wettbewerb auf den Verkehrsmärkten, Heidelberg, 1989, pp. 24 et seq.; on the repeal of their exemption from Article 81, EC’s (now: Art. 10, TFEU) prohibition of cartels, see id., in Ulrich Immenga and Ernst-Joachim Mestmäcker, eds., Wettbewerbsrecht – EG/Teil 2, 4th ed., Munich, 2007, Verkehr, Nos. 5 and 12 et seq.

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consistently have a significantly greater incentive to standardize conditions of sale than an individual customer will have to standardize conditions of purchase.⁴¹⁶ The customer’s total purchase volume is as a rule smaller than the total sales of the supplier. The number of national sales markets for suppliers will in most cases exceed the number of purchase markets of the individual customer. Although one will observe instances of purchasing power in prominent customers, particularly in the large trading firms which also standardize their purchase conditions, this is not characteristic of the market as a whole. Thus, the suppliers will on balance engage in a greater number of transactions with customers throughout the world than will, conversely, customers with suppliers from different countries. The standardization of jurisdictional and choice-of-law clauses consequently represents a significantly greater advantage for suppliers, i.e. increased total efficiency and cost savings, than would be realized by a customer implementing a corresponding standardization of purchase conditions. 230. These circumstances explain why many more firms impose standard terms and conditions of sale in regards to contractual relations where they act as suppliers as opposed to standard terms and conditions of purchase in respect of contracts they enter as buyers. Individualized negotiations over these terms are, furthermore, virtually never undertaken since the majority of these standard terms and conditions only take on significance in the unusual event of contractual non-performance. Negotiating over these terms in advance of concluding the contract would, furthermore, be unadvisable since it could poison the business climate. Thus, the bias of choice-of-forum and choice-of-law clauses observed by Fresnedo de Aguirre often conceals pragmatic, business-minded calculations made by both sides. d) Macro-economic and individual disequilibrium 231. Furthermore, the reference to the north-south imbalance is debatable in this context since developing and also emerging nations often are – to a certain extent – home to large firms which procure the services of small suppliers located in foreign countries. Here the imbalanced conditions should presumably lead to the developing country also respecting a choice-of-law clause found in the standard terms and conditions of the smaller foreign supplier. Thus, the general proscription is clearly exaggerated. 232. Macro-economic imbalances existing between national economies do not necessarily imply a corresponding imbalance in power between private parties from those countries. Such a conclusion is even less warranted when national economies are in a state of transition and national interests, to the extent they may be taken into account in private law at all, are evolving over 416 On the following discussion see Jürgen Basedow, “Lex mercatoria and the Private International Law of Contracts in Economic Perspective”, in Jürgen Basedow and Toshiyuki Kono (eds.), An Economic Analysis of Private International Law, Tübingen, 2006, pp. 57, 68 et seq.; also in Unif. L. Rev. (2007), 697, 709 et seq.

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the course of time. Countries such as the People’s Republic of China, which hardly commanded its own vessel tonnage three decades ago, now has shipping fleets that number among the largest of the world.⁴¹⁷ A prohibition of choice-of-law clauses that might have been motivated by the fear of commercial inferiority 30 years ago would thus be detrimental to the country’s own interests at present. The exploitation of power imbalances between contractual parties cannot be combated with sweeping prohibitions relating to macroeconomic findings; it demands, instead, more finely calibrated measures. 5.

Conclusion

233. All considered, the categorical rejection of freedom of choice rests on shaky ground. The various objections, regardless of whether premised on legal theory, logic, public policy, motivations of individual justice or macroeconomic policy considerations, do not prove themselves airtight. But this is by no means an appeal for unrestricted freedom of choice. The aims and interests of national legal regimes indeed deserve a considerable degree of deference, yet they must be effectuated with differentiated adjustment rather than a blanket prohibition. Section 4: Theoretical Basis for Freedom of Choice 234. Nevertheless, having answered the objections to freedom of choice does not inevitably allow the inference that such agreements should carry a binding effect. The preceding analysis only supports the conclusion that a choice of law must not necessarily yield to sovereignty, ordre public or objective law, and one can further conclude that redistributive policy arguments running counter to the freedom of choice are ultimately not persuasive. Just why the will of two contracting parties as manifested in a choice of law ought to be given a binding effect independent of any particular legal regime remains, however, to be clarified. 1.

Efficiency

235. In modern conflicts theory inspired by the economic analysis of law, party autonomy in private international law is sometimes explained by the efficiencies it ensures. Thus, Erin O’Hara and Larry Ribstein put it very clearly, saying that “an efficient choice-of-law system should start with a presump-

417 On the development of the Chinese merchant fleet see Hongyan Liu, Liner Conferences in Competition Law – A Comparative Analysis of European and Chinese Law, Heidelberg, 2010, pp. 26 et seq., 38 et seq.

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tion in favour of choice-of-law clauses in contracts.”⁴¹⁸ In fact, if the public good is the aggregate of individual satisfaction of the members of society and the making of a contract indicates that the satisfaction of both parties will increase and at least not diminish, the agreement on a choice-of-law clause gives evidence of an efficient solution of the choice-of-law issue; other authors are in agreement on this point.⁴¹⁹ The efficiencies in question may relate to a number of issues: the reduction of legal uncertainty that might prevail in the absence of choice,⁴²⁰ the suitability of the law chosen for the specific type of contract,⁴²¹ or its adequacy for the specific dispute settlement body selected in another clause of the contract.⁴²² These and other reasons come down to a reduction of transaction costs understood in a broad sense such as to include all costs incurred in the relation between the parties for the implementation of the transaction until the settlement of eventual disputes. 236. In some situations, the invalidation of choice-of-law clauses may even deter an undertaking from engaging in business in the respective country.⁴²³ Where that happens, both sides forego the benefit flowing from cross-border trade. This is, for example, the case in consumer insurance within the European Union: since the insurance contract laws of the European nations provide for a – divergent – minimum protection of the policyholder through 418 Erin O’Hara and Larry Ribstein, “From Politics to Efficiency in Choice of Law”, University of Chicago Law Review 67 (2000), 1151-1232 at pp. 1152-1153 and 1186. 419 Kurt Siehr, “Ökonomische Analyse des Internationalen Privatrechts”, in Dieter Henrich and Bernd von Hoff mann, eds., Festschrift für Karl Firsching, Munich, 1985, pp. 269-294 at p. 280; Eva-Maria Kieninger, Wettbewerb, p. 14 and 277; Francesco Parisi and Larry Ribstein, “Choice of Law”, in Peter Newman, ed., The New Palgrave Dictionary of Economics and the Law, Vol. 1, London, 1998, pp. 236-241 at p. 240; Jürgen Basedow, “Lex Mercatoria and the Private International Law of Contracts in Economic Perspective”, in Jürgen Basedow and Toshiyuki Kono, eds., An Economic Analysis of Private International Law, Tübingen, 2006, pp. 57-71 at p. 63; Giesela Rühl, pp. 435 et seq., with thorough explanations of the economic theories underlying her conclusion; in particular, she points out that the permissibility of choosing the applicable law paves the way for a market-oriented solution and for institutional competition. 420 Erin O’Hara and Larry Ribstein, The Law Market, New York, 2009, p. 8. 421 Rühl, p. 438; O’Hara and Ribstein, The Law Market, p. 14, point to the parties’ ability “to choose the law that suits each aspect of their economic and social lives – that is, Delaware for corporations, New York for commercial contracts, Massachusetts for mutual funds, South Dakota for credit cards – and still live in sunny California, which may have inferior laws in all these areas but better golf courses and ski slopes”. 422 Where the parties choose the courts of London for an eventual dispute, it is obviously reasonable to permit the choice of English law for the substance of the dispute; likewise, an agreement on arbitration to be conducted at Zurich or Geneva would suggest the option of choosing Swiss law. 423 O’Hara and Ribstein, The Law Market, pp. 6-7.

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numerous mandatory rules, private international law designates the policyholder’s law as applicable and does not allow for party autonomy.⁴²⁴ Consequently, insurers offering cover to foreign applicants would have to adjust their business to a number of foreign laws; most of them consider this as too costly and do not contract cross-border consumer business.⁴²⁵ 237. The efficiency argument is in line with what has been said above about the superior knowledge of private actors – as compared with States – of the future whereabouts and transactions of individuals and companies.⁴²⁶ Since that private knowledge is superior, private decisions taken on the basis of party autonomy are likely to promote efficiency more than decisions taken by State legislatures. However, the significance of efficiency as the basis and sole or predominant yardstick for party autonomy in private international law is nevertheless questionable. Doubts arise from both within the economic model and from without. For measuring efficiency gains, the economic reasoning would require precisely indicating the frame of reference: are efficiencies assessed as between the two contracting parties ? Or should the effects of an agreement on third parties be taken into account ? It has indeed been argued that for the framing of choice-of-law rules, it is “consistent with the economic approach … [to] take as … objective the maximization of global welfare.”⁴²⁷ The target “should be to identify and implement rules that will permit transactions to take place when the total impact on welfare is positive, and prevent transactions from taking place when the total impact on welfare is negative.”⁴²⁸ It is submitted that the assessment of global welfare including the welfare impact on all persons affected by a choice-of-law agreement or any other choice-of-law rule is in most cases beyond the ability of a court and that legislatures, instead of conducting the analysis required, will tend to decide on the basis of a political assessment. Similar difficulties arise from the time horizon that needs to be fi xed for an assessment of efficiencies. Are only short-term effects of a given conflict rule to be included, or should we equally consider long-term effects that a conflict rule may produce for a location or a whole industry ? Would, for instance, the progressive loss of business for the legal services market in London be a valid efficiency argument when it comes to a restriction of party autonomy excluding the choice of English law for certain transactions ? Without going into further

424 See now Article 7, para. 3, of the Rome I Regulation for so-called small and medium risks. 425 For a more comprehensive study of the problem see Jürgen Basedow, “The Case for a European Insurance Contract Code”, The Journal of Business Law, 2001, 569-586; id., “Insurance Contract Law as Part of an Optional European Contract Act”, Lloyd’s Mar. Com. LQ, 2003, 498-507. 426 See supra, paras. 92 et seq. 427 Andrew T. Guzman, “Choice of Law: New Foundations”, Geo. L. Journ. 90 (2002), 883-940 at p. 894. 428 Ibid., at pp. 896 and 905.

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detail, it appears that the explanatory capability of the efficiency analysis does not allow for sufficient normative conclusions at the present stage. 238. But even if that analysis can be further developed – as it certainly will in future years – it should not be forgotten that efficiency or welfare is only one value that determines the content of legal rules alongside and sometimes in conflict with others. Efficiency arguments may serve for the affirmation or the critique of legal rules and principles, but they are not apt to set aside the law. The pure utilitarian approach does not take seriously rights and their stabilizing function on the expectations of individuals even though the maximization of welfare is built on the assumption that property rights are respected and contracts are performed irrespective of the outcome of an efficiency analysis in the individual case.⁴²⁹ Nor can efficiency arguments provide an explanation for the view that party autonomy is more than just the result of the positive law of a given State. When we try to explain that view, we have to discuss the relation of the individual with the State, or rather, with the various States forming his or her environment in the open society. 2.

Freedom and Natural Will

239. The starting point for a justification of the binding effect of contracts in legal theory can only be the natural will of the individual along with the corollary right to craft such will by virtue of the individual’s innate freedom. The philosophers of the Enlightenment saw man as being born in a natural state of freedom. As framed by Locke: “We must consider what State all Men are naturally in, and that is, a State of perfect Freedom to order their Actions, and dispose of their Possessions,… within the bounds of the Law of Nature, without asking leave, or depending upon the Will of any other men. A State also of equality…”⁴³⁰ For Rousseau as well, our birth into a state of freedom is the core and origin of political philosophy: “Man is born free …”⁴³¹ and shortly thereafter as concerns children: “they are born men, and free; their freedom belongs to them, and nobody except them has a right to dispose of it.”⁴³² 429 For a thorough analysis of the political philosophy underlying the utilitarian approach, see Ernst-Joachim Mestmäcker, A Legal Theory without Law, Tübingen, 2007, in particular pp. 26-42; in German, see also id., “Gesellschaft und Recht bei David Hume und Friedrich A. von Hayek – Über die Zivilisierung des Egoismus durch Recht und Wettbewerb”, ORDO 60 (2009), 87-100. 430 See Locke, supra footnote 397397, p. 269 (§ 4 of the Second Treatise, emphasis in original). 431 “L’homme est né libre …”. Rousseau, supra footnote 398, Book I, Chap. 1, p. 46; the English by Betts, supra footnote 398, at p. 45, employs the past tense: “Man was born free …” to indicate a past state of nature. 432 “Ils naissent hommes et libres; leur liberté leur appartient, nul n’a droit d’en disposer qu’eux.” Rousseau, p. 58, supra footnote 398, Livre I, Chap. 4, p. 51; English translation here from Betts, supra footnote 398 , p. 50.

Chapter 2 – Theory of Choice of Law and Party Autonomy

240. In Germany, Immanuel Kant merged freedom and equality into one single right. “There is only one innate right. Freedom (independence from being constrained by another’s choice), insofar as it can coexist with the freedom of every other in accordance with a universal law, is the only original right belonging to every man by virtue of his humanity. – This principle of innate freedom already involves the following authorizations, which are not really distinct from it (as if they were members of the division of some higher concept of a right): innate equality, that is, independence from being bound by others to more than one can in turn bind them; ... his being authorized to do to others anything that does not in itself diminish what is theirs, so long as they do not want to accept it.”⁴³³ Thereby a subjective conception of law and right finds expression: natural freedom is at the outset the subjective right of the individual. Before this backdrop, Kant defines objective law as the “sum of the conditions under which the choice of one can be united with the choice of another in accordance with a universal law of freedom.”⁴³⁴ 3.

Binding Effect

241. The textual passages from the Enlightenment authors make clear the relationship between freedom and human will.⁴³⁵ It is also the ability to bind oneself according to one’s own will that finds expression. Yet why should this freedom not also include the power to withdraw the obligation at one’s discretion ? Where this is the case, no obligation could ever develop. That is to say, binding contracts would be logically excluded with the result that human interaction could only be coordinated through the (legally) nonbinding agreements which otherwise preside over life’s routine and trivial 433 “Das angeborene Recht ist nur ein einziges. Freiheit (unabhängig von eines Anderen nötigender Willkür), sofern sie mit jedes Anderen Freiheit nach einem allgemeinen Gesetz zusammen bestehen kann, ist dieses einzige, ursprüngliche, jedem Menschen kraft seiner Menschheit zustehende Recht – die angeborene Gleichheit, d.i., die Unabhängigkeit, nicht zu mehrerem von Anderen verbunden zu werden, als wozu man sie wechselseitig auch verbinden kann; … die Befugnis, das gegen Andere zu tun, was an sich ihnen das Ihre nicht schmälert, wenn sie sich dessen nur nicht annehmen wollen … – alle diese Befugnisse liegen schon im Prinzip der angeborenen Freiheit und sind wirklich von ihr nicht … unterschieden.” Immanuel Kant, Die Metaphysik der Sitten, 1797/1798, quoted here from the edition by Hans Ebeling, Stuttgart, 1990, p. 76 (pp. 237-238 of the original edition). English translation from Mary Gregor and Roger Sullivan, Immanuel Kant, The Metaphysics of Morals, Cambridge, 1996, 2009, p. 30. 434 “Inbegriff der Bedingungen, unter denen die Willkür des Einen mit der Willkür des Anderen nach einem allgemeinen Gesetze der Freiheit zusammen vereinigt werden kann.” Kant, preceding footnote, pp. 66 et seq. (p. 230 of the original edition); English text from Gregor and Sullivan, preceding footnote, p. 24. 435 See also the Rousseau quote supra footnote 398 and Locke, supra footnote 397, p. 309 (§ 63 of the Second Treatise): “The Freedom then of Man and Liberty of acting according to his own Will is grounded on his having Reason …”

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matters. Such agreements may witness informal enforcement within the confines of social groups, but they are obviously unsuited for the coordination of behaviour and determination of future action in respect of relationships extending beyond one’s own social circle or encompassing a long-term horizon. For such matters a legally binding effect is indispensable. 242. One might argue that the binding effect of a promise can be explained simply by innate individual freedom itself. Would the individual, by virtue of his freedom, not also be empowered to forswear any renunciation of his promise ? That sounds plausible at first sight. But is the waiver of this potential act of renunciation reconcilable with natural freedom ? Would it not be equivalent to accepting an unnatural state of man ? This question leads directly to a debate engaged in by Enlightenment philosophers in regard to justifications offered for slavery. Responding to the contentions of Grotius, Rousseau wrote, “to renounce our freedom is to renounce our character as men, the rights, and even the duties of humanity.”⁴³⁶ Locke for his part rejected the confiscation of property by the State on the grounds that “then all free and voluntary Contracts cease, and are void, in the World;… can there be any thing more ridiculous than to say, I give you and yours this forever; and that in the surest and most solemn way of conveyance can be devised: and yet, it is to be understood that I have Right, if I please, to take it away from you again to Morrow ?”⁴³⁷

243. Thus, it is ultimately reference to the obvious which is drawn upon as an argument for the binding effect of agreements, exactly in the manner that the binding nature of treaties in international law is also at present occasionally derived from the “nature of contracts”.⁴³⁸ Phrased alternatively, the natural freedom of the individual offers no further logical justification for a binding effect. Instead, the legally binding character denotes what Rousseau characterized as “passage from the state of nature to the civil state”.⁴³⁹ It has its roots in the individual’s natural freedom and will, but its effect only becomes manifest within man-made systems of law.

436 “Renoncer à sa liberté c’est renoncer à sa qualité d’homme, au droit de l’humanité, même à ses devoirs.” Rousseau, supra footnote 398, Livre I, Chap. 4, p. 51; English translation from Betts, supra footnote 398, p. 50. 437 Locke, supra footnote 397, p. 395 (§ 194 of the Second Treatise, emphasis in original). 438 See supra footnote 410. 439 “passage de l’état de nature à l’état civil …”. Rousseau, supra footnote 398, Livre I, Chap. 8, p. 60, English from Betts, supra footnote 398, p. 59.

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4.

Choice-of-Law Agreements as Self-fulfilling (Dispositional) Contracts

244. As discussed in more detail in Section 3 above, this conclusion has sometimes led to choice-of-law clauses only being granted recognition within the framework of a given positive conflict-of-laws system. In reaching that result, however, inadequate attention has been paid to just what the binding effect of choice-of-law agreements – as opposed to other contracts – signifies; the result has been an inappropriate commingling of the different types of contracts. 245. One who commits himself vis-à-vis another party to a course of action, forbearance or tolerance fi xes his future conduct or, at a minimum, rules out specified future behaviour. It is on this basis that a contractual partner, for his part, makes certain promises in return. The legally binding nature of a promise is thus prerequisite and consequence for the counter-promise; this mutual dependence finds expression in the exception non adimpleti contractus, the exception of an unfulfilled contract: where one party fails to meet its obligations, the other party’s non-performance is excused as well. Both obligations, initially independent from each other, are intrinsically connected to one another by the contract. 246. The agreement over a choice of law is of a wholly different nature. Neither of the two parties promises a certain future behaviour that is necessary for the mutual performance of the contract. One might infer from a choice-oflaw agreement the parties’ undertaking not to invoke a different law when a dispute occurs. But such a construction is not imposed by the nature of the contractual choice of law. If the parties make a valid agreement on Law A, a subsequent appeal by one of them for the application of Law B need not disconcert the other party; Law A will remain applicable absent a new agreement on the applicability of Law B. Put in other words, the choice-oflaw agreement is not binding through some sense of corresponding obligation. That is to say, an exception based upon an unfulfilled contract would not lie. Rather, the effect of the agreement was realized at the moment it was jointly adopted by the parties. It is a self-fulfilling contract and embodies what might best be described as a dispositional character: it disposes of the assignment of the contract to one of the several hundred legal orders to be found across the world. 247. As a dispositional contract, it arises in a context where an applicable legal order is, a priori, lacking and necessarily only stands to be determined with reference to the conflict-of-laws rules of the court that will later be seized of the case.⁴⁴⁰ That the parties can conclude such a dispositional agreement is the result of their natural freedom and the practical necessity that one of the many legal orders must ultimately referee their legal relationship. The parties can determine the assignment to a national legal system by virtue 440 See supra, Section 2.

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of their natural will since the alternative, namely assignment according to a national conflict-of-laws regime, varies from country to country and thus cannot guarantee the parties that their legal relationship will be subject to one and the same legal order across all the global fora that may eventually be seized of the case. The principle of equivalent natural freedom, emphasized by Kant, includes however, as a starting point, the safeguard of a uniform legal framework for the legally binding treatment of the individual. The judge must therefore recognize this principle in a first step also in those instances where he can, in conformity with his conflict-of-laws regime, impose specific and non-uniform limitations in a secondary step. 5.

Freedom of Choice as a Pre-governmental Right

a) Enlightenment philosophy and human rights 248. The above-described derivation of objective law from the individual’s subjective, innately endowed rights finds an echo in the development of human rights occurring since the end of the eighteenth century. At the start, we find the French revolutionary Déclaration des droits de l’homme et du citoyen of 26 August 1789. Its first article drew nearly verbatim from the formulations of Rousseau and Kant: “Men are born and remain free and equal in rights …”⁴⁴¹ 150 years later, on 10 December 1948, the General Assembly of the United Nations proclaimed with similar pathos in Article 1 of the Universal Declaration of Human Rights: “All human beings are born free and equal in dignity and rights.”⁴⁴² 249. This human rights dimension may perhaps seem exaggerated as an element of the free choice of law. One might question whether the ability of contracting parties to agree upon the applicable law holds more than token value in comparison to fundamental rights in respect of life and bodily integrity, due process and freedom of opinion. Can the contractual parties’ desire for transactional certainty – as served by private international law – truly be classified on the same level as the fundamental interest in not being subject to torture or slavery ? 250. While such a comparison would concededly be disproportionate, the question fails to perceive the theoretical objectives of this present enquiry. It does not relate to the quantification of restrictions and impairments imposed upon individuals, but rather to individuals’ entitlement to subjective rights both inside and outside of the confines of every legal order, rights visà-vis their own and foreign countries which may be declaratorily recognized by the positive law but whose existence is not dependent on such recognition. The existing catalogue of human rights by no means is limited to rights 441 “Les hommes naissent et demeurent libres et égaux en droits …” Unofficial English translation available at Eurodocs: Online Sources for European History: http:// www.hrcr.org/docs/frenchdec.html. 442 General Assembly, Official Records, III, Resolutions, UN doc. A/810, p. 71.

Chapter 2 – Theory of Choice of Law and Party Autonomy

which ensure mankind’s biological existence; numerous rights are related specifically to the relationship between the individual and the State, its laws and its institutions. One need only have in mind the right to be heard in judicial proceedings, the right of legal remedy, the principle of nulla poena sine lege, etc. 251. Reconciling the innate dignity of the individual with the power of the State can indeed be found at the origin of human rights as contemplated in the political thought of the Enlightenment. Therein, these rights are accordingly identified as protecting the individual in his relationship with his own State: or even more precisely, with “the” State. Without its ever being made explicit, the individual is consistently seen as a static entity wanting to assert itself vis-à-vis one single State, i.e. “the” State and, specifically, its respective authority. Even human rights which are tailored to dynamic interactions such as the right of migration or the right to seek asylum ultimately address the conflict between the individual and a single State, be it the country of origin or the host country. 252. The catalogue of human rights only marginally recognises that the individual, confronted with the dynamics of globalization, increasingly comes into conflict with several States simultaneously. Thus, for instance, pursuant to Article 28 of the Universal Declaration of Human Rights, “Everyone is entitled to a social and international order in which the rights and freedoms set forth in this Declaration can be fully realized.”⁴⁴³ Reading this provision in association with other individual rights such as the right to own property expressed by Article 17, one could nonetheless venture the conclusion that the international order, which is also contributed to by each individual State via its private international law, must be configured such that the individual is afforded legal certainty in respect of his property rights. 253. Contracts in which property rights are established or altered must, therefore, have predictable effects. This is not the case when the effects of the contract will depend upon the court which is called upon and its respective conflict-of-laws regime identifying one of several different national legal orders potentially involved. One must then infer from the conceptualization of human rights, i.e. a conception fundamentally embracing the existence of subjective rights within every legal order, that the efforts of individual contracting partners to create legal certainty by means of a choice-of-law selection are to be recognized and respected on their merits. This represents, as it were, a human right in a globalized world that is typically directed against not only one, but several affected States, specifically those States whose courts share the judicial competence to resolve a dispute arising from a contractual relationship. These courts are obliged to recognize the choice of law as an instrument which, in a multi-jurisdictional world, charts a course of legal certainty.

443 See preceding footnote.

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b) Clarification of freedom of choice as derived from human rights 254. The basis for a human rights justification for freedom of choice can also be found in the conflict-of-laws literature. It emerges from the comprehensive and thorough enquiry of Yuko Nishitani that one of the founders of European private international law, Pasquale Stanislao Mancini, was strongly influenced by the Kantian conception of freedom.⁴⁴⁴ Mancini sees the legal order as guarantor of “the reconciliation of private and individual liberty with the exercise of social power, i.e. of the relations between state law and the rights of the individual, between the political order and the civil order of domestic and private relations. The action of the social power stops where it encounters the inoffensive and therefore legitimate liberty of private individuals. Consequently, the social authority cannot, without acting with unjust excess, invade the inaccessible and inviolable sphere which is reserved to the extension and exercise of that inoffensive liberty.”⁴⁴⁵

And as to the question of why individuals should be allowed in their contracts to subject themselves to foreign law, Mancini answers: “because we have to respect their liberty to the extent that it is inoffensive, and that the State has no interest in preventing its exercise.”⁴⁴⁶ 255. These thoughts were again seized upon at the end of the twentieth century by the Institut de droit international and its rapporteur Erik Jayme.⁴⁴⁷ The resolution of the Institut points out in its preamble “that party autonomy is one of the basic principles of private international law”; furthermore, it 444 Yuko Nishitani, Mancini und die Parteiautonomie im internationalen Privatrecht, Heidelberg, 2000, pp. 45-47. 445 “accord de la liberté privée et individuelle, avec l’exercice du pouvoir social, c’est-àdire des rapports entre la loi de l’Etat et les prérogatives de l’individu, entre l’ordre politique et l’ordre civil des rapports domestiques et privés. L’action du pouvoir social s’arrête là où elle rencontre la liberté inoffensive et dès lors légitime des particuliers. En conséquence, l’autorité sociale ne peut, sans commettre un injuste excès, envahir la sphère inaccessible et inviolable dans laquelle se répand et s’exerce cette liberté inoffensive.” Pasquale Stanislao Mancini, “De l’utilité de rendre obligatoires pour tous les Etats, sous la forme d’un ou plusieurs traités internationaux, un certain nombre de règles générales du droit international privé, pour assurer la décision uniforme des conflits entre les différentes législations civiles et criminelles”, Journal du droit international (Clunet), 1 (1874), 221-239 and 284-304, p. 292; English translation here provided by the author. 446 “parce qu’on doit respecter sa liberté en tant qu’elle est inoffensive, et que l’Etat n’a d’ailleurs aucun intérêt à en empêcher l’exercice”. Mancini, preceding footnote, p. 295; translation here provided by the author. 447 See Erik Jayme, “Rapport définitif”, in Institut de droit international, Annuaire, Vol. 64, t. I – Session de Bâle 1991, Paris, 1991, pp. 62, 65 et seq. approved by Frank Vischer, “General Course on Private International Law”, Recueil des cours 232 (1992), 9-256 at p. 126.

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acknowledges “the freedom of the individual as recognized by the conventions and resolutions of the United Nations”.⁴⁴⁸ The Universal Declaration of Human Rights is referenced in connection with the resolution. Accordingly, Jayme’s report remarks that the provisions of positive law of the various legal systems “are inspired and supplemented by principles flowing from sources of international origin such as the conventions on human rights and the conventions and resolutions of the UN concerning civil and political rights. The legitimacy of party autonomy lies in the freedom of individuals in respect of their personal and commercial affairs recognized by the states≈…”⁴⁴⁹ It has to be noted that the report does not bestow a constitutive effect on the conferral – by the States – on individuals of freedom in respect of their affairs, but that it points to the recognition of such freedom by the States. It follows that the report considers that freedom as pre-existing and the recognition by the States as a declaratory act. Section 5: Conclusion 1.

Interaction of Choice of Law and Objective Law

256. In sum, the conclusion is warranted that party autonomy as seen in international contract law rightfully claims a theoretical foundation. It is rooted in the pre-governmental right of individuals to subject themselves to a particular positive legal order through acts of private volition. This right is justifiable for cross-border matters which, as a consequence of their nature, have some connection to more than one legal regime. In such cases, the positive law of individual legal systems does not yield the performance which is understandably sought, namely the creation of legal certainty. The claim to legal certainty can in fact be interpreted as flowing from a number of human rights. In a multi-jurisdictional context, this objective can only be attained through a threshold stipulation – a self-fulfilling or dispositional

448 “que l’autonomie de la volonté des parties est un des principes de base du droit international privé … la liberté de l’individu, telle qu’elle est reconnue par des conventions et des résolutions des Nations Unies”. See Institut, preceding footnote, p. 77; English translation provided by the author. 449 “sont inspirées et intégrées par des principes provenant de sources de caractère international telles que les conventions sur les droits de l’homme et les conventions et les résolutions de l’ONU concernant les droits civils et politiques. La légitimation de l’autonomie de la volonté des parties est la liberté des individus dans leurs affaires personnelles et commerciales, reconnues par les Etats.” See Jayme, supra footnote 447, p. 64; English translation provided by the author. On a similar note, Peter Nygh, “The Reasonable Expectations of the Parties as a Guide to the Choice of Law in Contract and in Tort”, Recueil des cours 251 (1995), 269-400, argues at p. 295: “[Autonomy] is not derived from municipal law, it is supranational … . It is an axiom grounded in universal practice.”

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agreement – entered into by the parties. To this extent party autonomy mirrors the pre-governmental character of individual freedom. 257. This understanding, conversely, cannot justify freedom of choice for purely domestic matters; here the national law of the affected State is capable of providing individuals with a homogeneous framework under which they may order their relations under conditions of legal certainty. This is in accord with the non-derogable nature of mandatory law as provided by Article 3 paragraph 3 and Article 3 paragraph 4 of the Rome I Regulation for, respectively, purely domestic matters and intra-Community matters.⁴⁵⁰ While these provisions do allow for a choice of law as concerns purely domestic/ internal matters as well, such choice is only available in respect of optional or default rules of law, i.e. non-mandatory provisions. In this context choice of law serves merely as a kind of proxy for the incorporation of substantive foreign law; it would be possible in theory that the contract contains a whole body of foreign dispositive law copied rule by rule. A choice-of-law clause abbreviates such lengthy and cumbersome procedures. The parties’ right to stipulate the application of foreign law to a purely domestic transaction with regard to dispositive rules makes practical sense in some cases and has therefore been acknowledged by the European legislature. It is anchored in positive law but cannot be said to flow from a human rights approach. 258. In other regards, the foundation of party autonomy as an individual right, ascribable to natural law and – more recently – to human rights, can only explain the very core of choice of law as such, but not the myriad limitations, the modalities nor its specific scope. Just as advocates of a wholly positivistic, derivative understanding of party autonomy must recognize that significance ultimately inheres to the will of the individual,⁴⁵¹ a priori, natural law or human rights conceptions of party autonomy do not satisfactorily explain its scope unless the political will of the respective legislatures – as given expression by the positive law of the individual legal systems – is simultaneously taken into account. A complete and reliable picture only unfolds when pre-governmental party autonomy is understood in co-existence with the varied limitations placed upon it by the objective law of individual nations. 259. These private international law conclusions broadly coincide with observations that we have made regarding the co-existence of private and State “law-making” in respect of substantive private law.⁴⁵² Private rule-making is an imperative in the modern economic world since market dynamics result in the private sector having a head start over its public counterpart in 450 See supra footnote 406. 451 See supra, Sections 2 and 3 at point 1 (c). 452 See supra, Part II, Chap. III, for private arrangements relating to international transactions and their regulation by private agencies; for a more general enquiry, see Jürgen Basedow, “The State’s Private Law and the Economy – Commercial Law as an Amalgam of Public and Private Rule-Making”, Am. J. Comp. L. 56 (2008), 703721, with detailed empirical findings.

Chapter 2 – Theory of Choice of Law and Party Autonomy

terms of emerging knowledge. The need for regulation registers first in the private sphere. The State legislature necessarily lags behind, reacting when market processes reveal that private arrangements have been detrimental to weaker market participants or third parties, or that the public interest in the functioning of the market or in other aspects (relating to the public good) is being harmed. Just as State law-makers must intervene in those situations with carefully tailored legislation, in private international law as well they have the analogous task of crafting and imposing focused restrictions on the freedom of choice. An additional task is, of course, incumbent upon State law where the private parties do not make use of their liberty to designate the law governing their legal relations. 2.

The Scope of Freedom of Choice in Private Law

260. The division of labour described here between party autonomy and the positive law of individual legal systems which marks its boundaries is not, in principle, limited to contractual obligations. Rather, the underlying legal theory has general application to all those areas in which private individuals are capable of creating legal relationships and consequences without the constitutive participation of public authorities. This holds particularly true for many areas of international family law – such as conflict-of-law rules for the personal and property effects of marriage, and for divorce – but also in the fields of succession law, tort law and, to a certain extent, also for property law and company law. Our subsequent analysis will explore the significance and possible evolution of party autonomy in these fields, see below, Chapter 3. 261. A theory of private international law which deliberately furthers legal development in an ex ante perspective as opposed to one which simply offers an ex post explanation for changes already observed should embrace the fundamental legitimacy and superiority of freedom of choice. Given that the conflict rules of private international law have, rather, emerged in an ex post view on cases brought to the courts, such theory requires a different investigation. It must aim at the identification of the room left by existing conflict rules for private agreements on the applicable law. This involves the need to take a closer look at the regular connections dictated by the private international law in force. In the areas covered, the analysis in Chapter 3 of part II will provide a survey of the main stream of conflicts law development. It will be shown that many conflict rules have come into existence as default solutions designed for cases where the private parties involved have not clarified the legal framework of their activities ex ante or where that could not be done due to the involvement of third parties. A growing trend towards the recognition of party autonomy will be ascertained here. The specific restrictions of party autonomy which States have put into effect in individual legal areas can then, in a secondary step, be examined in Part III. For the conception of individual liberty prevailing since the European

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Enlightenment and now finding expression in the Universal Declaration of Human Rights, the recognition of free choice of law as the primary method of ordering international legal relationships within individual legal systems remains the paramount consideration. It does not, however, reduce the significance of State intervention as a safeguard of justice in particular areas. Accordingly, the following chapter will explore the role of party autonomy, mainly in areas of the law where the private designation of the applicable law was not accepted in former times.

Chapter 3

New Domains for Party Autonomy

262. While party autonomy has been accepted in most jurisdictions with regard to contracts, it is much more difficult to implement when the interests or rights of third parties or of the public are involved. Yet, a gradual advance of party autonomy into areas of the law affecting third parties and the public interest can be discerned. It relates to issues ancillary to contract law such as agency or assignment, see below, Section 1. More recently, we can also observe the approval of party autonomy in the law of liability sounding in tort or delict, see below, Section 2, and in some areas relating to proprietary or in rem rights, see below, Section 3. International migration across open frontiers also leaves its traces in family law, favouring the admission of contractual choice of law in domestic relations, see below, Section 4, and in the law of succession, see below, Section 5. Section 1: Contractual Relations Involving Third Parties 263. Where three parties are involved in a transaction, a contract made between two of them may benefit but cannot encroach upon the rights of a third party without his or her consent. This principle goes back to the Roman maxim res inter alios acta alteri non nocet⁴⁵³; it applies to agreements on both substantive issues and choice of law. Consequently, the effects of party autonomy have to be limited whenever the risk emerges that third parties will be negatively affected by an agreement. For a long time, these considerations actually inhibited the recognition of any party autonomy in the areas of agency and assignment. More recently, a progressive approval of contractual choice of law can be ascertained in both areas.

453 Codex Iustinianus 7, 60, 1 and 7, 56, 4 (both Diocletian), see the edition by Paul Krüger, Codex Iustinianus, Berlin, 1877, reprint Goldbach, 1998.

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Agency

a) The structure of agency relations 264. Agency may result from law, being a matter of necessity, for example the legal representation of minors by their parents or a guardian, or representation of a body corporate by members of its board. But agency may also follow from the principal’s voluntary conferral of authority, permitting the agent to bind the principal by the conclusion of contracts with third parties. As between the principal and the agent, the underlying legal relation may, for example, be a labour contract, a commercial agency contract, a client-attorney contract or a mandate; the authority may be granted for a single contract or for a whole series of contracts of a certain kind. The agent may disclose his capacity and act in the name of the principal (direkte or unmittelbare Stellvertretung, direct agency), he may disclose his capacity as an agent but not the identity of the principal and act in his own name (indirekte or mittelbare Stellvertretung, indirect agency), or he may simply perform his actions in his own name without disclosing his capacity as an agent, although he intends to act for account of the principal (undisclosed agency). 265. Three relations have to be distinguished: (1) the “internal relation” between the principal and the agent is a regular contract which, in cross-border cases, is subject to the general rules of private international law relating to contracts, including in particular party autonomy. (2) By the internal relation, powers are conferred upon the agent for activities in his “external relations” with third parties: by virtue of these powers he can make binding contracts between the principal and third parties. The external relation has two branches: (a) the agent’s authority is important for the relation between the principal and the third party to which the agent is not privy; (b) moreover, the agent may incur certain liabilities vis-à-vis the third party when representing the principal. (3) The “principal-third-party relation” is again a regular contract, usually designated as the “main contract”, brought about by the agent’s intercession. This relation, too, is subject to the general rules of private international law in respect of contracts, being subject in particular to party autonomy, but its perfection is dependent on the agent’s authority, see above (2)(a). b) Choice of law and party autonomy 266. The central choice-of-law issue of agency relates to the external relation as outlined above in paragraph 265, see constellation (2)(a): which law applies to the beginning and the end as well as the scope of the agent’s authority to bind the principal ? This question has been very much debated over the years, but it has probably lost much of its practical significance in modern times; where doubts about the agent’s authority arise, a clarification in respect of the existence, scope and extent of the agent’s powers – and not only of the law determining those powers – can easily and almost instantly be obtained under conditions of worldwide electronic communications. Yet,

Chapter 3 – New Domains for Party Autonomy

court decisions from recent years give evidence of a remaining and perhaps even growing significance of issue (2)(b), which is outlined above in paragraph 265. They indicate a changing focus of legal practice: litigation now less frequently turns on the scope of the agent’s authority, which might differ depending on the applicable law,⁴⁵⁴ but rather on the liabilities incurred by agents who have acted without disclosing their capacity as agents or the names of their respective principals or without authority or ultra vires.⁴⁵⁵ This is in accordance with the economic function of intermediaries to create a pseudo-domestic environment for transactions:⁴⁵⁶ plaintiffs who can locate the agent in their home countries, but not the principal, try to sue the former in a domestic court. For the conflict of laws, this interdependence or complementarity is a strong argument for subjecting both types of issues to the same national law.⁴⁵⁷ 267. When looking at the role of party autonomy in international agency, a surprising finding comes to the fore: While the selection of the applicable law by the parties involved was hardly ever mentioned in legal scholarship as a possible method 40 years ago, it has meanwhile been accepted not only by legal scholars and courts, but also by international conventions and national legislatures. The broad comparative treatment of the matter by François Rigaux, completed in 1970 for the International Encyclopedia of Comparative Law, details several solutions relating to the law applicable to the external relationship: the law of the principal’s domicile; the law governing the 454 But see e.g. OLG Düsseldorf 23 September 2003, IPRspr. (2003), no. 25: contract on finishing treatment of textiles by the Italian plaintiff company was concluded on behalf and in the name of the German defendant B by another German company A; the conclusion of the contract between B and the Italian plaintiff was affirmed after the court had determined the scope of A’s authority under the laws of Italy, this being the country where the authority produced its effects. 455 See e.g. AG Duisburg 12 September 2003, IPRspr. (2003) no. 24: the individual lodging a registration application on behalf of a company was held to be liable by the registrar of companies; OLG Hamm 20 January 2004, IPRspr. (2004), no. 18: action against falsus procurator acting in Germany on behalf of a Belgian company declared void; OLG Schleswig 24 October 2008, IPRspr. (2008), no. 12: French defendant held liable for creating the appearance of acting in his personal capacity and not for the company he later pretended to represent; OLG Munich 10 December 2008, IPRspr. (2008), no. 13: claim of a German seller against the alleged agent of a United Arab Emirates buyer (where the agent was also established in Germany) dismissed. 456 See supra paras. 141 and 169 et seq. 457 See Max Planck Institute for Foreign Private and Private International Private Law, “Comments on the Commission’s Green Paper on the Conversion of the Rome Convention of 1980 on the Law Applicable to Contractual Obligations into a Community Instrument and Its Modernization”, RabelsZ 68 (2004), 1-118 at p. 97; Simon Schwarz, “Das Internationale Stellvertretungsrecht im Spiegel nationaler und supranationaler Kodifi kationen”, RabelsZ 71 (2007), 729-801 at pp. 798-799; H.L.E. Verhagen, Agency in Private International Law, The Hague, 1995, p. 359 with further references.

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internal relationship; the law governing the main contract; and the law of the place where the agent acts (lex loci actus).⁴⁵⁸ These approaches indirectly allow a contractual designation of the applicable law to the extent that the law applicable to the internal relation or to the main contract may be chosen by the parties. But this was not openly addressed in those years, not even by fervent supporters of the private ordering of international commercial relations and of the lex mercatoria.⁴⁵⁹ c) Party autonomy under positive law 268. An important step in the direction of party autonomy was made in the 1970s. While the 1975 Inter-American Convention on Powers of Attorney uncompromisingly adheres to the law of the place where the powers are to be used as the governing law,⁴⁶⁰ the negotiations leading to the 1978 Hague Agency Convention have pointed in a new direction.⁴⁶¹ That Convention⁴⁶² is in force for Argentina, France, The Netherlands and Portugal; since its application does not require reciprocity, see Article 4, it has replaced national conflict-of-laws rules in these countries. In Articles 11-13 the Convention contains detailed rules on the objective connecting factors which determine the law applicable to the external agency relation. But in Article 14 it opens the door for party autonomy:

458 François Rigaux, “Agency”, in IECL, Vol. 3, Chap. 29, Tübingen, 1973, Sects. 9-11; no reference likewise can be found to party autonomy for US private international law in Albert Ehrenzweig and Erik Jayme, Private International Law, Vol. 2 – Special Part, Leyden, 1973, pp. 119-120; the same applies to Henri Batiffol and Paul Lagarde, Droit International Privé, Vol. 2, 6th ed., Paris 1976, p. 285. Some references to authors approving party autonomy in the older literature are cited in Ulrich Spellenberg, in Franz Jürgen Säcker and Roland Rixecker, eds., Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. 10, 5th ed., Munich 2010, vor Art. 11 EGBGB no. 91. 459 Clive Schmitthoff, “Agency in International Trade”, Recueil des cours 129 (1970), 107203 at pp. 172-181. 460 Inter-American Convention on the Legal Regime of Powers of Attorney to be Used Abroad, adopted at Panama on 30 January 1975; the text is available on the website of the Organization of American States. The Convention has taken effect for 16 countries: Argentina, Bolivia, Brazil, Chile, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Panama, Paraguay, Peru, Uruguay and Venezuela. 461 See René de Quenaudon, “Quelques remarques sur le conflit de lois en matière de représentation volontaire”, Rev. crit. dr. int. pr. 73 (1984), 413-438 and 597-616 at p. 599. 462 Convention of 14 March 1978 on the Law Applicable to Agency, in Hague Conference on Private International Law, ed., Collection of Conventions 1951 – 2009, The Hague, 2009, pp. 268 et seq. For so-called enduring powers of attorney granted by a person in view of his or her future incapacity, the Hague Convention on the international protection of adults of the year 2000 also to a certain degree allows for party autonomy, see the discussion infra in paras. 376 et seq.

Chapter 3 – New Domains for Party Autonomy “Notwithstanding Article 11, where a written specification by the principal or by the third party of the law applicable to questions falling within Article 11 has been expressly accepted by the other party, the law so specified shall apply to such questions.”

269. Similar provisions have been enacted in several more recent national codifications of private international law.⁴⁶³ When submitting its proposal for the Rome I Regulation, the European Commission suggested the adoption of an analogous rule on the law applicable to agency which was rejected, however, by the Council.⁴⁶⁴ Agency has instead expressly been excluded from the scope of the Rome I Regulation.⁴⁶⁵ Not all of the national statutes explicitly allow the parties’ choice. For example, Article 126 of the Swiss law does not mention party autonomy, but the provision is part of the chapter of the law dealing with the law applicable to contracts, Articles 116 – 126, and the general admission of choice of law agreements in Article 116 is interpreted as extending also to the external relation of agency.⁴⁶⁶ It is noteworthy that Article 116 paragraph 3, 3rd sentence expressly reserves the rights of third parties.⁴⁶⁷

463 Austria, Bulgaria, Korea, Quebec, Romania, Spain and Switzerland are mentioned with further references by Schwarz, RabelsZ 71 (2007), 729 at p. 774-775. For Germany, see the comments approving party autonomy by Spellenberg, supra at footnote 458. For Taiwan, Articles 18 and 19 of the Act of 2011 designate the law chosen by the principal and the third party as governing the effects of agency in the relations both between the principal and the third party and the agent and the third party. The new Chinese law allows the parties’ choice of the law applicable to voluntary agency in Art. 16 para. 2, but it is not very clear as to which parties may choose and which relations will be covered by that choice. Under the Polish law of 2011 the principal can elect the law applicable to the agent’s powers of attorney, but he can invoke that choice of law as against the agent or a third party only where that person knew or could have known of that choice, see Article 23 para. 1. 464 See Article 7 para. 3 of the Commission’s Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I), COM (2005) 650 fi nal of 15 December 2005, also published in Max Planck Institute for Comparative and International Private Law, “Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I)”, RabelsZ 71 (2007), 225-344 at pp. 298-312 with the comments of the Institute. 465 See Article 1 para. 2(g) of the Rome I Regulation. 466 See Rolf Watter, in Heinrich Honsell, Nedim Peter Vogt and Anton K. Schnyder, eds., Kommentar zum Schweizerischen Privatrecht – Internationales Privatrecht, Basel, 1996, Art. 126 no. 40. 467 While this provision only refers to a choice of the applicable law subsequent to the conclusion of the contract, it is considered as a general principle applying to every choice of law, see Marc Amstutz, Nedim Peter Vogt and Marcus Wang, in Kommentar zum Schweizerischen Privatrecht, previous footnote, Art. 116 no. 51.

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d) Comments on the Hague Agency Convention 270. Article 14 of the Hague Agency Convention deserves some comments. As compared with other legislative texts on the private international law of contracts, the Agency Convention does not install the contractual selection of the applicable law into the lead position, but rather phrases the provision as an exception to the preceding rules on the objective connection of agency with specific jurisdictions. It should also be noted that the text avoids the usual terminology concerning the parties’ choice of the applicable law, although it deals with party autonomy in substance. In the trilateral agency relation, party autonomy seems however to be limited to the principal and the third party, apparently excluding an agreement between the agent and the third party on the law applicable to the external relationship. Since the agent’s powers are derived from an authorization by the principal, it is indeed difficult to assume that he can himself decide, perhaps to the detriment of the principal, on the law governing the scope of his powers. On the other hand, no such objections can be made where the principal has empowered the agent to choose the law applicable to his authority in the course of the negotiations between the agent and the third party.⁴⁶⁸ 271. A further point relates to the contractual nature of the designation of the applicable law in that it must be made by the offeror – either the principal or the third party – in writing and must expressly be accepted by the offeree, i.e. the other party. The written form of the offer, although difficult to justify,⁴⁶⁹ is probably not a great impediment if the modern forms of communication are included as constituting a record.⁴⁷⁰ In fact, most communication in cross-border cases is currently performed through emails which can be reproduced and provide a record of what the sender wanted to express. The requirement of an express acceptance gives rise to more difficulties. Although this requirement is not equivalent to an acceptance in writing and the approval may be expressed orally, mere conduct that allows the inference of a tacit acceptance will not suffice. Thus, where the agent presents to the third party a document drafted by the principal and setting forth his powers of attorney, including a choice of law clause, the third party’s subsequent conclusion of a contract with the principal as represented by 468 See Spellenberg, supra at footnote 458, vor Art. 11 EGBGB no. 97. 469 Verhagen, supra at footnote 457, p. 357. 470 See Article 1:301, para. 6 of the Principles of European Contract Law, see Ole Lando and Hugh Beale, eds., Principles of European Contract Law, Parts I and II, The Hague, 2000, pp. 122 and 125: “ ‘written’ statements include communications made by telegram, telex, telefax and electronic mail and other means of communication capable of providing a readable record of the statement on both sides”; see also Article 1.11 of the UNIDROIT Principles of International Commercial Contracts; under the 4th indent “ ‘writing’ means any mode of communication that preserves a record of the information contained therein and is capable of being reproduced in tangible form”, see the Comments by Kleinheisterkamp in Vogenauer/Kleinheisterkamp, Article 1.2 no. 5.

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the agent would not satisfy the requirement of an “express acceptance” of the choice-of-law clause. This can hardly be considered as a satisfactory solution.⁴⁷¹ One should even go a step further: since the conferral of authority on the agent cannot give rise to obligations for anyone except the principal, this conferral should also be valid without any acceptance, i.e. by a unilateral act.⁴⁷² 272. Further reservations may be expressed over Article 14 because of the agent’s exclusion from the agreement on the applicable law. Agency is a “trilateral” relationship, and it is therefore a risky and potentially unfair undertaking to subject the third participant to effects generated by the bilateral accord of the other two persons involved.⁴⁷³ It is true that the agent will generally be informed about a contractual designation, as between the principal and the third party, of the law governing the external relation, but this is not an indispensable requirement of Article 14, nor is a subsequent amendment by an agreement between the principal and the third party excluded. One should take into account that the liability of an agent exceeding his authority is governed (under Article 15 of the Hague Agency Convention) by the law which the principal and the third party may have selected (under Article 14) by common accord and without the agent’s knowledge. Where that happens, it amounts to a clear infringement of the fundamental adage of res inter alios acta alteri non nocet.⁴⁷⁴ A unilateral designation of the law by the principal or a bilateral choice by principal and third party are only acceptable where they do not generate negative legal consequences for the agent without his or her consent. An explicit reservation of third-party rights as contained in the Swiss law⁴⁷⁵ would therefore be appropriate. e) Conclusion 273. To sum up these observations, it can be said that the private international law of agency has made a distinct turn towards party autonomy over the last 30 to 40 years. As could be shown above, party autonomy has its place in agency relations provided that unilateral or bilateral designations of the applicable law do not engender negative consequences for third persons. Where such negative consequences result, the third persons must have means of avoiding them. For example, a subsequent choice of law agreed upon between the principal and the third party can only create additional

471 Schwarz, RabelsZ 71 (2007), 729 at pp. 782-783; Verhagen, supra at footnote 457, pp. 357-358. 472 See the thorough discussion by Schwarz, RabelsZ 71 (2007), 729 at pp. 777-781 referring to the private international law of Korea and the parallel discussion in substantive law. 473 See de Quenaudon, supra at footnote 461, Rev. crit. dr. int. pr. 73 (1984), 600. 474 See supra para. 263. 475 See supra para. 269.

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liabilities for the agent where the latter was informed of that choice and had the opportunity to terminate the agency relation. 2.

Assignment of Claims

a) General backdrop 274. Another area of contract law where the operation of the general rules of private international law and, in particular, of party autonomy gives rise to problems can be identified in the field of assignment of claims, in particular money claims. Here, the following relations have to be distinguished:⁴⁷⁶ (1) the debtor (D) has a certain obligation as against the initial creditor (C), often the payment of a certain sum of money; this is here referred to as the “claim” that may originate in a contract or in a non-contractual relation. (2) The creditor C transfers the claim to the assignee (A) by another contract, the “assignment”. (3) Thereby, the assignee A becomes entitled to the claim against the debtor D; whereas the claim itself is not altered by the assignment, a successful action by the assignee A against the debtor D requires, in addition to the existence of the claim, the validity of the assignment. Moreover, the debtor D wants to know whether he can discharge his obligation by payment to A or whether he still has to pay to C; the answer depends again on the existence of the claim and the validity of the assignment, and depending on the applicable law, perhaps even on an additional notification of the assignment to D. (4) Further relations with fourth and fifth parties have to be considered: C’s creditors may trust in C’s entitlement to the claim, and the same may hold true for A’s creditors. If C assigns the claim not only once, but twice or even more often, conflicts will arise between previous and subsequent assignees of the claim. 275. Assignment is used in a number of economic contexts. In some countries, such as Germany, it is very popular as a security device: in order to provide a surety for a credit granted by, for example, a bank or a seller, someone assigns a claim against a third party under the condition that the claim will be returned to him once he has paid back the credit (security assignment, Sicherungszession). Another important use of assignment is factoring: a seller or supplier of services sells his claims for remuneration to a factor bank; while that factor bank will pay him the value of the claim minus a certain deductible, it obtains in return the claim against the recipient of the goods or services through assignment ( factoring). A third function of assignment relates to securitization: an investor, often a bank, establishes a corporation, a so-called special purpose vehicle (SPV), for the sole purpose of holding claims. The SPV will issue securities in order to fund the purchase – from the bank or from other sources – of claims for interest and return payment 476 See Trevor Hartley, “Choice of Law regarding the Voluntary Assignment of Contractual Obligations under the Rome I Regulation”, Int. Comp. LQ 60 (2011), 29-56 at pp. 30-31 with a great many citations to other literature in footnote 1.

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of, for instance, mortgage loans accorded to real property owners. The transfer of the claims is put into effect through assignment. While the funding of the SPV may adopt different forms, the assignment of claims is an essential part of the whole transaction. 276. In private international law, some of the relations outlined above do not appear to pose serious problems. The law applicable to the claim is determined by the general rules of private international law of contracts or of torts, depending on the nature of the claim. Several issues fall under this law: the assignability of the claim, the relationship between the assignee and the debtor, the conditions under which the assignment can be invoked against the debtor, and the questions relating to the discharge of the debtor’s obligation.⁴⁷⁷ Where the assignment relation between the creditor C and the assignee A has a cross-border element, it is equally up to the general rules of the private international law of contract, including party autonomy, to determine the governing law. But like any contract on the alienation of an asset, the assignment has a dual nature: it provides for mutual obligations of assignor and assignee as against each other in their bilateral relation; at the same time, it brings about the transfer of the entitlement to the claim from assignor to assignee with erga omnes effects. The two parts of the assignment are not kept distinct in every legal system, and lawyers may not even be aware of them. Yet, they should be separated since obviously only the former part concerning the mutual obligations can easily be subject to the general rules on the private international law of contacts inclusive of party autonomy.⁴⁷⁸ But can the third party effects of the assignment – i.e. the question whether the assignee is to be considered as entitled to the claim as against the debtor, the creditors of the assignor (C) and his own creditors – be left to a choice-of-law agreement made between assignor and assignee ? b) Third-party effects: the Dutch solution 277. This question has been fervently debated in European private international law over recent years. It has been answered in the affirmative by the Hoge Raad, the supreme court of The Netherlands.⁴⁷⁹ The following facts were submitted to the Dutch courts: Hansa Chemie AG, a corporation established in Germany, delivered chemical products to the Dutch buyer Bechem BV in August 1994. The contract of sale contained a clause regarding a socalled prolonged retention of title (verlängerter Eigentumsvorbehalt): while 477 See Article 14 para. 2 of the Rome I Regulation. 478 See Article 14 para. 1 of the Rome I Regulation. 479 HR 16 May 1997, Ned. Jur. 1998, no. 585; on that decision see Carla Joustra, “Proprietary Aspects of Voluntary Assignment in Dutch Private International Law”, IPRax (1999), 280-284; Eva-Maria Kieninger, “Das Statut der Forderungsabtretung im Verhältnis zu Dritten”, RabelsZ 62 (1998), 678-711 at pp. 681-683 and 710-711; L. Strikwerda, Inleiding tot het Nederlandse internationaal privaatrecht, 7th ed., Deventer 2002, no. 192, pp. 198-199.

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the buyers were allowed to resell the goods delivered under the contract to their own customers, they had agreed in advance to assign the expected claims for purchase prices resulting from those retail sales to Hansa. Bechem resold the chemicals to another Dutch company called Senzora BV and shortly afterwards became insolvent. Senzora paid its purchase price into the court; Hansa and the trustee commenced litigation over the entitlement to that sum of money. The outcome of the proceedings depended on the law governing the advance assignment to Hansa of the claim on the purchase price. Under German law, that assignment would have been valid, and consequently Hansa would have been entitled to the purchase price paid by Senzora. If the assignment were subject to Dutch law, however, such a result would have been doubtful, since the new Dutch Civil Code invalidated security assignments and required a notification of the assignment to the debtor which had not occurred vis-à-vis Senzora. 278. The Dutch Hoge Raad applied the Rome Convention of 1980,⁴⁸⁰ the predecessor of the current Rome I Regulation. Article 12 of the Rome Convention provided for conflict rules relating to assignment similar to those which are now codified in Article 14 of the Rome I Regulation. Looking into the history of Article 12 of the Rome Convention, the Hoge Raad held that paragraph 2 of that provision was meant to establish an exception to the comprehensive purview of the law governing the assignment relation to which paragraph 1 referred. Since the enumeration of specific issues in paragraph 2 did not mention the transfer of the claim, this issue must be considered as being covered by paragraph 1. Moreover, the court pointed out that Article 12 paragraph 1 would not have any meaning of its own if it were only applicable to the obligatory relation between assignor and assignee which was already covered by Articles 3 and 4 of the Convention. Finally, the application of the law governing the assignment relation to the transfer itself, including its third-party effects, would prevent the unwelcome consequence that the latter might be governed by a law different from the one applicable to the assignment contract. It follows from this decision of the Hoge Raad that the assignor and the assignee can agree upon the law governing the third-party effects of the assignment.⁴⁸¹ This solution including the indirect approval of party autonomy was codified in a special statute on conflict issues of property law by the Dutch legislature in 2008 and affirmed in the comprehensive codification of Dutch private international law of 2011.⁴⁸² 480 Convention on the Law Applicable to Contractual Obligations, done in Rome on 19 June 1980, OJ 1980 L 266/1. 481 Explicitly in this sense Strikwerda, supra at footnote 479, no. 192, pp. 198-199. 482 Wet van 25 februari 2008, houdende regeling van het conflictenrecht betreffende het goederenrechtelijke regime met betrekking tot zaken, vorderingsrechten, aandelen en giraal overdraagbare effecten (Wet conflictenrecht goederenrecht), Stb. 2008, no. 70, German translation in IPRax (2008), 560-562 with an introduction by Teun Struycken/Bartosz Sujecki, “Das niederländische Gesetz zur Regelung des

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279. It has been noted that the legislative approval of the Hoge Raad’s approach amounts to an implicit recognition by the national Dutch legislature that the matter of the third-party effects of an assignment is not dealt with by Article 12 of the Rome Convention, now Article 14 Rome I, but left to national conflict of laws.⁴⁸³ Why else should national law deal with a matter which would have to be decided under a European text claiming priority anyway ? This view is shared by most authors who have commented on either the Rome Convention or the Rome I Regulation.⁴⁸⁴ According to the prevailing view, the gap was not filled in the discussions preceding the adoption of the Rome I Regulation.⁴⁸⁵ While Article 14 paragraph 1 Rome I applies, in accordance with recital 38, also “to the property aspects of an assignment, as between assignor and assignee”, the third-party effects of the assignment are not mentioned. Moreover, the review clause of Article 27 paragraph 2 Rome I required the Commission to submit a report, by 2010, on those third-party effects. If this regrettable gap in the Rome I Regulation actually exists, as it indeed appears, it is up to national rules of private international

Internationalen Sachenrechts”, IPRax (2008), 558-598; see Article 10. The provision has been adapted in Article 135 of the new Dutch private international law codified in book 10 of the Civil code, see Wet van 19 mei 2011 tot vaststelling en invoering van boek 10 (Internationaal Privaatrecht) van het Burgerlijk Wetboek (Vaststellingsen invoeringswet boek 10 Burgerlijk Wetboek) of 19 May 2011, Stb. 2011, no. 272; see also P. Vlas, “Rode Draad: Boek 10 BW (IPR)”, WPNR 2009, 893-898 at p. 896; M.E.Koppenol-Lavorce and F.H.Aalderink, Art. 126-144 Boek 10 BW: Goederenrecht en trusts, in P.Vlas et al., Hoofdlijnen Boek 10 BW, Den Haag, 2011, pp. 121-135 at pp. 130-131. 483 Eva-Maria Kieninger, “Die Vereinheitlichung des Kollisionsrechts der Abtretung”, in Jürgen Basedow, Oliver Remien and Manfred Wenckstern, Europäisches Kreditsicherungsrecht, Tübingen, 2010, pp. 147-171 at p. 161. 484 See Paul Lagarde, “Le nouveau droit international privé des contrats après l’entrée en vigueur de la Convention de Rome du 19 juin 1980”, Rev. crit. dr. int. pr. 80 (1991), 287-340 at p. 335; Hartley, Int. Comp. LQ 60 (2011), 29-56 at p. 35; Kieninger, RabelsZ 62 (1998), 678-711 at pp. 689-690 with a summary report of the discussions leading to Article 12 of the Rome Convention; Francisco Garcimartín Alférez, “Assignment of Claims in the Rome I Regulation: Article 14”, in Franco Ferrari and Stefan Leible, Rome I Regulation – The Law Applicable to Contractual Obligations in Europe, Munich, 2009, pp. 217-249 at p. 234; Anne Sinay-Cyterman, “Les conflits de lois concernant l’opposabilitée des transferts de créance”, Rev. crit. dr. int. pr. 81 (1992), 35-60 at pp. 42 and 43-44. 485 See the authors cited in the previous footnote; Ole Lando and Peter Arnt Nielsen, “The Rome I Regulation”, Com. Mkt. L. Rev. 45 (2008), 1687-1725 at pp. 1692 and 1713; the opposite view is taken in Germany by Dieter Martiny, in Franz Jürgen Säcker and Roland Rixecker, Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. 10, 5th ed., Munich 2010, Art. 14 Rome I-VO, no. 16, with further references; it emerges from this commentary, however, that Martiny’s view is more inspired by the undesirable subsistence of a small island of national conflict-of-laws rules than by legal argument.

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law to decide on the third-party effects of an assignment until an amended version of the Regulation supersedes national law. c) The law governing third-party effects: national conflict rules 280. Four solutions are competing for acceptance as a supplement to the existing conflict rules of Article 14 Rome I: the law of the debtor’s residence which is applied under the common law;⁴⁸⁶ the law of the assignor’s habitual residence which is, for example, relevant under the private international law of Belgium⁴⁸⁷ and under the United Nations Convention on the assignment of receivables in international trade;⁴⁸⁸ the law governing the assigned claim;⁴⁸⁹ and the law applicable to the assignment relation.⁴⁹⁰ Although varying in their extent, only the third and the fourth solutions allow to a certain degree for party autonomy, see below. But the first and the second solution are widely acknowledged and deserve some comment. 281. Recourse to the debtor’s residence as a connecting factor is historically rooted in the lex situs that is applied to the assignment of immovables in common law jurisdictions and which later saw its extension to the assignment of other objects; the main interest then was the ascertainment of the situs of the object, which, in the case of a personal claim, was said to be determined by the debtor’s residence.⁴⁹¹ With regard to personal obligations, however, the solution appears as excessively protective of the debtor’s interest; that interest is sufficiently safeguarded by a rule such as that of Article 14 paragraph 2 Rome I, which designates the law governing the claim as relevant for 486 Hartley, Int. Comp. LQ 60 (2011), 29-56 at p. 51; see also for Australia in the same sense Nygh, no. 33.63 at p. 685. 487 See Article 87 para. 3 of the Belgian Code on private international law of 16 July 2004, cf. Caroline Clijmans in J. Erauw, M. Fallon et al., eds., Het wetboek internationaal privaatrecht becommentarieerd – Le Code de droit international privé commenté, Antwerp, 2006, pp. 451-454; François Rigaux and Marc Fallon, Droit international privé, 3rd ed., Brussels, 2005, no. 14.57, p. 813. It is noteworthy that the Code superseded a conflict rule adopted only two years earlier with regard to assignments in the context of financial services; that rule had followed the Dutch approach, outlined supra in para. 278. 488 United Nations Convention on the Assignment of Receivables in International Trade, done at New York on 12 December 2001, Article 30; the text of the Convention is published in United Nations Convention on the assignment of receivables in international trade, New York 2004; as of 2011, the Convention has not yet taken effect. 489 This solution has been proposed by the United Kingdom, see Hartley, Int. Comp. LQ 60 (2011), 29-56 at p. 51; Kieninger in Basedow/Remien/Wenckstern, supra at footnote 483, p. 162. 490 Both the Dutch Hoge Raad, supra at footnote 479, and the subsequent Dutch legislation, supra at footnote 482, have espoused this approach; in legal literature it has most ably been defended by Axel Flessner and Hendrik Verhagen, Assignment in European Private International Law, Munich, 2006, pp. 22-36. 491 See Nygh, nos. 33.56 et seq., pp. 682 et seq.

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all issues affecting the debtor’s interest. Moreover, where the debtors in the case of a bulk assignment of multiple claims are resident in different countries, the cumulative application of the laws of all such countries makes the rule impracticable. 282. As a connecting factor, the assignor’s habitual residence has the advantage of being clearly discernible for all parties involved as long as assignments by the original creditor are concerned. Since both the debtor and the various stakeholders, i.e. one or more assignees, derive their potential rights from the assignor, they can be expected to know the assignor’s habitual residence. It becomes intransparent, however, where the first assignee re-assigns the claim: it is unclear whether the rule would refer to the habitual residence of the first or of the second assignor.⁴⁹² The initial transparency cannot be restored with regard to all parties involved without some act of publicity because the parties whose interests are somehow linked to the first assignor do not necessarily know about the second and vice versa. Situations of this kind may not be very frequent at present, but they can be imagined. 283. For example, a Dutch factor bank may have purchased open claims against Argentinian import houses from Spanish and Italian export firms; if it later agrees to a bulk security assignment of all these claims to a German bank, the latter and its creditors will usually not know the identity of the originators in Spain and Italy, but only of the second assignor’s habitual residence in the Netherlands and the overall volume of the bulk assignment. The situation is similar for the creditors of the Italian and Spanish export houses: they know the habitual residences of these export houses and are therefore able to ascertain the risks involved in the assignment of claims by the Spanish and Italian companies under a conflict rule designating the law of the assignor’s habitual residence as applicable to assignment. But they do not know the assignee of those operations, i.e. the Dutch factor bank, and therefore are unable to assess the risks involved in further assignments by that assignee under the said conflict rule. Thus, if a creditor of an Italian export house accepts the latter’s assignment of a claim that has already been assigned twice – first to the Dutch factor bank and then further to the German refinancing bank – no fair solution can be conceived under a conflict rule designating the law of the assignor’s habitual residence as governing the third-party effects of assignments, especially as regards competing assignments. While this conflict rule – which has also been proposed by the European Commission for filling the gap of Article 14 Rome I⁴⁹³ – produces clear answers in many simple solutions, it is not watertight. 492 Article 30 of the UN Receivables Convention, supra at footnote 488, does not address the problems arising from subsequent assignments of the same claim by assignors habitually resident in different states. 493 See Article 13 para. 3 of the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I), COM (2005) 650 final of 15 December 2005, also printed with

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284. Nor can the law governing the claim to which the assignment relates provide a satisfactory solution. In the example given above, the Italian and Spanish export houses will include choice-of-law clauses in their sales contracts with the Argentinian importers in view of their own commercial practices and potential disputes: if they employ lawyers trained in Spain and Italy and if they have agreed, by appropriate choice-of-forum clauses, on the competence of courts in these countries, they will not agree on choice-of-law clauses designating Dutch law for the sole reason that it may be more convenient for their Dutch factor bank. While recourse to the law of the claim would allow for some party autonomy as between the assignor and the debtor, their choice will generally be guided by considerations which are not affected by the assignment of the claims to the sales price. In a similar vein, in mortgage-backed securitization it is unlikely, although not excluded, that mortgage loans are paid out in various countries under laws other than the lex situs. And when it comes to a security assignment such as the one that occurred in the case of the Dutch Hoge Raad,⁴⁹⁴ the assignment would obviously lose part of its value as a security if it is governed, in export operations, not by the law of the export firm granting the credit but by the importer’s or the debtor’s law. 285. The Dutch solution – the law applicable to the assignment relation – allows for party autonomy as between assignor and assignee. It thereby has the obvious advantage of favouring the three commercial operations outlined above: security assignments; factoring; and securitization.⁴⁹⁵ The provider of credit and financial services can always try by appropriate choice-of-law clauses to consolidate all similar operations under a single law, in most cases his own law. This undoubtedly represents a great advantage, increasing efficiency not only in the European single market, but also beyond whichever frontiers become amenable to the cross-border flow of capital, goods and financial services. On the other hand, the Dutch approach permits parties to an assignment to agree on an applicable law that suits their own needs, but not those of their creditors. If the assignor of a claim wants to assign the same claim a second time, he may in fact agree with the second assignee on a national law that for all practical purposes invalidates the previous assignments. It has correctly been pointed out that under conditions of open markets governed by a diversity of laws, no one may expect that such occurrences do not happen.⁴⁹⁶ This is a realistic perspective; if it were shared by many market participants, it would considerably lower the value of claims approving comments in Max Planck Institute for Comparative and International Private Law, “Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I)”, RabelsZ 71 (2007), 225-344 at pp. 321-326. 494 See supra paras. 277-278. 495 See supra para. 275. 496 Flessner and Verhagen, supra at footnote 490, p. 33.

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as trade objects or as security. On the other hand, such risks are reduced by the fact that a second assignment of a claim, whether in a domestic or cross-border operation, will usually trigger investigation and that the parties, wary of criminal prosecution, will cautiously avoid such transactions. Professional suppliers of financial services in particular will also fear the reaction of the markets where they engage in such fraudulent conduct. d) A dual-track approach 286. What kind of rule can be recommended for the law governing third-party effects of the assignment of claims under these conditions ? There does not appear to be a watertight solution that, if universally accepted, would not expose third parties to unforeseen risks. Whatever solution will be adopted, it is by necessity only the second best. The traditional method of private international law alone, i.e. the designation of a single applicable law to the issue of priority in the case of competing assignments, cannot solve all problems entailed. On the other hand, the importance of worldwide financial markets calls for solutions which are tailored to enhancing the efficiency of the operations described above.⁴⁹⁷ The following model of a dual-track approach is not more than a first outline which deserves a more thorough enquiry. It transgresses the traditional boundary between private international law and substantive law to stimulate the debate. At the same time it takes account of our limited knowledge of the present and future evolution of financial transactions and therefore leaves some latitude to private decisions on the applicable law.⁴⁹⁸ 287. With a view to an optimal trade-off between the commercial security of assignment operations for the various interests involved and the efficiency of those operations, a two-pronged solution is suggested: the creation of a register for assignments and the simultaneous granting of permission to assignors and assignees to freely choose the law applicable to registered assignments in respect of their third-party effects, in particular to the priority as between competing assignments. The register could be public or established by a private entity and financed by the contributions of those who make use of it. Any assignor and – especially – any assignee should be allowed to register an assignment. Registration could be limited to some basic facts which allow the inference that a person has assigned certain claims or categories of claims. No assignor or assignee would be under a duty to register; if they abstain from registration, the law of the assignor’s habitual residence should determine the third-party effects of the assignment, with the advantages but also the risks outlined above.⁴⁹⁹ Where registration takes place, however, the law applicable to priority issues in case of multiple assignments could freely be selected by assignor and assignee. 497 See para. 275. 498 See supra paras. 91-96. 499 See supra para. 283.

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288. Prospective assignees would likely inspect the register and would become suspicious or cautious if their business partners whom they expect to assign claims to them are already registered as assignors; they would at least ask their partners for further clarification. In the case of a prospective bulk assignment, they would wish to inspect some random samples from the bulk of claims and act accordingly. If a prospective assignee does not inspect the register, he would deserve less protection against a law chosen by agreement between the assignor and a previous assignee that may affect his rights. The overall effect of the register would not be to instill confidence in those who examine it in respect of the accuracy of the entries, but to prevent a false confidence based on erroneous beliefs. At the same time the register would provide a basis for party autonomy in the financial services industry. 289. This proposal can, in a first step, probably best be implemented in the European Union; international law may follow suit. It would amount to a limited permission of party autonomy as between assignor and assignee in respect of the third-party effects of assignments; this permission would be granted under the condition that, first, a private or public register for assignments is established which contains certain minimum information about assignments and that, second, the claim to which a given choice of law relates is actually registered. In addition to the amendment of the Rome I Regulation, the European Union would have to establish by appropriate legislation the basic conditions to be met by the register and its operation. Section 2: Tort and Delict 290. Private ordering might appear to be outright impossible in respect of liability sounding in tort or delict on account of the specificity of legal relations in this area of the law, see below, subsection 1. Indeed, private international law has charted a very different course for many years, see below, subsection 2, and tort and delict appeared to be no-go areas for party autonomy which, for quite some time, were not even insinuated as being amenable to choice of law in jurisprudence or scholarly writings. At least in Europe, this has dramatically changed in recent years, see below, subsection 3, although several specific sectors of tort law are still immune from a contractual choice of law, see below, subsection 4. 1.

The Specificity of Tort and Delict

a) Primary and secondary rules of conduct 291. The law of torts and delict deals with the inevitable conflicts that arise from the uncoordinated actions of the members of human society. As long as people act intentionally, potential clashes between their actions may be avoided by agreement, provided that they know the intended action of others. This is the domain of contract law. But the agreement required cannot always be obtained, and in some cases, where it is detrimental to third parties or

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to the public at large, it will be invalidated by the law. Moreover, people do not always act intentionally. Yet, their conduct may interfere with the actions of others whom they often did not even previously know and cause harm to them. Here, an agreement on the applicable law is excluded before the event for practical reasons, and it usually will not occur thereafter because the parties will be aware of consequences which are detrimental to one of them. For such situations, every human society needs a basic order that allows certain kinds of behaviour and prohibits others, an order which in other words lays down primary rules of conduct. Moreover, that basic order must be amenable to enforcement: accordingly, it establishes remedies and sanctions available against a perpetrator in the case of a breach of that order. These orders and their rules of primary conduct differ from country to country and so do the rules on the legal consequences of their infringement. 292. In former centuries many of those primary rules were part of criminal law. Ever since the Industrial Revolution in the nineteenth century, an immense body of administrative law has been added:⁵⁰⁰ technical rules for the production, survey and safety of movable and immovable property; detailed prescriptions on the protection of human creativity through intellectual property rights; precise regulations on the handling of means of transportation and other dangerous machinery; meticulous regulations on the protection of the environment; a vast array of laws determining behaviour both in the markets and in respect of various social mechanisms providing for the redistribution of wealth, etc. Many of these regulations do not have the same moral foundations that are characteristic of criminal law; most are tools of what may be called man-made social engineering. There is hardly any sector of modern life that is not covered by a thick web of public (and private) regulations that steer our conduct in the interest of the public at large, but often also for the benefit of other individuals. And that web continues to grow. Every technical innovation potentially triggers new conflicts and gives rise to new regulations: for example, many forms of communication connected 500 With regard to labor relations, Wolfgang Friedmann, Law in a Changing Society, London, 1959, p. 142 already pointed out that “an increasing number of employers’ duties are regulated by statute [which] gives particular significance to the modern judicial interpretation of statutory duties.” The author further refers to the decision of the House of Lords in Lochgelly Iron & Coal Co. v M’Mullan, [1934] AC 1 (HL), which laid down that, where a statutory duty is framed in absolute terms, negligence, apart from breach of the statutory duty, need not be proved against the employer responsible for its fulfi llment. For a thorough study of the “Spezialgesetzgebung des Interventionsstaates”, i.e. the special legislation of the interventionist state which is proliferating in the second half of the nineteenth century, see Miloš Vec, “Recht und Normierung in der industriellen Revolution”, Frankfurt am Main, 2006, presenting at pp. 165 et seq. a survey of electric power regulation which displays a “verwirrenden Rechtsquellenpluralismus” (perplexing pluralism of legal sources), p. 203.

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to the internet, e.g. social networks, imperil the privacy of personal data, and the progress of genetic engineering in farming may endanger plants and animals as well as their owners and consumers. The constant need of society to adjust its basic order and the primary rules of general conduct to modern forms of life is only in part satisfied by statutory rules, public and private regulations and specific prescriptions; for the rest it is up to the courts to enunciate, adjust and develop such rules of conduct. 293. To a large extent, the creation of new primary rules of conduct occurs in proceedings under the law of tort or delict. For example, the protection of personality rights in the media results to a high degree not from regulation by statute, but from case law dealing with defamation or the invasion of privacy. Some of those rules of conduct, whether laid down in statute or case law, result from intense public debates, and similar to traditional criminal law precepts they become constitutive parts of the political, social or economic identity of a given society, cherished by its members and protected by its courts and administrative authorities. Their application in foreign countries may therefore pose serious problems. This clearly emerges from the history of the private international law of torts, see below, subsection 2. In more recent times, the focus of the choice-of-law discussion has increasingly abandoned the issue relating to the application of foreign primary rules of conduct. It has instead turned to the economic consequences of their breach, which the law of tort and delict is intended to address. These consequences relate to secondary rules of conduct, in particular monetary compensation. Since these rules are politically less sensitive, the private international law of torts has made considerable progress towards an application of foreign law with regard to such secondary rules of conduct. b) Contract and tort 294. While a clear distinction may appear to be possible between the primary rules of conduct which an individual has to respect as against every other person in a given society, and specific rules of conduct promised by agreement, the borderline between contract law and tort law as emerging from comparative enquiries is far from clear. It cannot unequivocally be drawn in a uniform way and it differs as between the various jurisdictions. Several more specific examples taken from the recent legal development give evidence of this finding. 295. Pre-contractual liability for breaking off negotiations contrary to the requirements of good faith and fair dealing is considered a contractual matter under the doctrine of culpa in contrahendo in, for instance, Germany and Italy, while French law applies the basic rules on delictual responsibility under Article 1382 of the Civil Code;⁵⁰¹ accordingly, a uniform classification for the 501 See the notes under Article 2:301 in Ole Lando and Hugh Beale, eds., Principles of European Contract Law – Parts I and II, The Hague 2000, pp. 191-192; the principles themselves deal with the issue as one of contract law.

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purposes of private international law could not be achieved before the Rome I and Rome II Regulations were adopted.⁵⁰² Another example of a divergent characterization is the liability of experts as against third parties who are likely to act in accordance with the expert advice and who therefore, without being contracting partners of the expert, are his addressees as a matter of fact; that liability, for example of a classification society in maritime law vis-à-vis potential buyers of the vessel, has been characterized as a delictual matter in several countries,⁵⁰³ whereas German law would apply the judgemade rules on contracts with protective effects for third parties and would likely classify the issue as contractual in private international law.⁵⁰⁴ 296. Further, road accidents and in particular the victim’s direct right of action against the insurer of the liable car owner give evidence of the difficulties of characterization at the borderline of contract and tort. While some countries traditionally classified direct claims as an annex to the car owner’s liability sounding in tort, others considered the law applicable to the liability insurance contract as being applicable.⁵⁰⁵ Ultimately, a third solution favouring the victim has prevailed: under both the law of Switzerland and the Rome II Regulation, a direct claim will lie where it is either granted by the law applicable to non-contractual liability or by the law governing the insurance contract.⁵⁰⁶ In this area, the dispute over the proper classification has, 502 Under Article 12 of the Regulation (EC) No. 864/2007 of the European Parliament and of the Council of 11 July 2007 on the Law Applicable to Non-contractual Obligations (Rome II), OJ 2007 L 199/40, an “obligation arising out of dealings prior to the conclusion of a contract, regardless of whether the contract was actually concluded or not,” is explicitly classified as “non-contractual”, but at the same time subjected to “the law that applies to the contract or that would have been applicable to it had it been entered into.” On the difficulties to ascertain the applicable law where no contract has been concluded, see Andrew Dickinson, The Rome II Regulation: The Law Applicable to Non-contractual Obligations, Oxford, 2008, no. 12.18-12.20, pp. 533-534; Jan D. Lüttringhaus, “Das internationale Privatrecht der culpa in contrahendo nach den EG-Verordnungen ‘Rom I’ und ‘Rom II’ ”, RIW (2008), 193-200 at pp. 197-198. 503 Marc Rich & Co. AG v Bishop Rock Marine Co. Ltd. (Nicholas H), [1995] 3 All ER 307 (HL) with a casenote by Peter Cane, “Classification Societies, Cargo Owners and the Basis of Tort Liability”, Lloyd’s Mar. Com. LQ 1995, 433 et seq. for the approach of the English common law. 504 Jürgen Basedow and Wolfgang Wurmnest, Third-Party Liability of Classification Societies – A Comparative Perspective, Berlin, 2005, pp. 39 et seq. for German law and pp. 15-38 for a comparative survey of the laws of England, New Zealand, Australia, the United States of America and France. 505 See the comparative survey by Thomas Kadner Graziano, Gemeineuropäisches Internationales Privatrecht, Tübingen, 2002, pp. 426-427, who refers to the laws of Romania, Greece, Poland and Hungary for the first solution and to the laws of France, Belgium, Luxembourg, Austria and Italy for the second. 506 See Article 141 of the Swiss Federal Law on the Reform of Private International Law and Article 18 of the Rome II-Regulation.

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however, lost much of its significance in Europe because the national laws of the EU Member States have been harmonized to a high degree by a number of Directives.⁵⁰⁷ 297. A final example concerns products liability, which is usually classified as a liability sounding in tort. In France, however, it was incipiently construed as a contractual liability of the manufacturer to his customer which is then extended, through a chain of commercial transactions and (implied) assignments of warranties, to the benefit of subsequent purchasers and the final consumer. Since the French Cour de cassation initially interpreted the pertinent Hague Products Liability Convention⁵⁰⁸ as applying only to noncontractual liability, it reduced considerably the significance of the Convention for France, one of the contracting States.⁵⁰⁹ In 2000, the decision was overruled. While the court realized that Article 1 of the Hague Convention is not confined to non-contractual liability, it did not however delve into the classification of products liability under French law.⁵¹⁰ The Rome II Regulation makes it clear that products liability is a delictual matter, allowing however the application of a law indicated by a closer relation, in particular a contractual relation between the parties.⁵¹¹ 298. These areas of uncertain classification are supplemented by other areas where contractual liability and liability in tort may coexist between the same parties; such overlap is possible in jurisdictions like Germany,⁵¹² England,⁵¹³ or the United States,⁵¹⁴ but not in others like France, where the doctrine of 507 These directives have been codified in Directive 2009/103/EC of the European Parliament and of the Council of 16 September 2009, Relating to Insurance against Civil Liability in Respect of the Use of Motor Vehicles, and the Enforcement of the Obligation to Ensure against such Liability, OJ 2009 L 263/11; the direct right of action of parties injured as a result of a road accident against the liability insurer is laid down in Article 18. 508 Convention on the Law Applicable to Products Liability, concluded at The Hague on 2 October 1973, in Hague Conference on Private International Law, ed., Collection of Conventions 1951 – 2009, The Hague, 2009, p. 201. 509 Cass. civ., 16 December 1997, Rev. crit. dr. int. pr. 87 (1998), 300, with critical annotation by Paul Lagarde. 510 Cass. civ., 7 March 2000, Rev. crit. dr. int. pr. 90 (2001), 101, with annotation by Paul Lagarde. 511 See Article 5 with the exception in para. 2 of the Rome II Regulation. 512 Dirk Looschelders, Schuldrecht – Allgemeiner Teil, 5th ed., Cologne, 2007, no. 24 at p. 9; Wolfgang Fikentscher and Andreas Heinemann, Schuldrecht, 10th ed., Berlin, 2006, no. 1545 et seq. 513 W.V.H. Rogers, Winfield and Jolowicz on Tort, 17th ed., London, 2006, no. 1-8, pp. 10-13. 514 W. Page Keeton, Prosser and Keeton on the Law of Torts, 5th ed., St. Paul, Minn., 1984 at pp. 664-667; Mathias Reimann, Einführung in das US-amerikanische Privatrecht, 2nd ed., Munich, 2004, § 25, 2, p. 80; however, the plaintiff is usually required to select between an action in contract or tort, except for personal injury claims where the courts themselves appear to have made a choice in favour of tort law.

Chapter 3 – New Domains for Party Autonomy

non-cumul prevails.⁵¹⁵ These observations explain why the law applicable to tort and delict could not remain unaffected by international contract law; its impact including the significance of party autonomy for the law of noncontractual liability will be further clarified below, see subsection 3. For a better understanding of that development it is, however, useful to outline first the evolution of international tort law. 2.

The Development of International Tort Law

a) Lex fori 299. The evolution of choice-of-law rules relating to tort and delict reflects the several stages of the development of substantive tort law outlined above. At an early stage, when the primary rules of conduct were mainly sanctioned by criminal law, private international law tended to subject claims sounding in tort to the lex fori; civil liability was treated as a kind of annex to criminal liability, which has always been and still is adjudicated on the basis of the lex fori. Savigny refers to obligations in general and points out that “when their validity is in conflict with law of a strictly positive, mandatory nature, it is not the local law mentioned above [applicable to the obligation in general], but rather the law of the place where the claim is brought, the law of the adjudicating judge, which governs.⁵¹⁶ … The indicated exception shall … be applied to obligations flowing from delict, and that in general, because the laws relating to delict have always to be counted among the mandatory, strictly positive ones.”⁵¹⁷

Through the first half of the twentieth century,numerous authorities from continental and common law jurisdictions are cited to the same effect.⁵¹⁸ 300. While the lex fori rule has generally been abandoned in more recent times,⁵¹⁹ certain elements subsist in some countries. This holds true in particular for the double actionability rule of the English common law, which still applies, even after the Rome II Regulation took effect, to some torts excepted from the Regulation under its Article 1 paragraph 2, notably invasion of privacy and defamation.⁵²⁰ That rule comes down to a cumulative application of the 515 François Terré, Philippe Simler and Yves Lequette, Droit civil – Les obligations, 10th ed., Paris 2009, nos. 834 et seq., pp. 771 et seq.; Boris Starck, Henri Roland and Lorant Boyer, Droit civil – Les obligations – 2. Contrats, 6th ed., Paris, 1998, nos. 2113 et seq. 516 Savigny, §374, pp. 275-276 (author’s translation). 517 Savigny, §374, p. 278 (author’s translation). 518 Albert A. Ehrenzweig, “Enterprise Liability”, IECL, Vol. 3, Chap. 32, Tübingen 1980, Sect. 2, with many further references; see also Adolf F. Schnitzer, Handbuch des Internationalen Privatrechts, Vol. II, 4th ed., Basel 1958, pp. 674-675. 519 It is still in force in, for example, Yemen, see Article 32 of the Civil code. 520 J. J. Fawcett, J. M. Carruthers and Peter North, Cheshire, North & Fawcett Private International Law, 14th ed., Oxford, 2008, p. 766; Richard Plender and Michael Wilderspin, Obligations, no. 17-054, p. 486.

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law of the place where the wrong was done and the law of the forum; the plaintiff ’s claim will only be successful to the extent that there is a cause of action under both the lex fori⁵²¹ and the lex loci actus.⁵²² In other jurisdictions such as Egy pt,⁵²³ the lex fori operates as a bar to or a limitation of claims arising under another law, in particular under the lex loci delicti. A similar vestige of the lex fori rule can be seen in the explicit right of the courts of EU Member States to abstain from granting “non-compensatory exemplary or punitive damages of an excessive nature” that would be awarded under the law applicable to non-contractual liability where such award would be incompatible with the legal order of the Member State of the court seized.⁵²⁴ b) Lex loci delicti 301. As the primary duties of conduct changed, being less and less imposed by penal law,⁵²⁵ the traditional principle that the courts of one country do not enforce the penal laws of another⁵²⁶ has lost much of its significance. When it comes to the assessment of a given conduct as lawful or unlawful, courts have become more and more prepared, not to enforce, but to take account of the foreign laws of the place of acting, irrespective of their private or administrative law character. Traffic regulations are a well-known example: when a French driver negligently drives on the right-hand side of a British road and crashes into another French car driving correctly on the left-hand side in the opposite direction, a French court will apply French law to the liability of the former but nevertheless give effect to the traffic regulations of 521 Metall- und Rohstoff AG v Donaldson Lufkin & Jenrette Inc., [1988] 3 All ER 116 (QB); [1990] 1 QB 391 (CA): Claims based, inter alia, on conspiracy following events that took place in New York and London were dismissed on the ground that the causes of action invoked were not available under English law. 522 Boys v Chaplin, [1971] AC 356 (HL) where compensation for pain and suffering following a road accident would have been due under the English law of the forum but were not granted by the law of Malta where the accident occurred. 523 See Article 21 of the Egyptian Civil code; while para. 1 basically refers to the law of the country where the event giving rise to the claim occurs, para. 2 excludes liability for acts considered as lawful under the laws of Egypt. Analogous conflict rules are laid down, for example, in Article 22 of the respective civil codes of Jordan and Syria. 524 See Recital 32 of the Rome II Regulation. 525 See supra, para. 292. 526 See for the United States, Huntington v. Attrill, 146 US 657 at 668-669 (1892); for the United Kingdom, Huntington v Attrill, [1893] AC 150 (PC) at pp. 156-157; for Germany, see for example Bundesgerichtshof 1 June 1954, NJW (1954), 1086; Kai Ambos, Internationales Strafrecht, 3rd ed., Munich, 2011, no. 5, p. 3: “… wenden deutsche Gerichte ausschließlich deutsches materielles Strafrecht an”; for France see Claude Lombois, Droit pénal international, Paris, 1971, no. 351, p. 401; as explained in the text, the decline of an outright application of foreign criminal law does not exclude taking that law into account when applying the law of the forum, see the broad discussion by David Chilstein, Droit penal international et lois de police – Essai sur l’application dans l’espace du droit penal accessoire, Paris, 2003, pp. 256 et seq.

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the United Kingdom.⁵²⁷ While this result is unanimously approved, the reasons given in the various legal systems diverge. Where private international law provides for the application of a law different from the law of the place of acting, the traffic regulations of the latter country have been considered – first by American authors – as local data that is to be given effect in the framework of a foreign tort law.⁵²⁸ The datum theory has comprehensively been codified in Article 17 of the Rome II Regulation; outside the area of traffic accidents, however, its meaning is not entirely clear, which explains the discretionary character of the rule.⁵²⁹ It gives some effect to the rules of safety and conduct of the law of the place of acting “as a matter of fact and in so far as is appropriate.” As opposed to the datum theory, present-day conflicts legislation often orders the outright application of the law of the country where the tort was committed, the lex loci delicti. It has replaced the lex fori in many jurisdictions and is the basis or starting point of modern codifications of the private international law of torts.⁵³⁰ 302. While the lex loci delicti, contrary to the lex fori, takes account of an existing general order establishing primary duties of conduct binding in the territory of a given country, it is insufficient when the harm caused by a breach of those rules occurs in a different State. As the permeability of national frontiers is increasing, the frequency of such cross-border is on the rise. They raise the difficult issue of whether the law of the place of acting (lex loci actus) or the law of the place of harm (lex loci iniuriae) should prevail; a third possibility, the law of the place where the loss is ultimately felt (lex

527 In accordance with Article 28 Rome II Regulation, the French court will apply The Hague Convention of 4 May 1971 on the law applicable to traffic accidents, in Hague Conference on Private International Law, ed., Collection of conventions 1951 – 2009, The Hague 2009, pp. 148 et seq.; under Article 3(b) of The Hague Convention which is in force for France, the court would apply the law of the country of common registration of the two cars, i.e. French law, but would take account of the British rules relating to the control and safety of traffic under Article 7. 528 Ehrenzweig, IECL, Vol. 3, Chap. 32, Sect. 37 with many further references; Herma Hill Kay, “Conflict of Laws – Foreign Law as Datum”, California Law Review 53 (1965), 47 et seq.; see also Rest. Second, Conflict of Laws, § 145 comment d and § 156. 529 See the comments in Plender and Wilderspin, Obligations, nos. 18-109 – 18-113 and 19-133 – 19-140; Dickinson nos. 15.30-15.34, who believes however that the enquiry imposed by Article 17 “should not be one that is difficult from a practical viewpoint,” no. 3.73. In a similar vein, Abbo Junker, in Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. 10, 5th ed., Munich 2010, Art. 17 Rom II-VO no. 4, who considers that the main practical significance of the provision is limited to accidents. 530 This was even recognised by Ehrenzweig, IECL,Vol. 3, Chap. 35, Sect. 22, who himself favoured the lex fori as the foundation. The rule also emerges, for example, from Article 44 of the 2010 Law of the People’s Republic of China, from Article 17 of the 2006 Japanese Act, from Article 34 of the 2007 Turkish Act and from Article 1219 of the Russian Civil Code enacted in 2001 and amended in 2013.

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loci damni⁵³¹), is usually excluded as being too remote.⁵³² Thirty years ago, Ehrenzweig thought that a decision between the lex loci actus and the lex loci iniuriae was premature at the time because cases where that decision would become relevant were too rare and the court decisions not conclusive.⁵³³ c) Lex loci actus and lex loci iniuriae 303. Since that time, several legislators have tackled the problem nonetheless. Some of the present Member States of the European Union have opted, before the Rome II Regulation took effect, for the lex loci actus.⁵³⁴ While the Rome II Regulation has superseded most of these laws within its own scope of application, the Principality of Liechtenstein, as a third State belonging to the European Economic Area, has maintained its statute primarily referring to the law of the State where the conduct giving rise to the damage occurred.⁵³⁵ Outside the European Economic Area, similar conflict rules are in force in Russia,⁵³⁶ Korea,⁵³⁷ Egypt and in some of the countries influenced 531 It is unfortunate that Recital 18 of the Rome II Regulation refers to the lex loci damni as the law of the country where the loss is sustained as this has been addressed in the previous literature as the lex loci iniuriae, see e.g. Ehrenzweig, IECL,Vol. 3, Chap. 32, Sect. 4. 532 In this sense with regard to jurisdiction, see ECJ, 19 September 1995, Case C-364/93 (Marinari v. Lloyds Bank) [1995] ECR I-2719, relating to Art. 5 no. 3 (Article 7 (2) of the recast version) of what is now the Brussels I Regulation (Reg. 44/2001, now Reg. 1215/2012), attributing jurisdiction in matters relating to tort to “the courts for the place where the harmful event occurred”; this term was held to cover the place where the initial damage was sustained but not the place where the victim claims to have suffered financial damage subsequent to the initial damage; aff ’d in ECJ, 10 June 2004, Case C-168/02 (Kronhofer v. Maier), [2004] ECR I-6009: the Austrian plaintiff had invested money held with a bank in Germany through the services of German defendant brokers in highly speculative call options on the London market; the ECJ held that the place where the assets involved where affected (Frankfurt), but not the domicile of the Austrian plaintiff, could be addressed as the “place where the harmful event occurred.” 533 Ehrenzweig, IECL,Vol. 3, Chap. 32, Sect. 41. 534 According to Kadner Graziano, pp. 196-197, the private international law acts of Austria, Liechtenstein, Lithuania, Estonia, Hungary and Portugal referred to the lex loci actus. 535 See Article 52 of the Law on private international law of 19 September 1996, Liechtensteinisches Landesgesetzblatt 1996 Nr. 194, also printed in Benedikt Marxer, Fritz Reichert-Facilides and Anton K. Schnyder, Gegenwartsfragen des liechtensteinischen Privat- und Wirtschaftsrechts, Tübingen, 1998, pp. 210 et seq.; critical comments in Jürgen Basedow, Liechtensteinisches Kollisionsrecht – Kodifikationsbedarf zwischen Bergidyll und Finanzoase, ibid., pp. 41-53 at p. 48. The lex loci actus is also applicable under Art. 1219 of the Russian Civil Code as enacted in 2001 and amended in 2013. 536 See Art. 1219 of the Russian Civil code as enacted in 2001 and amended in 2013. 537 See § 32 of the Korean Law of 2001.

Chapter 3 – New Domains for Party Autonomy

by the laws of the latter.⁵³⁸ For those areas of tort law which are not governed by the Rome II Regulation, German private international law equally refers to the law of the place of acting, but the victim may opt in favour of the law of the State where the loss occurred.⁵³⁹ The main tendency of modern conflicts legislation in the field of tort law has, however, taken a different direction and chosen the law of the place of harm (lex loci iniuriae) as the law applicable to non-contractual liability.⁵⁴⁰ The trend emerging from these legislative acts is confirmed by Article 4 of the Rome II Regulation, which refers to “the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.”⁵⁴¹ d) Specification and flexibilization 304. Two further tendencies of the more recent legislation should be added: the adoption, alongside the general rule, of conflict rules for specific torts as well as the flexibilization of the previously mentioned general rules by a certain number of exceptions. The Rome II Regulation contains specific choice-of-law rules for non-contractual liability arising in not less than five areas: products liability; unfair competition and restrictions of free competition; environmental damage; the infringement of intellectual property rights; and industrial action. A sixth specific topic, namely defamation and invasion of personality rights, had to finally be excluded from the scope of the Regulation because no agreement could be achieved on the appropriate conflict-of-laws rule.⁵⁴² The specification of choice of law in matters of tort and delict has its historical roots in American developments after World 538 See supra at footnote 523. 539 See Article 40 of the Introductory Law of the Civil Code. 540 See for the time preceding the Rome II Regulation, Kadner Graziano, pp. 199 et seq. referring to statutes in the United Kingdom, Switzerland, Romania, Turkey and Italy, and to the case law in the Netherlands and France. Outside the European Union, the same solution is provided for by Art. 17 of the 2006 Japanese Act, Art. 70 para. 2 of the 1998 Law of Tunisia and Art. 32 of the Law on private international law of Venezuela of 1998. 541 For a critical assessment see Symeon Symeonides, “Tort Conflicts and Rome II: A View from Across”, in Heinz-Peter Mansel et al., Festschrift für Erik Jayme, Vol. 1, Munich 2004, pp. 935-954 at pp. 952 et seq.; but see also the counter-criticism by Toshiyuki Kono, “Critical and Comparative Analysis of the Rome II Regulation on Applicable Laws to Non-contractual Obligations and the New Private International Law in Japan”, in Jürgen Basedow, Harald Baum and Yuko Nishitani, eds., Japanese and European Private International Law in Comparative Perspective, Tübingen 2008, pp. 221-241 at pp. 223 et seq. 542 See Article 7 of the Preliminary Draft Proposal of the European Commission published in 2002, reproduced in RabelsZ 67 (2003), 1-56 at p. 24; Article 6 of the Commission Proposal of 22 July 2003, COM (2003) 427 final.

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War II.⁵⁴³ In the more recent codifications of private international law it can be identified in several countries.⁵⁴⁴ The specific rules reflect the social and economic differences that exist in the various sectors and also the growth of bodies of substantive law specifically dealing with the single sectors. 305. But even where the general choice-of-law rule applies, statutory exceptions provide for a built-in flexibility. Where the persons claimed to be liable have their habitual residence in the same country as the victims, the law of that State will frequently govern liability.⁵⁴⁵ In some other jurisdictions it is the law of the common nationality that prevails over the lex loci delicti.⁵⁴⁶ Moreover, recent instruments often contain a general exception in favour of the law of a country which is manifestly more closely connected with the circumstances of the case.⁵⁴⁷ In the United States, the need for flexibility has even brought about what may be called “non-rules”. The Restatement Second on the Conflict of Laws, without providing any basic principle or default rule, simply refers to the “most significant relationship” that has to be ascertained between, on the one side, the facts of a case and the parties, and, on the other, the law of a jurisdiction involved; numerous choice-influencing factors including some local connections, but also the policies of the several States involved, have to be considered in this process.⁵⁴⁸ And under 543 See the methodological debate on the existence of a unitary principle of the conflict of laws in the field of tort and delict in Albert A. Ehrenzweig and Stig Strömholm, “Torts – Introduction”, IECL,Vol. 3, Chap. 31, in particular pp. 6-7. 544 The Swiss federal law on private international law enacted in 1987 had already enacted specific conflict rules on road accidents, products liability, unfair competition, restrictions of competition, environmental liability and infringement of personality rights. Similarly, special conflict rules deal with the infringement of personality rights, products liability, unfair competition and restrictions of competition in the 2007 Turkish Act, while the 2006 Japanese law limits itself to specifically dealing with the law applicable to products liability and to defamation, see Articles 18 and 19. 545 For exceptions in favour of the law of the common habitual residence, Kadner Graziano, pp. 382 et seq., refers to Art. 133 of the Swiss law and some other European laws now mainly superseded by the Rome II Regulation – the latter containing a similar rule in Art. 4 para. 2. For Korea, see § 32 para. 2 of the Law of 2001, for Japan, see Art. 20 of the 2006 Act, for the People’s Republic of China see Art. 44 of the 2010 Act; for Russia, see the next fn. 546 See Kadner Graziano who refers at p. 379 to this rule for the former USSR; Article 1219 para. 2 of the Russian Civil Code affi rmed that rule before the amendment of 2013; it now refers to the common domicile and to the common nationality only where a common domicile is lacking; analogous provisions referring to the common nationality are contained in Article 31 § 2 of the 1965 Polish Law and in Article 62 para. 2 of the 1995 Italian Act for citizens of the same state who have their habitual residence in their home country. 547 See Article 4 para. 3 of the Rome II Regulation; for Swiss law see the general escape clause of Article 15 of the Federal Law on Private International Law. 548 See §§ 145 and 6 of the Rest. Second, Conflict of Laws; cf. also supra para. 17.

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the Louisiana Civil Code, delictual obligations “are governed by the law of the State whose policies would be most seriously impaired if its law were not applied to that issue.”⁵⁴⁹ 306. These tendencies – the datum theory, the enactment of conflict rules for specific torts, the general escape clause in favour of a more closely connected law, the exception for parties having the same origin, and the US-style complete abandonment of rules – all testify to the increasingly complex and detailed factual background of international tort law. Moreover, they again point to the difficulty legislatures face in attempting to precisely foresee all situations that may arise in this area of private international law; hence the widely perceived inability to draft clear-cut conflict rules which can govern this immense variety of fact situations. This raises the question – once more – whether it would not in the first place be advisable to leave the choice-oflaw issue to the parties’ agreement provided that such choice is possible in practice. 3.

Party Autonomy

a) Survey 307. The role of party autonomy in international tort law has long been characterized by contradictory statements and a lack of profound reflection. In his comparative enquiry into the conflict of tort laws, Ehrenzweig briefly pointed out in the late 1970s that “parties to any litigation can ordinarily agree that both the procedural and substantive law of the forum is to apply. Courts of many countries have so held in tort cases as well as in others, and some have also given effect to agreements which were concluded before any tort was committed.”⁵⁵⁰

While this statement which is underpinned by a number of citations to court decisions and scholarly writings solely refers to agreements on the application of the lex fori, Ehrenzweig later extends it to the choice of foreign law.⁵⁵¹ In the light of the close historical relation of civil liability sounding in tort to criminal law,⁵⁵² this broad statement is surprising. It does not appear to take account of the widespread view that “torts are the source of legal obligations and therefore by definition escape the impact of the individual will”.⁵⁵³ It is due to this traditional view that party autonomy has only gradually come 549 See Article 3542 of the Louisiana Civil Code as enacted by Act no. 923 of 1991, RabelsZ 57 (1993), 50. 550 Ehrenzweig, IECL, Vol. 3, Chap. 32, Sect. 21. 551 Ibid., Sect. 38. 552 See supra paras. 292 and 299. 553 Pierre Bourel, “Du rattachement de quelques délits spéciaux en droit international privé”, Recueil des cours 214 (1989), 251-398 at pp. 297 (author’s translation).

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to the fore in conflicts legislation and that it still often plays a subordinate role.⁵⁵⁴ A further reason may have been the practical impossibility of achieving agreements on the conflict of laws in many fact situations governed by international tort law: parties frequently do not know each other ante factum, and one of them will usually be unwilling to enter an agreement on the applicable law post factum because that law as compared with the law otherwise applicable will be detrimental to his or her interests. b) Ex post choice of law 308. Statutory rules allowing party autonomy in international tort law are still not very common, but they are becoming more and more numerous; however, they display considerable divergences with regard to the time and modalities of choice and in respect of the eligible national laws. At one end of the scale, Swiss law has laid down the rule enunciated already by Ehrenzweig decades ago: it allows the parties to choose the lex fori after the event causing the loss has occurred.⁵⁵⁵ This meets the practical needs of the parties when they go to court: the reduction of litigation costs otherwise caused by the ascertainment of foreign law is an important factor, especially where insurance companies are involved, as they often are in tort cases on one or both sides of the dispute.⁵⁵⁶ While a corresponding need cannot be expected to exist to the same degree for the choice of a foreign law, this is not a valid counter-argument against party autonomy covering such agreements as well. Freedom of contract is granted as a general principle of the law irrespective of whether a practical need for it has been proven. The permissibility of post factum party autonomy, yet without limitation concerning the eligible laws, can be found in the more recent codifications of Korea, 554 Kadner Graziano, pp. 171-172; the comprehensive comparative investigation by Gerhard Hohloch, Das Deliktsstatut, Frankfurt am Main 1984, still did not specify the parties’ choice of the applicable law as an independent conflicts rule of international tort law; on the gradual development of legal opinion in Germany towards the approval of party autonomy see Jan von Hein, “Rechtswahlfreiheit im Internationalen Deliktsrecht”, RabelsZ 64 (2000), 595-613 at pp. 597-599. 555 See Article 132 of the Swiss law and Ehrenzweig, supra at para. 307; the same rule is laid down in Article 1219, para. 3 of the Russian Civil code as enacted in 2001; similarly also in Article 71 of the 1998 Act of Tunisia; the 2009 Act of the US state of Oregon, too, allows for the ex post choice of Oregon law, see Oregon Revised Statutes Sect. 31.870 (1), renumbered as Sect. 15.430(1) in 2011, but equally permits, in another provision, the ex post choice of foreign law, see infra, footnote 557; cf. James Nafziger, “The Louisiana and Oregon codifications of choice-of-law rules in context”, Am. J. Comp. L. 58 (2010), Supplement pp. 165-193 at p. 187 pointing to the innovation the Oregon statute brought for the conflict of tort laws in the US by introducing party autonomy. 556 See Andreas Bucher, “Les actes illicites dans le nouveau droit international privé suisse”, in François Dessemontet, ed. Le nouveau droit international privé suisse, 2nd ed., Lausanne 1989, pp. 107-141 at pp. 115-116.

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Belgium, Japan, Oregon, Turkey and the Peoples Republic of China.⁵⁵⁷ For the Member States of the European Union, Article 14 paragraph 1 (a) of the Rome II Regulation has established the same rule. Contrary to some of the regimes mentioned before, in Rome II this is only one of the gateways by which party autonomy may unfold its effects. c) Indirect ex ante choice of law 309. Agreements on the law applicable to non-contractual liability that are made prior to the event giving rise to the damage may address this issue directly or indirectly. According to the various choice-of-law regimes the validity of such direct and indirect agreements may be determined by different provisions; they should therefore be analysed separately. In any event, it is only parties who are already in a pre-existing relationship that can possibly think of agreeing on a law applicable to non-contractual claims that may subsequently arise between them. In such situations there will often be a need for applying the law governing the pre-existing relationship also to the liability sounding in tort; this would be an extension of that law and, in case of a choice of law applicable to the pre-existing relationship, an indirect and de facto agreement on the law governing the tort. Examples include the relations between the passengers and the operator of bus services, between the owner of an intellectual property right and a licensee, between a corporation and a shareholder, between the owner of an apartment and a tenant, between an undertaking exerting dominant market power and its customers, etc. When the contractual side of such a relationship is subject to the law of State A whereas the delictual liability is governed by the law of State B, the consequences may be unfortunate. For example, a certain claim, if classified as contractual, may be subject to the law of State A which provides for a 10-year prescription, whereas the claim will lapse in a much shorter period under the law of State B if characterized as a matter of tort. Suppose further that the law of B provides for a non-cumul of delictual and contractual liability whereas the law of A allows the plaintiff to base the claim on either cause of action alternatively.⁵⁵⁸ Under such conditions, no consistent solution ap557 See § 33 of the Korean Act of 2001 and Knut Benjamin Pissler, “Einführung in das neue internationale Privatrecht der Republik Korea”, RabelsZ 70 (2006), 279-341 at p. 312; Article 101 of the Belgian Act of 2004, now to a large extent superseded by the Rome II Regulation; Article 21 of the 2006 Japanese Act and Kono, supra at footnote 541, p. 240; Article 34 para. 5 of the Turkish Act of 2007; Article 44 of the 2010 Act of the People’s Republic of China; in the US state of Oregon, Sect. 31.885, renumbered in 2011 as Sect. 15.455 of the Oregon Revised Statutes has the same effect, see supra footnote 555. 558 For an early analysis of similar cases see Rolf Birk, Schadensersatz und sonstige Restitutionsformen im Internationalen Privatrecht, Karlsruhe, 1969, pp. 15 et seq. From a common law perspective, also Adrian Briggs, “Choice of choice of law ?”, Lloyd’s Mar. Com. LQ 2003, 12-38 and id., “On drafting agreements on choice of law”, ibid. 2003, 389-395.

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pears to be possible unless the parties are allowed to choose the applicable law also in respect of non-contractual liability. Similar inconsistencies may occur with regard to the burden of proof, the standard of care, vicarious liability, the assessment of damages, or the application of maximum amounts of liability. In all these cases, the separation of the law governing the contractual relationship from the law applicable to a resulting tort can amount to the destruction of a unity of valuation that is ensured within each of the national legal systems involved. Our observations militate in favour of parallel choice-of-law rules for contract and tort including the permissibility of an ex-ante choice of the applicable law in international tort law, unless this is in conflict with compelling reasons which may however exist with regard to specific areas of the law, see below sub-section 4. 310. Without explicitly allowing for ex ante party autonomy, several conflicts laws indirectly take account of the need outlined above. Where a legal relationship preexists between the victim and the person whose liability is invoked, claims sounding in tort are unequivocally subject, for example under Swiss and Korean private international law, to the law governing that relationship;⁵⁵⁹ the terms of this exception to the general conflict rule for tort law are not limited to contracts, but would include any other pre-existing legal relationship arising, for example, from company law or family law. Where the parties may choose the law applicable to that relationship, as they may in contract law, their choice will thus also determine the law governing non-contractual liability.⁵⁶⁰ Conflict rules of this type are sometimes designated as providing for an “accessory” or “secondary” connection of the liability sounding in tort. It is noteworthy that despite the significant role of tort litigation in the United States, apparently “neither the literature nor the case law has sufficiently explored this notion.”⁵⁶¹ 311. In other modern conflicts statutes, such accessory connections are concealed behind or within an escape clause that sets aside the general conflict rule of tort law where a manifestly closer connection can be ascertained between the tort and another country.⁵⁶² Thus, Article 4 paragraph 3 of the Rome II Regulation, providing for such an escape in its first sentence, points out in the second sentence that a “manifestly closer connection with an559 See Article 133 para. 3 of the Swiss Federal Law; an identical rule can be found in § 32 para. 3 of the 2001 Act of Korea, see also Pissler, RabelsZ 70 (2006), 312; similar is the wording of Article 100 of the 2004 Belgian Act 560 Kurt Siehr, Das Internationale Privatrecht der Schweiz, Zurich, 2002, p. 360; also Robert P. Umbricht, in Honsell, Vogt and Schnyder, Article 133, no. 3 and 5 points to the wide scope of application of the Swiss conflict rule mentioned in the previous footnote and to the significance of party autonomy in this context; for the Belgian Act of 2004, see previous footnote, the significance of party autonomy has thoroughly been explained by Stéphanie Francq, in Erauw, Fallon et al., p. 520. 561 Hay, Borchers and Symeonides, p. 898, but see also the text infra at para. 317 at footnote 579. 562 See supra at footnote 547.

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other country might be based in particular on a pre-existing relationship between the parties, such as a contract that is closely connected with the tort/delict in question.” While this rule allows the parties’ choice of the law applicable to the contract to impact liability sounding in tort, the European Commission has stressed the discretionary and the exceptional character of the escape clause; it expects the courts to make use of that discretion to offset the absence of any limitation of choice of law in Article 4 paragraph 3.⁵⁶³ However, heterogeneous considerations may influence the choice-oflaw analysis in cases of concurrent contractual and delictual liability; alongside the protection of the weaker party, there is also the effort to attain consistency in the application of contract law and tort law to a given set of facts; both objectives may point in different directions. It remains to be seen whether and to what extent courts actually apply the escape clause in the sense outlined by the Commission.⁵⁶⁴ d) Direct ex ante choice of law: Rome II Regulation 312. Some jurisdictions explicitly permit the parties to agree ante factum on the applicable law also in respect of claims sounding in tort. This holds true in particular for Article 14 of the European Rome II Regulation, which however adds some provisos: (1) the parties must pursue a “commercial activity”; (2) the agreement must be “freely negotiated”; (3) it must be “expressed or demonstrated with reasonable certainty by the circumstances”; (4) it must not prejudice the rights of third parties; and (5) the mandatory rules of the law otherwise applicable cannot be derogated from where all the elements relevant to the situation are located within the jurisdiction of those mandatory rules.⁵⁶⁵ Provisos (3) to (5) have essentially been adopted from Article 3 of the Rome I Regulation on the law applicable to contracts, while provisos (1) and (2) are specific to international tort law. 313. The requirement of “commercial activities” pursued by all the parties involved is meant to protect “weaker parties”⁵⁶⁶ and invalidates, as far as non563 See the Commission Proposal, COM (2003) 427 pp. 12-13. 564 Dickinson, no. 4.93, p. 345; in a similar vein Plender and Wilderspin, Obligations, no. 18-106, p. 538 at footnote 223; Jan von Hein, “Of older siblings and distant cousins: the contribution of the Rome II Regulation to the communitarization of private international law”, RabelsZ 73 (2009), 461- 508 at pp. 487 et seq. positing that limitations of the choice of the applicable law under Article 14 are not applicable under Article 4 para. 3; Éric Loquin, “La règle de conflit générale en matière de délit dans le Règlement du 11 juillet 2007 (Rome II)”, in Sabine Corneloup and Natalie Joubert, eds., Le Règlement “Rome II” sur la loi applicable aux obligations non-contractuelles, Paris, 2008, pp. 35-53 at p. 49 stresses that the escape clause “présente en effet le très grand intérêt de conduire à l’application d’une loi unique à l’intégralité des relations juridiques des parties” and that courts will therefore be tempted to make use of it in a very generous way. 565 Article 14 para. 1 (b) and paras. 2 and 3 of the Rome II Regulation. 566 See Recital 31 of the Rome II Regulation.

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contractual liability is concerned, ex ante choice-of-law clauses particularly in consumer contracts or employment contracts. But the term “commercial activity” (activité commerciale) is rather unfortunate as a means of attaining that objective. According to the traditional legal terminology and the system of law of some European jurisdictions, for example France, this term would not comprise the activities of all undertakings and in particular not those of professionals such as accountants or law firms.⁵⁶⁷ Consequently, they would not be in a position to agree with their clients ex ante on the law applicable to tortious liability, certainly an unintended result. In order to avoid such misunderstandings, courts will have to recall that the concepts employed in legal acts of the European Union will generally have to be interpreted in an autonomous way,⁵⁶⁸ which in this case would also comprise the professionals mentioned above as well as bodies of the public administration.⁵⁶⁹ It is noteworthy that choice-of-law agreements not covered by Article 14, for example those made with consumers, are invalid under that provision. This consequence appears to be in clear contrast to the consumer protection mechanism under Article 6 Rome I Regulation which allows the parties to a consumer contract to freely agree on the applicable law, reserving however the consumer protection afforded by the law applicable in the absence of choice.⁵⁷⁰ In such situations the validity of the choice-of-law clause for

567 Loquin, in Corneloup and Joubert, pp. 35, 52; see also the critical comments on the terminology employed by Gerhard Wagner, “Die neue Rom II-Verordnung”, IPRax (2008), pp. 1-17 at p. 13. 568 See e.g. ECJ, 16 July 2009, Case C-168/08 (Hadadi), [2009] ECR I-6871 cons. 38 relating to Reg. 2201/2003 (Brussels IIbis); ECJ, 15 November 1983, Case 288/82 (Duijnstee v. Goderbauer), [1983] 3663 cons. 17 et seq. concerning provisions of the Brussels Convention of 1968; Hannes Rösler, “Interpretation of EU Law”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 2, Oxford, 2012, pp. 979-982, also available in German under the heading “Auslegung des Gemeinschaftsrechts” in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen 2009, 122-126 at p. 123. 569 Bart Volders, “Communautair verwijzingsrecht voor niet-contractuele verbintenissen”, Rechtskundig Weekblad 2010, pp. 1154-1172 at p. 1166; Peter Mankowski, Interessenpolitik und europäisches Kollisionsrecht, Rechtspolitische Überlegungen zur Rom I- und Rom II-Verordnung, Baden-Baden, 2011, pp. 36-37, in accordance with the terminology of European consumer law, considers “commercial activities” as an equivalent to activities carried out by a natural or legal person who, for the transaction in question, is acting for purposes relating to his trade, business or profession, as defined, for example, in Article 2(c) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993 L 95/29. 570 See Th.M. de Boer, “Party autonomy and its limitations in the Rome II Regulation”, YBPIL (2007), 19-29 at pp. 27-28; Pedro A. de Miguel Asensio, “El regimen comunitario relativo a la ley applicable a las obligaciones extracontractuales”, Revista española de seguros 2009, 695-725 at p. 713.

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contractual matters might help, in view of Article 4 paragraph 3 Rome II, to extend the operation of that law also to non-contractual liability.⁵⁷¹ 314. The second requirement, that the choice-of-law agreement has been “freely negotiated ( frei ausgehandelt)”, is not very clear either. The German equivalent is reminiscent of the terminology employed in the German Civil Code for the definition of “standard conditions of contract” which excludes any terms that have been individually negotiated; the latter words are also used for the delineation of the scope of judicial review of unfair terms in consumer contracts under the pertinent EU Directive.⁵⁷² Are choice-of-law clauses contained in standard terms therefore excluded by Article 14 paragraph 1(b) of the Rome II Regulation ?⁵⁷³ No categorical answer appears to be possible. A contract term contained in pre-established standard terms or otherwise drafted in advance can very well be the object of negotiations, even if the term is not amended in their course. Moreover, the threshold for the assumption of free negotiations between the contracting parties would appear to differ in accordance with the type and economic value of the contract, the specific expertise of the parties and other circumstances. While it will be up to the national judge to make that assessment in individual cases, the European Court of Justice should provide some general guidance in this respect; in particular it will have to clarify the relation between Article 14 paragraph 1(b) Rome II Regulation and Article 3 of the Unfair Terms Directive 93/13. 315. The coexistence of a specific rule on the ex-ante choice of tort law in Article 14 and an escape clause in Article 4 paragraph 3 allowing for an alignment of the law applicable to tortious liability with the law governing contractual liability raises the question of the mutual relation of these provisions. It is all the more important as Article 4 paragraph 3 does not contain the provisos of Article 14 and would therefore allow such alignment also in consumer or employment contracts or where the choice-of-law clause has not been freely negotiated. Are the clear preconditions of a valid choice of law under Article 14 meant to exclude the application of Article 4 paragraph 3 where these preconditions are absent, for example in a labour relationship ? This would have the unfortunate consequence that the law applicable to the contractual side of this relationship and the law governing the non-contractual liability arising from it would differ, which could produce inconsistent results

571 See infra, para. 315. 572 See § 305, para. 1, 3rd sentence BGB: “There are no general conditions of contract as far as the terms have been individually negotiated between the contracting parties.” (Author’s translation); see also Article 3 of the Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993 L 95/29. 573 In this sense Mankowski, Interessenpolitik, p. 37; Loquin, in Corneloup and Joubert, p. 52; Thomas Kadner Graziano, “Das auf außervertragliche Schuldverhältnissse anzuwendende Recht nach Inkrafttreten der Rom II-Verordnung”, RabelsZ 73 (2009), 1-77 at p. 8; contra Volders, Rechtskundig Weekblad (2010), p. 1166; Gerhard Wagner, IPRax (2008), pp. 13-14.

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as outlined above.⁵⁷⁴ For example, the employee could benefit, in case of a labour accident, from an accident insurance policy that the employer had been obliged to take out under the employment contract which, by virtue of a choice-of-law clause, is subject to the law of State B; whereas the law applicable to the employer’s tortious liability would be the law of State A under which the existence of that accident insurance would not be taken into account. In order to avoid such inconsistencies, Article 4 paragraph 3 grants discretion to the judge, whereas Article 14 contains a binding choice-of-law rule. The solution for situations of the kind described above should, therefore, not be a mutual exclusion of Articles 4 paragraph 3 and 14, but rather a cautious application of the escape clause in view of the substantive solution resulting from the application of two different legal orders’ uncoordinated rules on tort and contract law. It is not unlikely that at the end of the day the internal consistency between the rules of contract law and tort law within a legal system is more important for appropriate solutions in these cases than the fulfillment of the conditions laid down in Article 14 of the Rome II Regulation. e) Direct ex ante choice: other jurisdictions 316. Several jurisdictions have permitted an ex-ante choice of tort law in a much less equivocal way than the Rome II Regulation. Austria and the Principality of Liechtenstein have enacted statutes on private international law that contain a general conflict rule for all types of obligations, both contractual and non-contractual, allowing the parties to freely agree on the applicable law, without any restrictions emerging from the statute. This general rule applies to liability sounding in tort law as well.⁵⁷⁵ In the Netherlands, too, the admission of party autonomy for international tort law has been explicitly acknowledged by the legislature in 2001; it relates to both ex post and ex ante choices of law.⁵⁷⁶ The three statutes just mentioned do not qualify the parties’ right to choose the law applicable to non-contractual liability 574 See supra para. 309. 575 See for Austria § 35 of the 1978 Law on private international law and for the Principality of Liechtenstein Article 39 of the 1996 Act, which adopts the Austrian rule verbatim; for its application to non-contractual liability see Alfred Duchek and Fritz Schwind, Internationales Privatrecht, Vienna, 1979, § 35 no. 1, p. 83; Michael Schwimann, Internationales Privatrecht, 2nd. ed., Vienna, 1999, p. 60; Willibald Posch, Bürgerliches Recht Band VII – Internationales Privatrecht, 5th ed., Vienna, 2010, no. 15/5 p. 131. 576 Wet conflictenrecht onrechtmaatige daad van 11 April 2001, Stb. 2001, no. 190; see Strikwerda, no. 183, pp. 187 et seq. For the major part of its scope of application, the law of 2001 has been replaced by Rome II; where Rome II does not apply, Article 159 of the new Book 10 of the Civil code adopted in 2011 orders the application of Rome II by analogy, see M. Zilinsky, Art. 125, 153-159 Boek 10 BW: Vertegenwoordiging, verbintenissen uit overeenkomst en verbintenissen uit andere bron dan overeenkomst, in Vlas, pp. 149-157 at p. 155.

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with any preconditions, although some or all of the conditions applying to choice of law in contracts may apply by analogy.⁵⁷⁷ While the laws of Austria and the Netherlands have been superseded to a large extent by the Rome II Regulation, the Liechtenstein rule has so far remained unaffected. f) Summary 317. The tendency emerging from this survey of the legal development is a progressive recognition of party autonomy in the private international law of torts. In some of the more recent statutes it is expressed more cautiously, in others more daringly. While some legislatures have still remained silent on the parties’ choice of tort law after the turn of the new millennium,⁵⁷⁸ they have remained a minority. More numerous are those statutes which deal only with some rather clear-cut cases of agreements on the law applicable to torts, in particular ex post agreements. The silence of legislators on the ex-ante choice of the applicable law does not help, however, to solve the issues arising in those cases. Where the conflict rules applicable to tortious liability have a rigid character, the inconsistencies between contractual claims subject to one national law and claims sounding in tort that are subject to another will sooner or later give rise to arbitrary decisions; where the legislative framework allows for more flexibility, however, courts will make use of it to accommodate choice-of-law clauses governing the contractual relations between the parties. As shown by a very large number of court decisions from the United States where, in most of the States, no legislative choice-of-law rules are in force, the results are far from predictable.⁵⁷⁹ The European Rome II Regulation, with its basic recognition of party autonomy subject to several provisos, does not entirely restore the predictability of results, but comes closer to that objective. It also takes account of the fact that the parties to a pre-existing relationship are in a privileged position to foresee the prospective links of their relationship with various jurisdictions. 4.

Limits of Party Autonomy for Specific Torts

318. As outlined above, modern conflicts legislation in the field of torts displays a trend towards the development of conflict rules on specific torts.⁵⁸⁰ This development relieves the basic conflict rule on torts of some of its functions. 577 See for the Netherlands Strikwerda, no. 183, p. 188; the author more specifically deals with some of the general restrictions but does not mention consumer or employment contracts as areas where agreements on the applicable tort law are excluded. 578 See for example Article 30 of the 1999 Act of Slovenia, which contains an escape clause without however indicating the pre-existence of a contract between the parties as an example of its intended application. 579 Hay, Borchers and Symeonides, p. 901 citing several dozens of divergent court opinions in footnote 35. 580 See supra para. 304.

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This may be one of the reasons for the progressive recognition of party autonomy in general international tort law as some of the specific torts are in fact so closely related to public interests that a private agreement abrogating the otherwise applicable law encounters serious objections. Consequently, excluding party autonomy for particular torts of this kind also has the effect of making party autonomy more easily tolerable in other areas covered by the general conflict rule of international tort law. 319. The implementation of limits to party autonomy in international tort law depends in part on the legislative technique employed. Direct and indirect party autonomy⁵⁸¹ should be distinguished. As far as party autonomy indirectly follows from the operation of an escape clause, the systematic position of that escape clause is decisive. In the European Rome II Regulation it is placed in paragraph 3 of the provision containing the basic conflict rule of international tort law. Since, according to generally accepted principles of drafting, a subsequent paragraph is to be interpreted as a qualification of the preceding paragraphs of the same provision, the escape clause will only apply as an exception to the basic conflict rule contained in Article 4 paragraph 1 Rome II Regulation and not as an exception to subsequent conflict rules for specific torts. Thus, the escape clause is inapplicable with regard to the conflict rules concerning restrictions of, and unfair, competition,⁵⁸² environmental damage,⁵⁸³ the infringement of intellectual property rights,⁵⁸⁴ and industrial action.⁵⁸⁵ While this would follow from basic principles underlying the drafting technique of statutes, it has to be conceded that the European legislature did not fully adhere to those principles: both Articles 5 and 9 establish specific conflict rules for products liability and industrial action “without prejudice to Article 4(2)”. Th is reservation presupposes that Article 4(2), i.e. the exception made for the law of parties having their habitual residence in the same State, is basically applicable outside the scope of Article 4, which however is theoretically not the case because of the described principle of statutory drafting.⁵⁸⁶ This lack of drafting precision notwithstanding, the escape clause of Article 4 paragraph 3 does not apply to the specific torts regulated in Articles 5 to 9. An indirect choice of the applicable law as described above is therefore also excluded in those areas, 581 See paras. 308, 309 and 312 supra. 582 See Article 6 of the Rome II Regulation; however, where an act of unfair competition exclusively affects the interests of a specific competitor, Article 4, including the escape clause and the implicit possibility of the parties making an ex ante choice of law, is to apply, see Article 6 para. 2. 583 See Article 7 Rome II Regulation, granting the plaintiff a choice between two different laws which exludes the application, by the court, of an escape clause. 584 See Article 8 Rome II Regulation. 585 See Article 9 Rome II Regulation. 586 Still, the reservations made in both Articles 5 and 9 should be understood as a reference to the conflict rule contained in Article 4 para. 2. The correct wording would have made the operation of Articles 5 and 9 “subject to Article 4(2)”.

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subject to two exceptions. With regard to products liability, Article 5 paragraph 2 contains an escape clause of its own which may equally be a gateway for a choice-of-law clause contained in a contract, for example a contract of sale or lease, between the victim and the person whose liability is asserted. And in respect of environmental liability Article 7 has a completely different structure, granting the aggrieved party the unilateral right to choose between the lex loci iniuriae and the lex loci actus. 320. The exclusion of an indirect choice of law put into effect by an escape clause in cases of an infringement of competition rules (Article 6), an infringement of intellectual property rights (Article 8) and industrial action (Article 9) is not explicitly stated, but it is probably intended and implied by the drafting technique outlined above. As to its rationale, it may be motivated by considerations of the public interest. Claims arising from the infringement of competition law and intellectual property rights are considered as part and parcel of the respective market order. In the context of the Rome II Regulation, they are therefore equally excluded from a direct agreement on the applicable law under Article 14, whether that agreement is made before or after the event giving rise to the claim.⁵⁸⁷ The conflict rule on liability arising from industrial action refers to the law of the place of acting where the social and political interests involved collide. It does not exclude agreements made under Article 14. This may appear as a lack of consistency but it is unlikely to produce negative effects. As far as employees or their trade unions are involved, an ex ante choice of law would not be validated in any event because they do not carry out commercial activities, see Article 14 paragraph 1(b). Ex post agreements on the applicable law will generally be excluded by the unique political dimension and dynamics of industrial action. Where they occur, however, for example in the framework of a collective agreement putting an end to a labour dispute and immunizing the parties from liability arising from that strike or lockout, the parties should be allowed to subject that clause to the law of their choice, as it may provide for the most effective legal framework for terminating the dispute.⁵⁸⁸ 321. Switzerland has been indicated above as a further example of a jurisdiction characterized by the enactment of conflict rules on specific torts, on the one hand, and the acknowledgment of party autonomy in international tort law on the other.⁵⁸⁹ The significance of the allowance of choice of law for the spe587 See Article 6 para. 4 and Article 8 para. 3 of the Rome II Regulation. It should be noted, however, that the choice of the applicable law with regard to claims for the infringement of intellectual property rights is by no means met with worldwide approval; an explicit admission of the ex post choice of the lex fori is laid down in Article 110 para. 2 of the Swiss Law of 1987 and Article 23 para. 2 of the Turkish Law of 2007. 588 See Christian Heinze, “Der internationale Arbeitskampf”, RabelsZ 73 (2009), pp. 770-792 at p. 787. 589 See supra paras. 304, 308 and 310.

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cific torts is, however, unclear and the subject of debate.⁵⁹⁰ This discussion is being conducted on the basis of rather formalistic arguments relating to the legislative system of the Swiss statute and does not touch upon the basic policies underlying the admission or prohibition of party autonomy. For our analysis, which is not focused on the interpretation of any single positive law, it is however indispensable to take a closer look into those policies. 5.

Conclusion: Comparative Assessment and Policy Considerations

a) Party autonomy and its discontents 322. The admission of party autonomy in international tort law appears to be a constant in the conflicts legislation of recent decades. Statutes without any rule on the parties’ choice of the applicable tort law have become more and more exceptional. The debate increasingly turns upon the precise limits of party autonomy in international tort law and not on its admission as such. Are there any red lines which private international law should not cross when permitting the parties to choose the applicable tort law ? As pointed out before, there is no valid reason to allow an ex post choice of only the lex fori, but not of a foreign law.⁵⁹¹ In fact, there are no valid objections to an ex post choice regardless of what its content will be. Before agreeing on a choice of law after the occurrence of the event giving rise to the dispute, parties can be expected to collect some rough information about the law in question. After the occurrence of the harmful event they have the same opportunity of inspection that they may benefit from when buying a car or new furniture. The basic considerations underlying freedom of contract apply in both instances; this includes responsibility for the consequences of a decision taken in the exercise of the freedom of contract. The only conceivable barrier to such an ex post choice can be the protection of third parties who are not to be exposed to detrimental effects arising from a res inter alios acta, and the interest of the public in protecting certain aspects of the social or economic order. But these considerations are not specific to international tort law; they also apply to international contract law and are taken into account by several provisions contained in, for example, the Rome I Regulation.⁵⁹²

590 With regard to products liability, unfair competition, restrictions of competition, environmental liability and the infringement of personality rights, the ex post choice of the lex fori has been approved by Alfred von Overbeck, “Das neue schweizerische Bundesgesetz über das internationale Privatrecht”, IPRax (1988), 329-334 at p. 331; in a similar vein Siehr, pp. 370, 372 and 373 in respect of road traffic accidents, products liability and unfair competition; contra Bucher, in Dessemontet, p. 116; Anton K. Schnyder, Das neue IPR-Gesetz, 2nd ed., Zurich, 1990, p. 118, both for systematic reasons. 591 See supra para. 308. 592 See in particular Article 3 para. 2, 2nd sentence; Article 3 paras. 3 and 4, Articles 9 and 21 of the Rome I Regulation.

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323. But what about the admission of an ex ante choice of the applicable tort law ? The conflict rule of Article 14 paragraph 1(b) of the Rome II Regulation has been criticized for not achieving the objective established by Recital 31 of the Regulation, whereby “protection should be given to weaker parties by imposing certain conditions on the choice”.⁵⁹³ According to the same author, “contracting parties do not (and should not) contemplate a future tort, and they do not know who will injure whom or the nature or severity of the injury. Moreover, a weak or unsophisticated party may uncritically sign such an agreement, even when the odds of him being the victim are much higher than the odds of his being the tortfeasor. For these and other reasons, most systems do not sanction pretort agreements.”⁵⁹⁴

This quote points to the asymmetric information and bargaining power of the parties as the main reason for not allowing an ex ante choice of the law applicable to tortious liability. From an historical perspective, the author’s reasoning is not quite accurate; as explained above, tort law has historically evolved from criminal law and the widely perceived need to ensure an objective order of conduct within a given territory.⁵⁹⁵ Considerations of public order and private remedies had in fact been intermingled over the centuries until the law gradually started to assert a public monopoly on the prosecution of more severe criminal acts, this leading towards a split of criminal law and civil liability sounding in tort.⁵⁹⁶ As this split unfolded, tort law was progressively disburdened from considerations of the public order, which is a precondition for the permissibility of party autonomy. It is only in a private law environment that the equality of bargaining power can become a relevant consideration. b) Protection of the weaker party ? About contract and tort 324. Even under the current conditions of a tort law dominated by private interests, Professor Symeonides’ critical remarks cited above deserve closer scrutiny and some corrections. First, the assertion that contracting parties do not contemplate a future tort is plausible only for those parties who do not 593 Symeon Symeonides, “The American Revolution and the European Evolution in Choice of Law: Reciprocal Lessons”, Tulane L. Rev. 82 (2007-2008), 1741-1799 at p. 1772. 594 Ibid., p. 1770. 595 See supra paras. 291-293. 596 See generally Henry Sumner Maine, Ancient Law, 15th ed., London, 1894, pp. 367 et seq.; Stephan Meder, Rechtsgeschichte, Cologne, 2002, pp. 27-31; with a focus on late medieval developments Dietmar Willoweit, “Programm eines Forschungsprojekts”, in id., ed., Die Entstehung des öffentlichen Strafrechts, Cologne, 1999, pp. 1-12 at p. 1; more specifically, for the development of furtum in the ius commune: Reinhard Zimmermann, The Law of Obligations, Cape Town 1990, pp. 943-952.

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contemplate any disturbance of their future relation whatsoever, whether contractual or non-contractual. But to the extent that they are mindful of a possible breach of the contract, they will also consider that the same set of facts may constitute a tort. It is probably fair to say that contracting parties who contemplate the possibility that something will go wrong in their relationship do not care whether lawyers will classify that potential occurrence as a tort or as a breach of contract. From a legal point of view, the same considerations that militate in favour of party autonomy in the field of contracts should therefore apply to pretort choice of the applicable law: the parties are in a better position to ascertain and to weigh the links of their relation with the jurisdictions involved. As between them, choice of law is a trustworthy tool which can provide for a reliable legal framework. Moreover, that framework is also consistent where the parties’ intent to cover both contractual and non-contractual aspects of their relationship unambiguously emerges from the contract. 325. Second, if the objective of protecting the weaker party does not exclude choice of law in cross-border contracts, why should the result differ for the same potential events where they are assessed under the law of torts ? Since the unequal bargaining power ascertained for consumer transactions and employment contracts does not lead to an exclusion, but only to a restriction of party autonomy in certain situations, it is difficult to understand why international tort law should deal with the same situations in an entirely different way. Where, for example, the Spanish passenger of a Dutch coach is hurt on his way from Spain to the Netherlands in a road accident in France which has been caused by the negligent coach-driver, it is difficult to see why the choice of Dutch law contained in the standard terms of the contract of carriage is accepted for all claims arising under the contract but not for those flowing from the law of torts. Or consider an Austrian consumer who engages a German financial broker for an investment and assume that their contract designates German law as applicable; if the Austrian consumer is sufficiently protected with regard to his claims resulting from the broker’s fraudulent misrepresentation under international contract law, how can anyone allege the protection to be insufficient if the whole matter is considered under international tort law ? We should therefore conclude as follows: since party autonomy, under both US and EU law, is not excluded, but only restricted with regard to contract law,⁵⁹⁷ the effort to protect the weaker party in international tort law can only lead to an analogous restriction and not an exclusion of party autonomy with regard to an ex ante choice of law. 326. Third, Professor Symeonides alleges that Article 14 Rome II Regulation does not prevent the stronger party from “taking advantage of the weaker party”, for example a franchisee who just like the franchisor carries out a commercial activity and would therefore not benefit from the protection against un597 See for consumer contracts under US law: Hay, Borchers and Symeonides, § 18.5, pp. 1109 et seq. and for EU law: Article 6 of the Rome I Regulation.

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fair choice-of-law clauses although clearly being the weaker party.⁵⁹⁸ It is certainly true that there is sometimes a clear inequality of bargaining power between two parties who both undertake commercial activities and that this inequality is not always levelled by competitive forces in the market. But it is not quite clear what kind of bias the author has in mind when he hints at an “advantage” of the stronger party. Is it an advantage that specifically flows from the law of torts chosen, for example the exclusion of punitive damages or a shorter prescription period for claims made against the stronger party ? Or is it the result of a combined assessment of the law of contracts and the law of torts of that jurisdiction as compared with the corresponding contracts/torts package of another jurisdiction ? It should probably be the latter since the choice-of-law clauses employed in practice usually deal with both contracts and torts. But if the advantage is measured by the package, one should consider that legal systems usually provide for an overall protection which does not diverge so much, because the relevant protective provisions are merely placed in different parts of the law. Some legal orders protect the weaker party in the law of contracts, others in tort law. Professor Symeonides’ apprehension appears to be well-founded only where the stronger party is intent on cherry-picking, selecting within the same relationship the law of State A for the contractual matters and the law of State B for tortious liability. Thus far, however, this has been a very rare occurrence which is apt to exclude the ante factum choice of tort law only if the latter choice diverges from the choice of the applicable contract law. c) Freedom of contract in substantive law and tort conflicts 327. The exclusion of ex ante party autonomy in international tort law can finally be criticized for its inconsistency with the freedom of contract found in substantive law. In many – probably in most – jurisdictions, the liability of the tortfeasor under the applicable tort law is not of a mandatory nature; a person whose rights are potentially subject to infringement may acquiesce to that infringement, whether against or in the absence of a reward. For example, celebrities may sell their right to use their names and pictures to the boulevard press; others engaged as test subjects by the pharmaceutical industry may acquiesce to personal injuries suffered as a consequence of a test treatment; and the owner of land may accept the pollutant input from his neighbour’s property. If potential victims are allowed under the substantive tort law of most or all jurisdictions to make contractual arrangements relating to the protection of their rights, why should they be pre-empted from agreeing on the law applicable to tortious liability arising from that kind of situation ?⁵⁹⁹ The dispositive nature of liability sounding in tort under sub598 Symeonides, Tulane L. Rev. 82 (2007-2008), 1772. 599 See Vischer, Recueil des cours 232 (1992), 127: “If parties are free to settle a dispute, if at any time a claimant can renounce and a defendant acknowledge a claim and thereby terminate proceedings, it is hard to see why the parties should not have

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stantive law and the alleged mandatory character of the conflict rules employed in the private international law of torts are clearly inconsistent. 328. The overall conclusion in respect of party autonomy in international tort law is positive: instead of criticizing Article 14 Rome II Regulation as excessive, one should rather lament that the European legislature in adopting this provision has been too timid. In accordance with the preliminary proposals of the British Law Commissions published in 1984, the basic rule should be that an agreement relating to the law applicable to matters of tort or delict, whether arrived at before or after the event and whether designating the lex fori or a foreign law, should be given effect as a matter of principle.⁶⁰⁰ Such a conflict rule should essentially be in line with the rules governing party autonomy in international contract law. Only some specific areas which are part and parcel of particular sectors of the public order should be subject to specific conflict rules excluding party autonomy. Section 3: Property Rights 329. As opposed to obligatory rights arising between specific persons, i.e. inter partes, from contract or tort, property rights in the legal (not economic) sense are potentially effective against everyone: erga omnes. They may relate to tangibles, whether movable or immovable, or to intangibles, in particular to intellectual property. While claims unfold their effects between debtor and creditor and are therefore usually classified as obligatory, the entitlement to a claim and its transfer may become issues of erga omnes significance; this has already been discussed under the heading of assignment.⁶⁰¹ The erga omnes effect of property rights makes the operation of party aua certain freedom in the designation of the applicable law.” On a similar note, de Miguel Asensio, Revista española de seguros 2009, 711; Posch, no. 15/5, p. 131; Mankowski, Interessenpolitik, p. 35, refers to the “Dispositionsbefugnis des Gläubigers”. 600 The Law Commission, Working Paper no. 87, and The Scottish Law Commission, Consultative Memorandum no. 62, Private international law, Choice of law in tort and delict, London, 1984, no. 4.21, p. 93: “…it could be that the parties might find themselves able to agree on what system of law should govern their mutual liability in tort or delict, and we believe tbat such agreement (whether arrived at before or after the event) should be given effect to in the United Kingdom. We therefore propose that the parties should by means of contract be permitted to choose which law should govern an action between them in tort or delict. Although it seems probable that an agreement as to the applicable law would often result in the application of the lex fori, we propose that such an agreement should be effective whether or not it had this result.” See the approval by Bourel, Recueil des cours 214 (1989), 301; Peter North and J.J. Fawcett, Cheshire and North’s Private International Law, 13th ed., London, 1999, pp. 627-628 regretting that the final report of the Law Commission was silent on this point; with the same view Nygh, Recueil des cours 251 (1995), 350 et seq.; von Hein, RabelsZ 64 (2000), 611-613. 601 See supra paras. 274 et seq.

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tonomy difficult in this area of the law because agreements on the applicable law, contrary to the privity of contracts,⁶⁰² may always negatively affect the rights of uninvolved third parties, in particular the rights of creditors of parties agreeing on a choice-of-law clause. That is why private international law relating to property rights has developed, until recent years, essentially without taking cognisance of party autonomy, see below, subsection 1. The application of the lex situs currently reflecting the international standard has, however, generated serious problems. These relate to: the use of property rights in goods as collateral in international commerce, see below, subsection 2.; the application of the lex situs to securities, see below, subsection 3.; and the unrestricted application of the lex loci protectionis, the corresponding standard for intellectual property, see below, subsection 4. More recent developments indicate that party autonomy is increasingly employed to alleviate these problems. 1.

The Development Towards Lex Situs

a) The lex situs and its rationale 330. While property rights in land have always been governed by the lex situs, legal scholars of the statutist doctrine took the view that movables were instead governed by the personal law of the owner as indicated by domicile; by the eighteenth century, however, the lex situs was also applied to movables.⁶⁰³ In the mid-1970s, Venturini could summarize his comparative investigation with the following statement: “At the present time it can be said that practically all statutory regimes submit both movables and immovables to the lex situs.”⁶⁰⁴

On the basis of a large number of modern codifications of private international law, more recent investigations have affirmed this finding.⁶⁰⁵ The lex 602 See supra para. 263. 603 Gian Carlo Venturini, “Property”, IECL,Vol. 3, Chap. 21, Sect. 1, citing the enquiry of Diena, I diritti reali considerati nel diritto internazionale privato, Torino, 1895, pp. 1-52. 604 Venturini, previous footnote, Sect. 2 citing further comparative enquiries. 605 Karl Kreuzer, “La propriété mobiliaire en droit international privé”, Recueil des cours 259 (1996), 9-318 at p. 45; citing a large number of statutory provisions from across the globe, the author concludes: “Ainsi on peut constater que la plupart des lois de droit international privé se satisfont pour l’essentiel de la règle du situs pour les biens meubles et immeubles complétée ici et là de quelques règles spéciales.” See also Daniel Girsberger, Grenzüberschreitendes Finanzierungsleasing, Tübingen, 1997, no. 348, p. 193: “… gilt praktisch weltweit das Prinzip, das auf dingliche Verhältnisse das Recht am Lageort, die lex rei sitae, anzuwenden sei (situs-Regel).” Similar is the statement by José Carlos Fernández Rozas, Rafael Arenas García and Pedro Alberto de Miguel Asensio, Derecho de los negocios internacionales, 3rd ed., Madrid 2011, p.

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situs rule basically applies to both immovables and movables, although with regard to the latter, the unanimity is not complete; some jurisdictions in the United States still adhere to the law of the owner’s domicile.⁶⁰⁶ In respect of intangibles, due to the absence of a corporeal existence, the lex situs obviously does not make sense and is substituted with a different connection, the lex loci protectionis, see below paragraph 345. 331. Various reasons have been given in legal literature for the lex situs rule, namely its simplicity, common sense and claim to the general consensus,⁶⁰⁷ but also – in respect of immovables – its link with territorial sovereignty, i.e. with public international law.⁶⁰⁸ The commercial side of this argument points to the determination, by the law of a given country, of the ordering and prioritization of creditors with regard to the recovery of assets situated in that State. Other more practical considerations relate to the fact that immovables cannot be relocated into other jurisdictions; that land registers have to be administered by one single law which can only be the law of the State establishing that register; that for both movables and immovables the location can easily be ascertained by anyone who may have an interest in the respective tangible; and that a judgment relating to the respective property can only be enforced in the country of the situs, with this country likely be470: “solución común en el Derecho comparado“; Herbert Kronke, “Parteiautonomie und Prorogationsfreiheit im internationalen Mobiliarsicherungsrecht: Zwei Grundprinzipien der Konvention von Kapstadt”, in Hilmar Krüger/Hein-Peter Mansel, eds., Liber amicorum Gerhard Kegel, Munich, 2002, pp. 33-42 at p. 34:“... eine der ältesten, gesichertsten und weltweit verbreiteten Kollisionsnormen.” For the common law see Janeen Carruthers, The Transfer of Property in the Conflict of Laws, Oxford, 2005, nos. 1.20 et seq., pp. 19 et seq. The most detailed survey of national sources of law in this area is provided by Hans Stoll, “Internationales Sachenrecht”, in J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetzen und Nebengesetzen – Einführungsgesetz zum Bürgerlichen Gesetzbuch/IPR, 13th ed., Berlin, 1996, nos. 5-103. 606 See California Civil Code, Sect. 946: “If there is no law to the contrary, in the place where personal property is situated, it is deemed to follow the person of its owner, and is governed by the law of his domicile.” The 2001 version of Article 9 of the Uniform Commercial Code, with regard to the law governing perfection and priority of security interests, provides in § 9-301(1) that “while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.” Cf. also Hay, Borchers and Symeonides, § 19.18, pp. 1263 et seq. 607 Louis d’Avout, Sur les solutions du conflit de lois en droit des biens, Paris, 2006, no. 2, p. 3: “ Sa simplicité, son bon sens et son caractère consensuel. ” 608 For a general discussion of the grounds militating for and against the lex situs, see Carruthers, nos. 8.02 et seq., pp. 195 et seq.; Ann-Christin Ritterhoff, Parteiautonomie im internationalen Sachenrecht, Berlin, 1999, pp. 55-63. The link with territorial sovereingnty is stressed by Batiffol, Aspects philosophiques du droit international privé, no. 117, pp. 262-263; Dieter Martiny, “Lex rei sitae as a connecting factor in EU Private International Law”, IPRax (2012), 119-133.

Chapter 3 – New Domains for Party Autonomy

ing reluctant to enforce a decision not based on its own law, i.e. the law of the situs⁶⁰⁹ (what amounts to the reverse side of the sovereignty argument cited above). b) A critical policy appraisal 332. Many of these arguments are convincing with regard to immovable property, but they should be and have already been partly reconsidered with regard to movables. The situs of movables may be purely fortuitous, this even more so in the light of the exorbitant growth rates of the international trade in goods.⁶¹⁰ Where goods sold by a Canadian manufacturer to a Polish importer are seized on behalf of a creditor in the port of Hamburg, there is no compelling reason for applying German law to the transfer of property as between the two contracting parties, not even where the creditors are Germans. Numerous legislatures have therefore enacted specific rules dealing with goods in transit, which are sometimes subjected to the law of the place of departure,⁶¹¹ more often however to the law of the country of destination⁶¹² or to the law of the State where a change of the right in rem has been perfected.⁶¹³ Further exceptions to the situs rule relate to in rem rights in means of transport, in particular vessels and aircraft, but also the rolling stock of railways and road vehicles.⁶¹⁴ Apparently the arguments inferred 609 For these arguments see Stoll, nos. 125-126. 610 See the comparison of the export growth rates with the production growth rates supra in para. 44. 611 This was the conflict rule laid down in § 10 of the Act on the application of law to international legal relations and to international economic contracts of 5 December 1975 of the former German Democratic Republic, Gesetzblatt DDR 1975 I, 748; see W. Schönrath in G.-A. Lübchen et al., Internationales Privatrecht – Kommentar zum Rechtsanwendungsgesetz, Berlin, 1989, p. 46; the same rule can still be found in Article 1206 of the Russian Civil Code as amended in 2013. 612 See for example for Belgium Article 88 of the 2004 Code; for Turkey, see Article 21, para. 2 of the 2007 Act; for Korea, § 22 of the 2001 Act etc. 613 See for example for Austria § 31, para. 1, for Japan, Article 13, para. 2 and for Taiwan, Article 38, para. 3 of the Act of 2010. For further references see Karl Kreuzer, “Gutachtliche Stellungnahme zum Referentenentwurf eines Geseztes zur Ergänzung des Internationalen Privatrechts”, in Dieter Henrich, ed., Vorschläge und Gutachten zur Reform des deutschen internationalen Sachen- und Immaterialgüterrechts, Tübingen, 1991, pp. 37-180 at pp. 163-166. 614 The specific rules for means of transport usually refer to the law of the country of registration, see for Germany Article 45 of the Introductory Law to the Civil code for vessels, aircraft and railway rolling stock; similarly Article 22 of the Turkish Law of 2007; for the Netherlands Article 2, paras. 2 and 3 of the Wet Conflictenrecht Goederenrecht of 25 February 2008, Staatsblad van het Koninkrijk der Nederlanden 2008, no. 70 for vessels and aircraft; for all registered means of transport in Belgium Article 89 of the 2004 Code; for registered movables in general, Article 59 of the 1998 Code of Tunisia; for Russia Article 1207 of the Civil Code as amended in 2013 refers to the law of the place of registration for vessels and aircraft and for cosmic

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from territorial sovereignty and the reluctance of the State of location to apply foreign law are of minor significance in these areas. But are they relevant at all ? 333. Many jurisdictions accept the acquisition of ownership of items located within their respective countries by an heir through the operation of a foreign law of succession. Why should a transfer of title inter vivos of the same items raise concerns of sovereignty if put into effect by the operation of a foreign law of property ?⁶¹⁵ Similar inconsistencies can be ascertained in the law of insolvency where the insolvency proceedings opened in a given State affect the exercise of proprietary rights in assets also located in other countries; this may, for example, be the case in the European Insolvency Regulation.⁶¹⁶ The protection of the creditors’ trust in the operation of the law of an easily perceptible location of personal property is not very convincing either. Creditors are aware of the corporeal existence of an object in a given jurisdiction, and they may also discern the identity of the custodian. But they do not know the background of that person’s entitlement. Does the custodian possess the goods as a purchaser, as a tenant under a rental agreement or in any other capacity of a bailee ? Some jurisdictions require registration of certain transactions that entail a separation of ownership and possession, but that registration is never exhaustive; some of those transactions will always remain undisclosed. Thus the creditors’ confidence in those positions under substantive law is not protected, nor can they trust that, for example, a rental agreement or a lease contract is governed by the law of the situs. It is difficult to see why they deserve a better protection when the custodian tells them that he does not hold the goods as a lessee, but instead as a purchaser under a sales contract reserving the title to the seller until full payment of the purchase price. Widely accepted as it is, the situs rule appears to be influenced by archaic notions of power over corporeal assets and to not be very consistent with conflict rules governing other areas of the law. In particular, its general approval with regard to property can hardly be reconciled with the wide acceptance of party autonomy in contract law. In an era objects; see also Kreuzer, previous footnote, pp. 110-136; Ulrich Drobnig, “Vorschlag einer besonderen sachenrechtlichen Kollisionsnorm für Transportmittel”, in Henrich, previous footnote, pp. 13-36; for proprietary rights of a lessor, see in the same sense Ioannis Voulgaris, “Le credit-bail (leasing) et les institutions analogues en droit international privé”, Recueil des cours 259 (1996), 319-412 at pp. 368 et seq., referring however to the different solution – party autonomy – adopted by the French Cour de cassation, Cass. 11 May 1982, Rev. crit. dr. int. pr. 72 (1983), 450 et seq. with an annotation by Georges Khairallah. 615 See Ritterhoff, p. 71. 616 See Articles 4 and 3, para. 1 of Council Regulation (EC) no. 1346/2000 of 29 May 2000 on insolvency proceedings, OJ 2000 L 160/1; the extraterritorial effect of insolvency proceedings is restricted in part by Article 5, reserving the application of the lex situs to third parties’ rights in rem. See also the general discussion by Ritterhoff, pp. 74-75.

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of open frontiers, the situs rule is increasingly vulnerable to criticism. While the present study is not meant to investigate the merits of the situs rule at large and in detail, it will explore the possible reach of party autonomy for a specific situation in the following subsection. 2.

Party Autonomy: Acquisition and Loss of Rights in Rem in Movables

a) Inconveniences of the situs rule 334. The problems generated by the situs rule relating to goods in transit and to means of transport have already been mentioned above. They concern in particular the loss and acquisition of ownership or of other in rem rights. But res in transitu and vehicles provide only two examples for a more general critique of the application of the situs rule to moving objects. Under the lex situs, crossing a border into another jurisdiction is tantamount to a change of the applicable law (conflit mobile, Statutenwechsel). As a result, in rem rights established under the previous law have to be adjusted where possible to the categories of the new law. Where that adjustment fails because the new law does not provide for equivalent rights, the rights established under the previous law may cease to exist. 335. An example is an Austrian case dealing with the fiduciary ownership granted by a German borrower to his German bank without transfer of possession; the chattels in question were later shipped to Austria where they were seized by German creditors of the German borrower. The bank objected to that seizure in the Austrian courts. The Austrian Supreme Court held that what the German borrower and his bank had agreed upon was equivalent to a pledge; under Austrian law, however, this would have required a transfer of possession to the pledgee. In the absence of such transfer, the fiduciary ownership of the bank could not be recognized in Austria, and the bank was preempted from objecting to the seizure and forced sale of the goods in question.⁶¹⁷ A further example is an Italian court’s non-recognition of a retention of title clause contained in the standard contract terms agreed upon by a German exporter in his contract with an Italian customer. In accordance with the German law governing the contract, that clause was valid. Under Italian law, however, which was applicable as the lex situs after the export transaction had been carried out, a reservation of title is valid as against third parties only if it is laid down in a document with a “secure date” (data certa), a formality which would have required an authentication 617 OGH, 14 December 1983, JBl 1984, 550 = IPrax (1985), 165, with annotation by Dieter Martiny, Nichtanerkennung deutscher Sicherungsübereignung in Österreich, pp. 168-171; see also Judith Schacherreiter, Leading decisions zum internationalen Privatrecht, Vienna, 2008, pp. 146-149 with comments and further references; the resulting situation has been addressed as a “legal nightmare”, see Fritz Schwind, “ ‘Hinkendes Eigentum’ im österreichisch-deutschen Rechtsverkehr – Ein juristischer Alptraum”, in Festschrift für Gerhard Kegel, Stuttgart, 1987, pp. 599-604.

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by a notary or a public registration.⁶¹⁸ When the Italian buyer became insolvent, the German seller brought an action against the trustee for restitution which was subsequently dismissed because the retention of title clause did not meet the formal requirements of Italian law.⁶¹⁹ Further examples of proprietary rights which have been extinguished as a consequence of crossborder transfers of the encumbered chattels have been identified in Spanish case law.⁶²⁰ 336. The change of the applicable law may, as the cases clearly show, strongly disturb contractual relations, impede the use of movables as collateral and thereby undermine international trade relations. The – undeserved – benefit falls upon the creditors of one of the parties involved, irrespective of whether they are domiciled in the country of the previous or subsequent location of the goods. Within the European Union, the loss of collateral resulting from a combination of the private law and the conflict rules of the country of destination can be assessed as a measure having equivalent effect to a quantitative restriction, which is therefore prohibited as an infringement of the free movement of goods under Articles 34 and 35 TFEU.⁶²¹ The law of the European Union may help to scrap the lex situs rule in some of the situations described above. But the basic freedoms do not replace the existing conflict rules with new ones. Moreover, their effect is geographically limited to the internal market of the European Union while the negative consequences outlined above may occur in any international relation, whether inside or outside Europe. A solution should therefore rather be contemplated from a conflicts perspective not limited to the internal market. b) Party autonomy as a solution 337. A possible way out of the dilemma could be the permissibility of choice-oflaw agreements with regard to in rem rights. In the cases reported above, the German bank and the German exporter could have insisted in their bilateral relations with the borrower and the Italian importer on a contractual choice of German law with regard to, respectively, the fiduciary ownership and the retention of title. There is no question that the validity of the collateral in both cases was a precondition for the credit granted by them. By contrast, the legitimate interests of the creditors who ultimately prevailed 618 See Articles 1524 and 2704 of the Italian Civil Code. 619 Corte d’Appello di Milano, 6 April 1956, Il Foro Italiano 1957, I, 1856; see with reference to further decisions Eva-Maria Kieninger, Mobiliarsicherheiten im europäischen Binnenmarkt, Baden-Baden 1996, pp. 60-62. 620 Alfonso-Luis Calvo Caravaca and Javier Carrascosa González, eds., Derecho internacional privado, Vol. 2, 11th ed., Granada, 2010, p. 732, nos. 27-28. 621 See Jürgen Basedow, “Der kollisionsrechtliche Gehalt der Produktfreiheiten im europäischen Binnenmarkt: Favor offerentis”, RabelsZ 59 (1995), 1-55 at pp. 41-48 with further references at p. 43 in footnote 167; Kieninger, Mobiliarsicherheiten, pp. 152 et seq., p. 214; Peter von Wilmowsky, Europäisches Kreditsicherungsrecht, Tübingen, 1996, pp. 110 et seq.

Chapter 3 – New Domains for Party Autonomy

in the Austrian and Italian courts are difficult to ascertain. In the Austrian case, the creditors earned a windfall profit from the accidental transfer of the objects in question to Austria, and the situation of the creditors of the Italian importer represented by the trustee was similar. Thus, when weighing the interests involved, one hardly finds any valid reasons for excluding a choice of law. Moreover, both proceedings would perhaps have ended with different results if the parties had chosen different legal constructions for their transactions, for example lease contracts instead of fiduciary ownership and retention of title. However, at present only few pieces of conflicts legislation contain provisions that permit party autonomy in property law. But they are growing in number.⁶²² While it would be premature to label this a trend, it is fair to speak of a growing awareness among legislators of the inconveniences that the situs rule may precipitate. Consequently, some of the more recent statutory acts have opened the door for party autonomy, although only slightly and sometimes even indirectly and for limited areas of application. It is not a simple task to provide a comparative survey of the existing rules on party autonomy in a systematic way as the approaches and terminology differ widely. c) Indirect admission of party autonomy through an escape clause 338. The least visible deference to party autonomy can probably be found in German law. While basically adhering to the situs rule with exceptions for means of transport, the rigid conflict rules adopted in 1999 are, however, not meant to be conclusive. Article 46 of the Introductory Law to the Civil Code mandates the application of a different law if, as compared with the situs or the law of the register of the means of transport, a substantially closer connection can be ascertained with that other law. As the legislative materials show, the escape clause is also intended to take account of cases where the parties have agreed, with regard to their bilateral relations, on the application of a different law.⁶²³ While the German Government wanted to limit the effects of choice-of-law clauses contained, for example, in an underlying sales contract to the contracting parties, the potential erga omnes effect has not explicitly been excluded in the relevant provision of the statute. Thus, where a closer connection is actually ascertained in accordance with Article

622 Kreuzer, Recueil des cours 259 (1996), p. 67 ascertains a growing inclination (“propension croissante”), in the same sense and supporting this tendency Axel Flessner “Rechtswahl im internationalen Sachenrecht – neue Anstöße aus Europa”, in Peter Apathy et al., eds., Festschrift für Helmut Koziol, Wien, 2010, p. 125 et seq. 623 See the Draft Bill submitted by the German Government: Entwurf eines Gesetzes zum internationalen Privatrecht für außervertragliche Schuldverhältnisse und für Sachen, Deutscher Bundestag, 14. Wahlperiode, Drucksache 14/343 of 1 February 1999, p. 19; see also Heinz-Peter Mansel, “Normzweck und Tatbestandsstruktur des Art. 46 EGBGB”, in Festschrift für Andreas Heldrich, Munich, 2005, pp. 899-906 at p. 905.

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46 on the basis of a choice-of-law clause, the law chosen by the parties may very well be effective erga omnes. d) Choice-of-law clauses with inter partes effects 339. More explicitly, Swiss law allows the acquisition and loss of in rem rights in movables to be subjected to either the law of the State of origin or the law of the State of destination provided that the chosen law is applicable to the underlying contract; on the other hand Swiss law explicitly pre-empts the parties from invoking the choice-of-law clause as against third persons; the usefulness of this rule has been questioned.⁶²⁴ Analogous is the legal situation under Article 1210 paragraph 1 of the Russian Civil Code and Article 39 paragraph 2 of the Ukrainian Law of 2005. Similar provision for inter partes effects of choice-of-law clauses was made with regard to the conveyance of an interest in a chattel in general and of a security interest in particular in the American Restatement Second.⁶²⁵ Without an explicit limitation to the bilateral relation of the parties, Spanish law allows them, for goods in transit, to agree that the goods are not located in the country of despatch, but in the country of destination; it appears however that the respective provision gives rise to a great many uncertainties of interpretation and is of minor significance in legal and commercial practice.⁶²⁶ 340. At first sight, Article 51 of the 1995 Italian Law on private international law appears to take an important step towards the recognition of party autonomy relating to proprietary rights. While paragraph 1 almost literally affirms the rule of the lex situs which had already been acknowledged in Article 22 of the Preliminary Provisions of the Civil Code of 1942, a second paragraph is added saying that the same law governs the acquisition and the loss of in rem rights, “except in matters of succession and when the attribution of an in rem right depends on a family relation or on a contract.” The wording of the provision suggests that the lex situs will entirely be replaced as far as the acquisition and the loss of rights having erga omnes effects are concerned⁶²⁷ and that acquisition and loss resulting from a contract are governed by the law applicable to that transaction which very often is chosen by the parties. The prevailing view in Italian scholarship does not draw that conclusion, however. Rather, Article 51, paragraph 2 is to be interpreted in the light of 624 See Article 104 of the 1987 Swiss Law; see the critical remarks by Pius Fisch in Honsell, Vogt and Schnyder, nos. 15-18, who suggests to extend the effects of the parties’ choice erga omnes. 625 See Rest. Second, Conflict of Laws, §§ 244 and 251. 626 See Article 10.1, para. 3 of the Spanish Civil Code and the detailed discussion in: Julio D. González Campos et al., Derecho internacional privado – Parte especial, 6th ed., Madrid 1995, nos. 331-335, pp. 249-253; José Carlos Fernández Rosas and Sixto Sánchez Lorenzo, Derecho internacional privado, 2nd. ed., Madrid, 2001, nos. 624625, pp. 649-651. 627 See Tito Ballarino, Diritto internazionale privato – Manuale, 3rd ed., Padova 1999, p. 567.

Chapter 3 – New Domains for Party Autonomy

the traditional distinction of titulus adquirendi and modus adquirendi. The titulus adquirendi may be constituted by succession, a marital property regime or a contract, and in the latter case would be subject to the law governing the contract, for example the law chosen by the parties. But the modus adquirendi is classified as an aspect of the exercise of in rem rights and therefore is governed by the lex situs.⁶²⁸ This solution essentially amounts to the inter partes effect of choice-of-law agreements. e) Title retention clauses in export contracts 341. Less equivocal are provisions in Dutch, Swiss and Romanian law dealing with retention of title agreements in international transactions. While a 2008 statute of the Netherlands basically subjects the in rem effects of retention of title clauses to the lex situs, it cautiously allows parties to an export transaction to choose the law of the State of destination provided that the retention of title does not, under that law, lose its effect of postponing the transfer of ownership until the price has been paid in full. A further proviso requires that the goods have actually been shipped into the country of destination.⁶²⁹ The scope of application of this rule is surprisingly narrow; since litigation concerning proprietary aspects usually takes place in the country where the goods are located, this conflict rule, which applies only after the goods have been exported but which is binding only on the courts in the Netherlands, will not be applied very often. The exclusion of imported goods gives evidence of a clear bias in favour of Dutch exporters. In the European Union it might be struck down as discrimination on the grounds of nationality in violation of Article 34 TFEU on the free movement of goods.⁶³⁰ A similar although less conspicuous bias can be ascertained in Swiss law. Subject to a choice of law by the parties having only inter partes effect,⁶³¹ title retention clauses in export contracts are subject to the law of the country of destination.⁶³² If, on the other hand, goods are imported into Switzerland subject to a retention of title that is not in accord with Swiss law, the seller will retain ownership for three months but cannot invoke his title against 628 See Riccardo Luzzatto, Articolo 51 (Possesso e diritti reali), in “La riforma del sistema italiano di diritto internazionale private – Commentario”, Riv. dir. int. priv. proc. 31 (1995), 905-1279 at p. 1156; Franco Mosconi, Diritto internazionale privato e processuale – Parte speciale, Torino, 1997, p. 119; Ballarino, pp. 567 et seq.; Paolo Benvenuti, in Stefania Bariatti, ed., Legge 31 maggio 1995, N 218 – Riforma del sistema italiano di diritto internazionale privato – Commentario: Le Nuove Leggi Civili Commentate 19 (1996) 877-1505 at p. 1331. 629 See Article 3, para. 2 of the Wet Conflictenrecht Goederenrecht of 25 February 2008, Stb. 2008, no. 70; under para. 3 of that Article, the provision also applies to lease contracts relating to goods designed for exportation. See now the codified version in Article 128 of Book 10 of the Civil Code adopted in 2011. 630 See supra the text in para. 336. 631 See supra the text in para. 339 at footnote 624. 632 See Article 103 of the 1987 Swiss Law.

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third parties acting in good faith.⁶³³ Finally, Article 54 of the 1992 Law of Romania, now: Article 2619 of the New Civil Code equally permits the parties to an export transaction to choose the law governing the preconditions and the effects of a reservation of title. As opposed to the Dutch provision, the Romanian conflict rule validates the choice-of-law clause irrespective of the location of the goods. It has been criticized for being ineffective as long as foreign countries insist on the lex situs rule also in respect of the retention of title.⁶³⁴ This criticism is accurate as far as it pinpoints the unilateral character of a rule which is only applicable to export transactions. That unilateral bias will, however, probably be given up sooner or later since it discriminates on grounds of nationality against imports from other EU Member States. In the long run though, rules such as those of the Netherlands and Romania may very well help to overcome the present inconveniences of the lex situs rule. f) Party autonomy for movable property 342. A first move towards party autonomy can be found in the United States in the field of secured transactions. In respect of, and limited to, deposit accounts held with a bank, Article 9 UCC provides that the perfection, the effect of perfection or non-perfection, and the priority of a security interest are governed by the local law of that bank’s jurisdiction.⁶³⁵ What appears at first sight as another form of the localization of the legal relation, in reality affords ample latitude for party autonomy. The “bank’s jurisdiction” is defined as the jurisdiction designated for this purpose in the agreement between the bank and the debtor governing the deposit account.⁶³⁶ Where this definition does not apply, for example in the absence of such a designation, the agreement between the bank and its customer governing the deposit account may expressly provide that the agreement is governed by the law of a particular jurisdiction, which in that case is the “bank’s jurisdiction”. It is only where such a choice-of-law clause is equally lacking that objective connecting factors are used to localize the legal relation. A similar cascade of connecting factors with prevalence for party autonomy is laid down for the law governing perfection and priority of security interests in investment property held by a commodity intermediary.⁶³⁷ For uncertificated security rights in investment property, the relevant provisions refer to Article 8 633 See Article 102 paras. 2 and 3 of the 1987 Swiss Law. 634 Kreuzer, Recueil des cours 259 (1996), 277 et seq. who attributes a “caractère illusoire” to the Romanian rule. 635 § 9-304 (a) UCC; James White and Robert Summers, Uniform Commercial Code – Secured Transactions, 5th ed., St.Paul, Minn. 2000, pp. 803-804, consider the conflict rules of § 9-304 as “monumentally unimportant” since the substantive law in all 50 states of the US is the same due to the harmonisation achieved through the UCC. 636 § 9-304 (b)(1) UCC. 637 § 9-305 (b)(1) and (2) UCC.

Chapter 3 – New Domains for Party Autonomy

UCC.⁶³⁸ These innovations can essentially be explained by the non-physical existence of bank accounts which often cannot effectively be localized; a substitute connection with the governing law is therefore urgently needed. 343. The most far-reaching recognition of party autonomy relating to rights in rem has been codified in the 2010 Law of the People’s Republic of China. Article 37 unequivocally states: “The parties may by agreement choose the law applicable to rights in rem in movable property.” The lex situs is a default rule and applies only in the absence of a choice by the parties. A similar rule deals with party autonomy relating to goods in transit, see Article 38. Limited to the transfer of property under a sales contract and to security rights in movables, the same rule could be found in some of the former socialist jurisdictions, for example in East Germany.⁶³⁹ Given the extreme restrictions of international contacts and legal relations in socialist States as well as the foreign trade monopoly of a few State undertakings, those provisions on party autonomy did not really have to stand the test of practical utility in socialist times. And as of now, there is no practical experience capable of indicating whether these radical provisions are applied in a market economy without any restrictions and under which conditions their practical application may be qualified.⁶⁴⁰ g) Summary 344. In summary of the comparative observations, party autonomy has not gained wide support in the law of property so far. Apart from the People’s Republic of China, its approval in modern legislation is confi ned to specific issues and its limits are often uncertain. Moreover, national legislatures appear to be inspired by the belief that they somehow foster their national interests by admitting party autonomy only in a biased way for export operations, while prohibiting it for all other transactions, in particular the import trade. This may be based on the assumption that litigation in domestic courts is usually initiated by domestic creditors who want to enforce their claims through 638 § 9-305 (a)(2) and (3) UCC; see infra paras. 348 et seq. 639 See § 13 of the Rechtsanwendungsgesetz of the German Democratic Republic and Schönrath in Lübchen, supra at footnote 611, pp. 60-61, pointing to the advantage of the concordance of the laws governing the contract and its proprietary effects; see also d’Avout, p. 639 640 See the critical remarks on Articles 37 and 38 of the Chinese law by Weizuo Chen, “Chinese Private International Law Statute of 28 October 2010”, YBPIL 12 (2010), 27-41 at p. 40; a clear plea for a restrictive interpretation of Articles 37 and 38 is also made by Huanfang Du, “The Choice of Law for Property Rights in Mainland China: Progress and Imperfection”, in Jürgen Basedow and Knut Benjamin Pissler, Private International Law in Mainland China, Taiwan and Europe, Tübingen, 2014, p. 99117 at p. 107 and 109; for a restriction of party autonomy to the relations between the contracting parties see Wenwen Liang and Xiongbing Qiao, “Party Autonomy in the Applicable Law to Rights IN REM to Movables under the Chinese Act on the Law Applicable to Civil Relations with a Foreign Element: A Comparative Review”, Frontiers of Law in China 9 (2014) 446 et seq.

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the seizure of assets located within the respective State. Disallowing party autonomy for import transactions therefore may appear as a means of protecting domestic creditors. While this holds true in some cases, it can by no means be generalized. As the Austrian case reported above in paragraph 335 demonstrates, it might very well occur that the foreign creditors of a foreign owner/exporter who cannot seize the encumbered asset within their home country will take advantage of its transfer into another State. Instead of looking for allegedly public interests of their own State and national economy, legislatures would be well advised to rather have in mind the private interests involved, irrespective of whether these interests are domestic or foreign. 3.

Negotiable Instruments: Security Interests in Financial Collateral

a) Changes of the commercial environment 345. Negotiable instruments have a hybrid character. The right to the paper as a corporeal object and the rights incorporated therein must be distinguished. The latter rights arise from other areas of the law, for example the rights of shareholders from corporate law and those of bondholders from contract law. In international cases the conflicts analysis accordingly departs from the law applicable to those rights, i.e. the law governing a corporation or the law applicable to a contract. But the entitlement to such incorporated rights as against third persons is connected to the nature of the negotiable instrument which, if issued to the bearer, is treated as a corporeal movable subject to the situs rule (lex cartae sitae).⁶⁴¹ Negotiable instruments can be transferred into other countries without practical difficulty. As pointed out above, this entails a change of the law applicable to the proprietary aspects⁶⁴² and consequently a reduction of the legal certainty desirable for such transactions. A transfer of any proprietary right in the negotiable instrument will often depend on the cumulative application of the previous and the subsequent lex cartae sitae. 346. In the period following World War II, two major developments have fundamentally affected the legal framework relevant for negotiable instruments. The first was the unprecedented growth of the trade in commercial paper at the major market places, i.e. the stock exchanges. In the 1960s the daily turnover in shares at the New York Stock Exchange quadrupled from 3 million to about 13 million, and in the 1970s it quadrupled once more up to 52 million shares per day; traders would talk of a “paperwork crisis” or even a “paperwork crunch”, which forced the New York Stock Exchange for some time to close one day a week to process the backlog of paperwork generated 641 See e.g. Pierre Mayer/Vincent Heuzé, Droit international privé, 10th ed., Paris, 2010, no. 752, p. 576; Bernard Audit and Louis d’Avout, Droit international privé, 6th ed., Paris, 2010, nos. 785-787, pp. 683-684; Kegel and Schurig, p. 769; Cheshire, North and Fawcett, p. 1244. 642 See supra, para. 334.

Chapter 3 – New Domains for Party Autonomy

by the week’s transactions.⁶⁴³ The answer of the markets was a dematerialization of negotiable instruments and a transition from a direct holding system to an indirect holding system: less and less securities were actually printed out, and more and more of them existed only as a single global certificate placed in the custody of a central agency established at the national level, a so-called central securities depository (CSD).⁶⁴⁴ Banks, brokers and other financial institutions hold accounts with the CSD; they are called participants of the respective CSD system and act as intermediaries between their customers, i.e. the investors, and the CSD. If for example the owner A of securities sells them, through the operation of a stock exchange, from his bank deposit with bank X to a buyer B holding a deposit with bank Y, there will only be several bookings and no longer any physical movement of negotiable instruments. The securities will be booked out from A’s bank deposit with bank X; the account of X with the CSD will accordingly be debited, and the account of bank Y with the CSD will be credited; and finally, the securities will be booked into the deposit account of B with bank Y. The whole process resembles climbing to the top of a pyramid for a descent down another side, especially where more than one intermediary is interposed between the investor and the CSD. In such cases, the intermediaries on the lower tiers will hold omnibus accounts for their various customers with the upper intermediaries, a facet which practically excludes an attribution of single bookings effected on the upper tiers to specific investment transactions of individual customers. Analogous booking operations take place where, instead of ownership, other security interests such as pledges are transferred. 347. These changes of the relevant operations were initially confined to national markets where the corresponding booking systems were established. The second major development concerns their expansion to international operations. In the absence of any physical cross-border movement of corporeal objects being required, the tremendous progress of electronic communication⁶⁴⁵ throughout the last decades has laid the foundation for a rapid growth of a cross-border trade in financial securities, as they are habitually called nowadays. Just as borrowers can obtain loans from foreign lenders, the booking operations outlined above enable them to provide security to 643 Ulrich Drobnig, “Dokumentenloser Effektenverkehr”, in Karl Kreuzer, ed., Abschied vom Wertpapier ? Dokumentenlose Wertbewegungen im Effekten-, Gütertransport und Zahlungsverkehr, Neuwied, 1988, pp. 11-41 at p. 14; Christophe Bernasconi, “Indirectly Held Securities: A New Venture for the Hague Conference on Private International Law”, YBPIL 3 (2001), 63-100 at p. 66. 644 The developments are summarised by Drobnig, previous footnote, pp. 16-24; a survey of the current CSDs (Depository Trust Company, Kassenverein, Sicovam etc.) is provided by Bernasconi, YBPIL 3 (2001), 67 in footnote 7; Michel Germain and Catherine Kessedjian, “La loi applicable à certains droits sur les titres détenus auprès d’un intermédiaire. Le projet de convention de La Haye de décembre 2002”, Rev. crit. dr. int. pr. 93 (2004), 49-81 at pp. 55, 60 et seq. 645 See supra, paras. 39 and 42.

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their foreign creditors without any practical difficulties. In a report on the operation of the pertinent EU Directive 2002/47, the European Commission described how that collateral in the Euro area was increasingly used on a cross-border basis. While at the end of 2005 such international transactions occurred in almost 50 per cent of all collateral business, the corresponding share had amounted to not more than 12 per cent in 1999.⁶⁴⁶ One of the reasons for this rapid growth of cross-border securities transactions is the concentration and relocation of the CSDs. While there had initially been one CSD per country, at present only a small handful of CSDs serve the securities markets of a very large number of countries. b) From lex situs to party autonomy 348. In the absence of any physical existence of the negotiable instrument, it is obvious that the application of the lex situs does not make sense; the investor’s entitlement flows from the booking in the account, not from the certificate.⁶⁴⁷ The solutions emerging from the more recent legal developments are not identical in the major jurisdictions. While some replace the situs of the certificate by the situs of one of the bank accounts involved, there is a tendency towards the admission of party autonomy. A first major step in this direction was done in the United States by the regulation of investment securities in Article 8 UCC. It distinguishes two major aspects of securities operations: the validity of securities which are essentially bonds and shares,⁶⁴⁸ together with issuer-related matters on the one side, and the trade in those securities between other persons (intermediaries, investors etc.) including their relations with third parties bringing adverse claims on the other.⁶⁴⁹ The latter relations which concern what traditionally have been referred to as proprietary issues are subject to the law of the security intermediary’s jurisdiction; it governs among others the acquisition of a security entitlement. This jurisdiction may be designated or its law may be chosen in the agreement on the securities account concluded between the intermediary and the account holder.⁶⁵⁰ Even more pioneering is the new private international law of Taiwan. It unambiguously designates the law specified in the

646 Report from the Commission to the European Parliament and the Council, Evaluation report on the Financial Collateral Arrangements Directive (2002/47/EC), of 20 December 2006, COM (2006) 833 final, pp. 4-5. 647 See Drobnig, supra at footnote 643, p. 37; Bernasconi, YBPIL 3 (2001), p. 69; Simon Schwarz, “Financial Collateral”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 692-697 at p. 695, also available in German under the heading “Verwahrung (Wertpapiere)”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. II, Tübingen 2009, p. 1720 at p. 1726. 648 See the definition of security in § 8-102 (a)(15) UCC. 649 See § 8-110 (a) and (b) UCC. 650 See § 110 (e)(1) and (2) UCC.

Chapter 3 – New Domains for Party Autonomy

account contract as governing the acquisition, loss, disposition or change of right regarding securities held with a CSD.⁶⁵¹ 349. The European legislature, too, has abandoned the situs rule for financial securities in collateral, but it has not yet admitted party autonomy. The relevant Directive 2002/47 essentially applies to the inter-bank sector, but it has been extended to other participants in the investment business in some Member States. It lays down a number of substantive rules for the booking operations and also deals with the conflict of laws in respect of so-called “book entry securities collateral”, referring to the law of the country in which the “relevant account” is maintained.⁶⁵² That law is applicable in particular to the proprietary effects of such book entry securities collateral as well as to the requirements for their perfection and to issues of priority.⁶⁵³ The connecting factor, i.e. the location of the “relevant account”, is defined as “the register or account … in which the entries are made by which that book entry securities collateral is provided to the collateral taker.”⁶⁵⁴ This is said to be the Place of the Relevant InterMediary’s Approach (PRIMA) and is sometimes identified with the transferee’s account.⁶⁵⁵ But the wording is not entirely clear because “the entries … by which that book entry securities collateral is provided to the collateral taker” may also include – as an indispensable precondition – the entry made in the transferor’s account, i.e. the debiting of that account, and other accounts of interposed intermediaries.⁶⁵⁶ In more general terms it is questionable whether an account, being a mere contractual relation, can unequivocally be assigned to a specific country in all cases. The Commission therefore appears to be justified when taking the view “that there is not a sufficient level of legal certainty at present, neither 651 Article 44 of the Taiwan Act of 2011; in the absence of a contractual designation, the law most closely connected is applicable. 652 See Article 9 of Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements, OJ 2002 L 168/43; on the substantive law provisions of that Directive see Thomas Keijser, “A Need for a Change – The Undesirable Consequences of the Settlement Finality Directive and the Collateral Directive in the Field of Property and Insolvency Law, in Particular for Small- and Medium-sized Enterprises”, ZEuP (2006), 308-325; the conflict rule of Article 9 has been implemented in the national legislations of the various Member States, see e.g. for Austria, § 33a of the Act on Private International Law and Judith Schacherreiter, “Das neue österreichische Kollisionsrecht des Effektengiroverkehrs”, Österreichisches Bank-Archiv 2005, 336-340; for Poland, see Article 44 of the law of 2011; for Germany see § 17a Depotgesetz. 653 See Article 9, para. 2. 654 See Article 2, para. 2(h). 655 Schwarz, “Financial Collateral”, supra at footnote 647 at p. 695; see however for the application of both the transferor’s and the transferee’s law prior to the European Directive: Drobnig, supra at footnote 643, p. 37. 656 See Germain and Kessedjian, Rev. crit. dr. int. pr. 93 (2004), 65, who accurately point out the lack of precision of the PRIMA definition in a draft of the Hague Securities Convention.

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at the international level nor at Community level.”⁶⁵⁷ Hence the Commission proposed that the European Union sign the pertinent Hague Securities Convention,⁶⁵⁸ an instrument which allows for a certain degree of party autonomy, see below. However, the matter turned out to be highly controversial, and when the Commission finally felt unable to ensure a ratification by all Member States, it withdrew its proposal in 2009.⁶⁵⁹ 350. In pursuance of a unified universal conflicts regime for financial securities in collateral, the Hague Conference adopted, on 5 July 2006, the Convention on the law applicable to certain rights in respect of securities held with an intermediar y.⁶⁶⁰ Under what is regarded as the primary rule of that Convention, which is Article 4, a large number of proprietary aspects of securities held with an intermediary (listed in Article 2, paragraph 1) are subject to the law governing the account agreement between the intermediary and its customer, a law that may be chosen by the parties provided that the relevant intermediary maintains, in the State whose law has been chosen, an office engaged in specific activities related to security accounts.⁶⁶¹ The limitation of party autonomy by the requirement of what is called a “qualifying office” is

657 Report, supra at footnote 646, COM (2006) 833 final, p. 11. For the “difficulty in localizing such securities”, see also Carruthers, no. 7.59, p. 193. 658 Proposal for a Council Decision concerning the signing of the Hague Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary of 15 December 2003, COM (2003) 783, OJ 2004 C 96/33. After the adoption of EU measures on that matter, see supra at footnote 634, the competence for concluding the Convention has passed from the Member States to the European Union, see Carruthers, nos. 7.42-7.44, pp. 187-188. 659 See Withdrawal of Obsolete Commission Proposals, OJ 2009 C 71/17 sub “internal market and services.” 660 See Hague Conference on Private International Law, ed., Collection of Conventions 1951 – 2009, The Hague 2009, pp. 454 et seq.; so far, the Convention has been signed by the US and ratified by Mauritius and Switzerland; for the Proposal of the European Commission, see supra footnote 658. The Convention was hailed by the financial services industry, which urged its immediate and universal ratification, see J.H.A. van Loon, “The Hague Conference on Private International Law – Work in Progress 2003 – 2004”, YBPIL 6 (2004), 237-245 at p. 238; yet, second thoughts appear to have slowed down the general approval more recently. For an explanation of the background and the various rules, see Roy Goode, Hideki Kanda and Karl Kreuzer, Explanatory Report on the Hague Convention on the Law Applicable to Certain Rights in Respect of Securities held with an Intermediary, The Hague, 2005; for a positive evaluation, see Matthias Lehmann, Finanzinstrumente, Tübingen, 2009, p. 502; see also Fabian Reuschle, “Haager Übereinkommen über die auf bestimmte Rechte in Bezug auf Intermediärverwahrte Wertpapiere anzuwendende Rechtsordnung”, IPRax (2003), 495-505. 661 See Article 4, para. 1(a) of the Hague Securities Convention; according to Reuschle, IPRax (2003), 500, the use of the habitual standard conditions of banks is sufficient for designating the applicable law.

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meant to forego a fraudulent choice of the applicable law.⁶⁶² Article 5 contains fall-back rules which designate the applicable law in the absence of a choice made by the parties, in accordance with some objective connecting factors. Although party autonomy is restricted in this context, the change from the PRIMA concept to party autonomy is a noteworthy occurrence. It is the result of the drafters’ intention to ensure legal certainty, an objective that can better be attained by the parties’ choice of the applicable law than by any conflict rule aiming at the localization of the complicated sequence of bookings.⁶⁶³ The same can be said in respect of the transparency of the connecting factors determining the applicable law: since the multitude of relevant connections in the booking pyramid renders all efforts at localization futile, reference to the law governing the security account (which may be chosen by the intermediary and the investor) has the advantage of a relative transparency. 351. It has been argued that the primary rule relating to the agreement between an intermediary and the investor or account holder cannot be classified as providing for party autonomy and that the use of this term in that context would be inappropriate and misleading; the concept of party autonomy would, if understood correctly, refer to an agreement between the investor and a collateral taker or transferee.⁶⁶⁴ This remark goes beyond mere semantics. It points to the characteristics of in rem rights in collateral held in bank deposits. The acquisition of such proprietary rights depends by their very nature on both the agreement between the previous owner and the purchaser, and the several account agreements involved. It is therefore doubtful whether it would be appropriate to speak of party autonomy with regard to any single agreement since effective party autonomy would require a multitude of agreements made between various parties involved. Yet, the admission of private choice of law in the account agreement as a precondition for the proprietary effects of a transaction itself gives evidence of the growing significance of freedom of contract in international property law. Although the gradual advance of party autonomy in this field, similar to the rules on the retention of title outlined above,⁶⁶⁵ only concerns a specific sector where proprietary rights are used in commercial relations, it is undeniable that a growing body of opinion endorses private ordering by means of choice-of-law agreements. Switzerland has recently enacted the Hague Securities Convention as autonomous national law

662 Christophe Bernasconi and Harry Sigman, “The Hague Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary (Hague Securities Convention)”, Unif. L. Rev. (2005), 117-140 at p. 125; Germain and Kessedjian, Rev. crit. dr. int. pr. 93 (2004), 67, who speak of a reality test for the parties’ choice of the applicable law. 663 Goode, Kanda and Kreuzer, supra at footnote 660, pp. 20-21 and 67. 664 Bernasconi, YBPIL 3 (2001), 85; in a similar vein Schwarz, Financial Collateral, supra at footnote 647 at p. 696. 665 See supra paras. 338 et seq., 341 et seq.

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irrespective of its status under public international law;⁶⁶⁶ this will generate some practical experience with choice of law in a highly developed financial market. It may cause the EU and its Member States to revisit their rejection of the instrument and encourage others to contemplate party autonomy in this field. Here again, its growing acceptance is due to the simple fact that the private actors of the global financial markets are better placed to determine the applicable law than the States. 4.

Intellectual Property

a) Nature, development and territoriality of intellectual property rights 352. Intellectual property and property in tangibles have in common their designation as property and an erga omnes effect. But they differ profoundly. First, there is no overall concept of intellectual property which is not more than a collective name for an enumerative list of rights granted by the various legislatures.⁶⁶⁷ Second, intellectual property consists exclusively of data without any basis in reality; once the data is disclosed, the intellectual property cannot be protected any more by physical measures. Third, the use of intellectual property is by no means impaired by its concurrent use by others. While the use of corporeal goods is characterized by rivalry and exclusion, it is not in respect of intellectual property. Its use by an unlimited number of persons at the same time may reduce its commercial value, but it will in no way affect its substance and qualities. Thus, intellectual property receives its exclusive character by the sole operation of law. While the legal protection of property in tangibles is due to the need to prevent social

666 Articles 108a-108d of the Swiss law of 1987 as amended in 2008, in particular Article 108c referring to the Hague Convention; see Anton Schnyder and Manuel Liatowitsch, Internationales Privat- und Zivilverfahrensrecht, 3rd ed., Zurich, 2011, paras. 713a and 713b at p. 246; see in particular the extensive commentary by Florence Guillaume in Andreas Bucher, ed., Loi sur le droit international privé – Convention de Lugano. Commentaire romand, Bâle 2011, pp. 877-889. 667 See Article 2 (viii) of the Convention establishing the World Intellectual Property Organization, done at Stockholm on 14 July 1967, 828 UNTS 3, referring to “rights relating to literary, artistic, and scientific works; performances of performing artists, phonograms and broadcasts; inventions in all fields of human endeavour; scientific discoveries; industrial designs; trademarks, servicemarks, and commercial names and designations; protection against unfair competition; and all other rights resulting from intellectual activity in the industrial, scientific, literary and artistic fields.” A similar approach is taken by Article 1, para. 2 of the Agreement on TradeRelated Aspects of Intellectual Property (TRIPS), which is Annex 1 C of the Agreement establishing the World Trade Organization, signed at Marrakesh on 15 April 1994, 1869 UNTS 299, OJ 1994 L 336/214: “For the purposes of this Agreement, the term ‘intellectual property’ refers to all categories of intellectual property that are the subject of Sections 1 through 7 of Part II.”

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unrest and commotion, the protection of intellectual property is rather a matter of maximizing welfare. 353. Initially, rulers pursued their own private welfare. They awarded intellectual property rights on an individual basis for the promotion of their own wealth, granting the exclusive right to print a book or to produce items based on a given technology. Their motivation was the intent to have their share in the profit effectuated by the extraction of royalties. Where they believed this to be beneficial, they sometimes withdrew these rights later on. Under the philosophical influence of the Enlightenment, the claim was made for more stability and for independence from individual concessions. The progeny of human creativity was considered as belonging to the creator or originator. But the first statutes ensuring legal security in this respect were enacted only after the French Revolution.⁶⁶⁸ They replaced the discretion of princes in according the right with a system of statutory prerequisites for the recognition of such rights, a system administered by special authorities under the control of the courts. 354. But the historical background of intellectual property in the economic policy approaches of the mercantilist era kept its significance even after legal certainty was increased by pertinent statutes. While intellectual property rights granted by seigneurs and princes could only be effective in the territory governed by the respective ruler, this approach remained basically unchanged. Public power was replaced by public law maintaining, however, the territorial scope of protection. The private welfare of the prince was replaced by the public welfare of the whole nation as the ultimate goal of intellectual property legislation. The promotion of public welfare and public policy is still considered as an important objective of intellectual property law.⁶⁶⁹ It follows from this mercantilist approach that the legislation on in668 See Helmut Coing, Europäisches Privatrecht 1800 bis 1914, Vol. II, Munich 1989, pp. 152 et seq., referring to the French Decrees of 1791 and 1793 as the first legislative acts espousing the principle of intellectual property. Jane Ginsburg, “The Private International Law of Copyright in an Era of Technological Change”, Recueil des cours 273 (1998), 239-405 at p. 258, mentions an early US copyright regime of 1790. William Cornish and David Llewelyn, Intellectual property: Patents, copyright, trademark and allied rights, 5th ed., London 2003, nos. 1-14 und 9-02 et seq., refer to the English Statute of Anne, 8 Ann. ch. 21 enacted in 1710 as the first copyright act. However, protection under that act was not granted to the creation as such, but only after registration of the right by the guild of stationers, see Eugen Ulmer, Urheber- und Verlagsrecht, 3rd ed., Berlin 1980, p. 55. 669 A telling example has been reported by the drafter of the Turkish Copyright Act in his autobiography, see Ernst E. Hirsch, Als Rechtsgelehrter im Lande Atatürks, Berlin, 2008, pp. 112 et seq.: Between World War I and II, the Turkish government refused to ratify the revised Berne Copyright Convention because of the exclusive copyright granted to the author in translations of his work, as established by what is now Article 8 of the Convention; in order to foster the modernisation of Turkish society, the government wanted to make accessible Western knowledge and ideas at low prices, i.e. without the payment of royalties to the foreign authors for translations of their works.

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tellectual property rights could only have territorial effect within the country granting the respective rights. This approach is usually encapsulated in the term of the lex loci protectionis, which is the law of the country for which protection is sought, not the law of the country where protection is sought, which would be a simple equivalent to the lex fori. b) The framework of the lex loci protectionis in international law 355. It is not entirely clear whether the lex loci protectionis principle has been laid down in the fundamental international conventions on intellectual property, i.e. the Paris Convention for the protection of industrial property of 1883⁶⁷⁰ and the Berne Convention for the protection of literary and artistic works of 1886.⁶⁷¹ These conventions implicitly acknowledge that each contracting State has its own legislation on intellectual property; except for some specific rules there is no comprehensive substantive harmonization of the law relating to the respective intellectual property rights.⁶⁷² On this basis, they endorse two principles: (1) The adoption of certain minimum standards of substantive law to be implemented by each contracting State; and (2) National treatment for foreign inventors and creators, i.e. the prohibition of any discrimination against foreign originators on the ground of their nationality. 356. In the context of the provisions on national treatment, the conventions also set forth rules which may appear, in a present-day reading, as choice-of-law provisions. Thus, Article 5, paragraph 2 of the Berne Convention prescribes that “the extent of protection [of a creator’s rights], as well as the means of redress afforded to the author to protect his rights, shall be governed exclusively by the laws of the country where protection is claimed.” While some authors consider this provision as a choice-of-law rule,⁶⁷³ others reject that interpretation.⁶⁷⁴ In light of the mercantilist policies pursued by the contract670 Paris Convention for the Protection of Industrial Property, done on 20 March 1883, 828 UNTS 305. 671 The Berne Convention for the Protection of Literary and Artistic Works, done on 9 September 1886, 1161 UNTS 3. 672 The proposal of the German delegation to the Berne diplomatic conference of 1884 to establish a uniform copyright law was rejected, see Ginsburg, Recueil des cours 273 (1998), 262. 673 S. J. Schaafsma, “Rome II: Intellectuele eigendom en oneerlijke concurrentie”, WPNR 2008, 998-1003 at p. 999; Ginsburg, Recueil des cours 273 (1998), 322 et seq.; James Fawcett and Paul Torremans, Intellectual Property and Private International Law, 2nd ed., Oxford, 2011, nos. 12.39-12.47, pp. 682-685. 674 Nerina Boschiero, “Infringement of Intellectual Property Rights – A Commentary on Article 8 of the Rome II-Regulation”, YBPIL 9 (2007), 87-113 at pp. 97 et seq.; Haimo Schack, “Das auf (formlose) Immaterialgüterrechte anwendbare Recht nach Rom II”, in Dietmar Baetge, Jan von Hein and Michael von Hinden, eds., Die richtige Ordnung – Festschrift für Jan Kropholler, Tübingen, 2008, 651-670 at p. 661; Paul Goldstein and Bernt Hugenholtz, International Copyright, 2nd ed., Oxford, 2010, p. 129; Dário Moura Vicente, “La propriété intellectuelle en droit internationale privé”,

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ing States in the nineteenth century with regard to intellectual property, it is unlikely indeed that the international community was very much concerned about choice-of-law principles. National Governments were rather preoccupied by two concerns: the risk that foreign States might grant protection to inventions and copyrighted works at a very low level or not at all, and the risk that they would discriminate against foreign inventors and authors. Provisions like Article 5, paragraph 2 of the Berne Convention are therefore more likely to be simple prohibitions of discrimination on grounds of nationality; this is even less ambiguous in the case of Article 2 of the Paris Convention with regard to patents. It also appears to be in line with the use of national treatment provisions in other areas of international economic law.⁶⁷⁵ 357. Nevertheless, the basic conventions of Paris and Berne impose limits on choice-of-law rules enacted by individual States. To the extent that national legislation actually contains conflict rules for intellectual property, the lex loci protectionis principle has in fact been followed by the vast majority of countries.⁶⁷⁶ It is only for non-registered intellectual property rights, in particular copyright, that some countries have rather designated the author’s national law as the law applicable before publication; afterwards it is the law of the country of first publication that applies.⁶⁷⁷ Recueil des cours 335 (2008), 105-503 at p. 271, who points out that the invariable application of the lex fori would also be in line with the principle of national treatment laid down in Article 5 para. 2 of the Berne Convention and that therefore no conflict rule can be inferred from that provision. In Japan as well, the prevailing view rejects the interpretation of the inland treatment provisions of the Paris and Berne Conventions as conflict rules, see Yuko Nishitani, “Intellectual Property in Japanese Private International Law”, The Japanese Annual of International Law 48 (2005), 87-108 at p. 95; Ulrich Drobnig, “Originärer Erwerb und Übertragung von Immaterialgüterrechten im Kollisionsrecht”, RabelsZ 40 (1976), 195-208 at p. 202, refers to the ”fremdenrechtliche Anlage” of the Berne Convention. 675 See e.g. Christian Tietje, ed. Internationales Wirtschaftsrecht, Berlin, 2009, § 3 nos. 71-76 (Christian Tietje on GATT); § 4 nos. 43-44 (Friedl Weiss on GATS); § 8 nos. 4145 (August Reinisch on investment protection); § 12 nos. 64, 72, 77, 92 (Horst-Peter Götting on intellectual property); see also Dominique Carreau and Patrick Juillard, Droit international économique, 4th ed., Paris 2010, nos. 535 et seq., pp. 212 et seq. 676 See for Austria § 34 of the 1978 Law: law of the country where “an act of exploitation or infringement is committed”, which is interpreted in the sense of the lex loci protectionis, cf. Posch, no. 13-9, p. 117; for Belgium, Article 93 para. 1 of the 2004 Code; for the People’s Republic of China see Articles 48 and 50 of the 2010 Act; for Italy Article 54 of the 1995 Act: “law of the state of exploitation“; for Korea § 24 of the 2001 Act deals only with infringement referring to the “law of the place of infringement”, which is considered as an equivalent to the lex loci protectionis, cf. Pissler, RabelsZ 70 (2006), 305; for Macao Article 47 of the Civil Code of 1999 cited by Moura Vicente, Recueil des cours 335 (2008), 272 in footnote 452; for Switzerland Article 110 of the 1987 Act; for Turkey see Article 23 of the 2007 Act. 677 Such rules can be found in Article 48 of the Portuguese Civil Code and in Article 60 of the Romanian Law of 1992, now Article 2624 of the New Civil Code.

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358. It should be noted, however, that with regard to security rights in intellectual property, the prevailing view might be changed as a result of recommendations made by UNCITRAL in a Supplement on Security Rights in Intellectual Property which is attached to its Legislative Guide to Secured Transactions.⁶⁷⁸ While Recommendation 248 basically affirms the lex loci protectionis rule with regard to the creation, effectiveness against third parties and priority of a security right in intellectual property, it further allows the creation of such a right under the law of the State in which the grantor is located; that law is also recommended for the enforcement of such a security right.⁶⁷⁹ Thus, an author domiciled in France and holding a copyright for a novel in 53 States may create a security interest in these 53 parallel copyrights under the sole law of France, which will certainly facilitate the procurement of credit. The reference to the grantor’s law gives evidence of the widely felt need of lenders to assess securities on the basis of a single law instead of having to look into a great number of different laws for that purpose. This need has already inspired the conflict rules of the 2001 version of the Uniform Commercial Code in the United States.⁶⁸⁰ In the present context, the grantor’s law may apply to a security interest in an intellectual property right as long as there is no conflict with other interests in that right; in the latter case, the Recommendation must however allow for an exception from the reference to the grantor’s law for priority issues, thereby implicitly affirming the general lex loci protectionis rule.⁶⁸¹ 359. The inconveniences caused by the principle of territoriality are obvious. As far as concerns intellectual property rights that have to be registered in order to come into being, multiple registration is necessary in all countries for which protection is sought. By contrast to property in tangibles which, in the case of the transfer of a movable is recognized by and adjusted to the law of the new situs,⁶⁸² intellectual property rights requiring registration have no existence in countries where they are not registered. Both for registered and non-registered rights the principle of territoriality leads to the existence of a multitude of parallel rights in the same subject matter in the various States, rights which are, however, not necessarily equal in their content, duration, protection by remedies, etc. For example, a patent for the same 678 UNCITRAL Legislative Guide on Secured Transactions – Supplement on Security Rights in Intellectual Property Rights, New York 2011. 679 UNCITRAL, previous footnote, Annex I, Recommendation 248 at p. 163. 680 See supra in footnote 606. 681 UNCITRAL, supra at footnote 678, Recommendation 248 (b). 682 See supra para. 334; the adjustment is put into effect in different forms in the various conflict statutes: According to Article 100, para. 2 of the Swiss Law of 1987, the content and exercise of proprietary rights in movables are governed by the lex situs, i.e. not by the law which originally had generated these rights; under Article 43, para. 2 of the Introductory Law of the German Civil Code, proprietary rights acquired in a foreign country in movables transferred to another state cannot be exercised contrary to the new lex situs.

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invention may have expired in State A while still persisting in State B, with obvious distorting consequences for international commerce in the patented goods. In a world featuring the free cross-border flow of goods, services and data, the territorial principle also impedes the protection of intellectual property rights by infringement actions. Issues concerning the validity of an intellectual property right which are usually raised in infringement cases have to be litigated in the numerous States where protection for the parallel rights is sought.⁶⁸³ Even if the actions could be combined and brought in one single country, the substantive issues of the case would have to be decided under the lex loci protectionis and in accordance with the various applicable laws of countries for which protection is sought. It is obvious that a better system is needed in a world of open frontiers and global communication.⁶⁸⁴ 360. Despite these drawbacks, the territorial principle is deeply rooted in international law and unlikely to be abandoned. The international conventions building upon the Paris Convention of 1883 and the Berne Convention of 1886 have received worldwide approval; moreover, the TRIPS Agreement attached to the WTO Treaty of 1994 has turned them into a cornerstone of the world trade order.⁶⁸⁵ These conventions have enshrined the principle of national treatment, which amounts to a prohibition of discrimination on grounds of nationality. Therefore, the contracting States must not afford, either by substantive provisions or by conflict rules, a protection to foreign originators that diverges from that granted to their domestic creators. Conflict rules having that effect would be incompatible with the principle of national treatment. This excludes not only outright discrimination on the ground of nationality, but also, as indirect discrimination, conflict rules which employ the rightholder’s domicile or habitual residence as a connecting factor, since these 683 Article 16 no. 4 of the Brussels Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, OJ 1978 L 304/36 (Article 22 no. 4 of the Brussels I Regulation 44/2001, OJ 2001 L 12/1, now: Article 24 (4) of the recast Regulation (EU) no. 1215/2012), provides for exclusive jurisdiction of the state of registration with regard to the validity of patents, trademarks, designs or other similar rights; according to the European Court of Justice, this rule applies in all proceedings relating to the registration of validity of such rights irrespective of whether the issue is raised by way of an action or a plea in objection to an infringement action, see ECJ, 13 July 2006, case C-4/03 (Gesellschaft für Antriebstechnik – GAT v. Lamellen- und Kupplungsbau – LUK), [2006] ECR I-5925; see the critical comments by CLIP, European Max Planck Group for Conflict of Laws in Intellectual Property, “Exclusive Jurisdiction and Cross-border IP (Patent) Infringement; Suggestions for Amendment of the Brussels I Regulation”, European Intellectual Property Review 2007, 195-203; see also the broad discussion of the opinion and its consequences in Fawcett and Torremans, nos. 7.27 et seq., pp. 346 et seq. 684 François Dessemontet, “International Private Law of Intellectual Property”, YBPIL 6 (2004), 71-84 at p. 72. 685 See Articles 2 and 9 TRIPS, 1869 UNTS 299, which is Annex 1 C and therefore an indivisible part of the WTO Treaty.

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localizing factors and nationality coincide in the majority of cases. However, if the principle of national treatment as laid down in the international conventions is interpreted not as a conflict rule but as a principle of international economic law limiting the contracting States’ discretion in adopting national legislation, party autonomy would not be affected. Where the unequal treatment of domestic and foreign originators results from the single agreements of private parties, it is not the consequence of discriminatory treatment by a contracting State. Moreover, domestic and foreign originators would equally be permitted to make use of their party autonomy. Thus, the situations in question would not be addressed by the principle of national treatment. c) The scope of party autonomy 361. But what is the actual and possible scope of party autonomy in this field ? It is by necessity limited. To the extent that intellectual property rights require registration with an authority in order to come into existence and provide protection for the authority’s country, the authority will by necessity apply its own law and will not accept applications lodged in accordance with the law of a different State. It is conceivable, however, that before registration the parties involved agree upon the person who is entitled to fi le for a patent or other right in his own name; what can be the subject of a choice-of-law agreement is the right to a patent, not the patent itself which arises from the grant and registration by the competent authority. With regard to non-registered intellectual property rights, in particular copyright, similar agreements appear to be possible in theory, for example between a publisher and an author, between a movie producer and an actress or between different laboratories cooperating for the development of computer software. Such agreements could identify the party that is entitled to intellectual property rights arising from their implementation. The agreements would relate to what is called initial ownership of intellectual property rights arising from research and development cooperations; but could they also designate the law applicable to initial ownership ? This raises the issue of party autonomy in intellectual property in a more general perspective. 362. Party autonomy has always had its place in the law of intellectual property. It is generally acknowledged that contracts on the transfer or licensing of intellectual property can be subject, by the parties, to the law chosen by them.⁶⁸⁶ However, this rule relates to the contractual or obligatory issues of those agreements, for example the transferor’s or licensor’s duty to convey the respective right free of any encumbrances, corresponding duties of the 686 This is explicitly stated in Article 110, para. 3 of the Swiss Act of 1987, for Turkey, in Article 28 para. 3 of the Act of 2007 and in Article 49 of the 2010 Act of the People’s Republic of China; but it has generally been long-recognised, see Kamen Troller, “Industrial and Intellectual Property”, IECL, Vol. 3, Chap. 22, Sects. 27 et seq.; Ginsburg, Recueil des cours 273 (1998), 356 and 363 et seq.; Goldstein/Hugenholtz, pp. 139 et seq.; for the Rome I Regulation see also Fawcett and Torremans, nos. 14.34-14.38, pp. 755-756.

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transferee or licensee, the prescription of the mutual obligations, etc. In this respect, the contractual transfer or the licensing of intellectual property rights does not differ in respect of the conflict of laws from other contracts, as had already been stressed by the Giuliano/Lagarde report on the Rome Convention on the law applicable to contractual obligations of 1980.⁶⁸⁷ The obligatory aspects of a transaction have, however, to be distinguished from the proprietary aspects which include initial ownership of an intellectual property right, its transferability, the erga omnes effect of a transfer or licence, etc. In general, the proprietary aspects are excluded from the operation of the law applicable to the contract, whether that law has been chosen by the parties or not. These aspects are therefore subject to the law applicable to intellectual property rights in general, i.e. to the lex loci protectionis in most countries. The inconveniences of the conflict rule which have been outlined above have still not been overcome. 363. An exception to the operation of the lex loci protectionis has been acknowledged for many years in respect of intellectual property rights arising from employment relations. According to Article 60 paragraph 1 of the European Patent Convention, the right to a European patent shall, if the inventor is an employee, be determined “in accordance with the law of the State in which the employee is mainly employed; if the State in which the employee is mainly employed cannot be determined the law to be applied shall be that of the State in which the employer has his place of business to which the employee is attached.”⁶⁸⁸ It is noteworthy that this conflict rule still adheres to an objective connecting factor and does not allow for a contractual choice of the law governing the right to the patent. This is different in the case of Article 122 of the Swiss Law of 1987; under para. 3 of that provision the law applicable to an employment contract, which is subject to a limited choice by the parties in accordance with Article 121 paragraph 3, governs also the effect of the parties’ agreements on rights in intangibles. While some commentators take the view that this includes initial ownership, others favour a narrow interpretation limited to the obligatory aspects of the agreement.⁶⁸⁹ 687 Mario Giuliano and Paul Lagarde, Report on the Convention on the Law Applicable to Contractual Obligations, OJ 1980 C 282/1 at p. 10 in para. 2: in rem rights and rights in intangibles are excluded from the scope of the Convention, which however in Article 4, para. 3 explicitly regulates contracts dealing with in rem rights in real property. It thereby makes clear that the exclusion referred to in para. 2 on p. 10 of the report does not relate to the contractual issues; see also Dieter Martiny in Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. 10, 5th ed., Munich 2010, Art. 4, Rom I-VO, nos. 201 et seq.; the distinction of contractual aspects and proprietary rights is further elaborated by Fawcett and Torremans, nos. 14.05 et seq., pp. 746-748. 688 Convention on the Grant of European Patents, done at Munich on 5 October 1973, 1065 UNTS 199. 689 In the first sense see e.g. Max Keller and Jolanta Kren Kostkiewicz, IPRG-Kommentar, Zurich, 1993, Art. 122 nos. 63-65; in the second sense Gion Jegher and Anton K.Schnyder in Honsell, Vogt and Schnyder, Art. 122 no. 30. The Turkish law of 2007

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The rule laid down in Article 47 of the 2011 Polish law is analogous but only relates to claims of the employee against the employer, which suggests a limitation of the scope of the rule to obligatory acts. Under the law of Taiwan there is however no doubt that the entitlement to intellectual property created by an employee in the performance of his or her duties is to be governed by the law applicable to the employment contract, which may be chosen by the parties.⁶⁹⁰ A further step was taken in Belgium by the 2004 Code. It has established a rebuttable presumption that the law governing the contractual relation underlying the intellectual activity is the law most closely connected to the intellectual activity generating the rights of intellectual property; it is that law which determines initial ownership.⁶⁹¹ While this rule only applies to industrial property and not to copyright, it is not restricted to employment contracts but covers other types of cooperation arrangements, too. Since party autonomy is explicitly admitted for contracts – including individual employment contracts – by Articles 3 and 8 of the Rome I Regulation (that Regulation having the force of law in Belgium as well), the Belgian rule is an undeniable case of party autonomy in respect of initial ownership in – some – intellectual property rights.⁶⁹² 364. More recently, the American Law Institute has adopted non-binding principles on the law applicable to intellectual property which open the door to party autonomy in various respects.⁶⁹³ The Principles are intended to inspire the future development of the law in US courts, but they may also be taken into account in other countries. In line with legal tradition, the ALI Principles subject the existence, validity, duration, attributes and infringement of intellectual property rights to the law of the State of registration, if any, otherwise to the lex loci protectionis, § 301. However, under § 302 the parties are with some exceptions allowed to agree, before or after a dispute arises, on the designation of the applicable law. The admission of party autonomy is further specified with regard to the initial ownership of intellectual property resulting from cooperation arrangements. For both registered rights and unregistered trademarks, the ALI Principles provide that the initial title is governed

690 691 692

693

has adopted a similar rule in Article 28 para. 3; since that rule is placed in the context of conflict rules on contracts (and not in the context of intangibles), commentators might also tend towards a narrow interpretation. See Article 42, para. 2 of the Act of 2011; party autonomy is acknowledged with regard to juridical acts in general in Article 20. See Article 93 § 2 of the 2004 Code and the comments of Marta Pertegás in Erauw/ Fallon et al., p. 477. Explicitly in this sense, Andrée Puttemans, “Les droits intellectuels et la concurrence déloyale dans le Code de droit international privé”, Tijdschrift voor Belgisch Handelsrecht 2005, 615-623 at p. 621. The American Law Institute, Intellectual Property – Principles Governing Jurisdiction, Choice of Law, and Judgments in Transnational Disputes, St. Paul, MN 2008, §§ 301 et seq.

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by the law that governs the contract or pre-existing relationship.⁶⁹⁴ For other non-registered rights, in particular copyright, the Principles equally allow for a contractual designation of the law applicable to initial ownership.⁶⁹⁵ 365. With regard to copyright, this novel approach may be difficult to reconcile with those national laws which consider copyright as a right which reaches beyond commercial exploitation and grants a moral right (droit moral, Urheberpersönlichkeitsrecht) that is considered as flowing from human dignity and is, therefore, inalienable. These laws admit the transfer of the commercial exploitation aspect of copyright to other persons, but they may disallow the designation of a law that does not respect the inalienable moral portion of copyright. While rejecting such a choice of the applicable law by the parties,⁶⁹⁶ they may at the same time interpret the parties’ arrangement as a licence, perhaps even as an irrevocable and exclusive licence relating to the commercial side of copyright.⁶⁹⁷ While this approach suffices for many practical needs, it 694 See § 311, para. 2 and § 312, para. 2 of the ALI Principles. 695 § 313 (1)(b) in general and (c) for employment relationships; see also: François Dessemontet, “The ALI Principles: Intellectual Property in Transborder Litigation”, in Jürgen Basedow, Toshiyuki Kono and Axel Metzger, eds., Intellectual Property in the Global Arena, Tübingen 2010, pp. 31-48 at p. 43. 696 See BGH, 2 October 1997 (Spielbankenaffaire), JZ (1998), 1015, with critical annotation by Haimo Schack: a co-production agreement concluded in 1955 for a movie between the East German DEFA and a Swiss partner had allocated, as licence areas, a number of countries – not including Luxembourg – to each contracting partner. In 1985, the Luxembourg TV company RTL acquired rights for Luxembourg, but the same rights were later acquired, in 1990, by the Swiss plaintiff. When the movie was broadcast via satellite by RTL, the BGH had to decide on the identity of the initial owner of the copyright for the movie in Luxembourg, a decision which, according to the court, had to be taken under the laws of Luxembourg; however, the court also pointed out that under the law of Luxembourg the basic agreement of 1955 might have included a tacit licence for later satellite broadcasting. This decision has been basically approved by leading authors, see Josef Drexl, in Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. 11, 5th ed., Munich 2010, IntImmGR no. 193. However, a tacit licence for satellite broadcasting construed in a contract concluded in 1955, i.e. even before the first satellites were carried into space, amounts to pure fiction as rather openly acknowledged by the BGH. 697 See Drexl, previous footnote, IntImmGR no. 193; a similar solution has been adopted by the European Max Planck Group on Conflict of Laws in Intellectual Property, see Article 3:201 (2) CLIP Principles, see Basedow, Kono and Metzger, p. 381; in most instances the CLIP solution will lead to the same result as a choice of the law applicable to initial ownership, see the case study by Yasuhiro Okuda, “Initial Ownership of Copyright in a Cinematographic Work under Japanese Private International Law”, YBPIL 11 (2009) 375-383 at p. 381. Okuda considers the following case: regarding a cartoon made in 1968 and based on the script of a Russian author, a Russian movie producer had assigned rights in respect of Japan to Japanese companies; while under the former law of the USSR the producer owned those rights, under Japanese law the script author also acquired a right in a movie produced on the basis of his script. Okuda argues that the law applicable to the contract between the script author and

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is excessive and questionable from a methodological point of view. It suggests a solution at the level of substantive law, although that substantive law must be applied, in accordance with a general principle of private international law, in conformity with the court practice and doctrinal opinion of the home State of the law. If, moreover, the moral right is considered as a non-derogable right of the author, it is sufficient to enforce that right as an overriding mandatory provision against a diverging choice of the applicable law.⁶⁹⁸ But in the light of the significantly reduced role of the moral side of copyright, it is difficult to infer from this approach a complete exclusion of party autonomy in respect of initial ownership. The parties to an international cooperation arrangement should basically be able to identify a single party as the initial owner of intellectual property rights flowing from that arrangement and, in order to exclude frictions between the various leges locorum protectionis, be able to designate a single law regulating that identification.⁶⁹⁹ 5.

Summary

366. In respect of proprietary rights, party autonomy has by necessity only a restrictive purview. The basic rules of the lex situs with regard to tangibles and the lex loci protectionis with regard to intellectual property result to a great degree from the role of State powers in these areas. The selective character of agreements, irrespective of their substantive or conflict-of-laws content, makes it difficult to reconcile party autonomy with the need to provide equal protection to all persons involved. Nevertheless, the advances of party autonomy in a number of areas which – at first sight – may appear as peripheral, have in fact assumed considerable commercial significance, for example reservation of title in movables, security interests in financial collateral held by intermediaries and initial ownership of intellectual property rights arising from cooperation arrangements. In part, these developments are due to the gradual expansion of contract law into areas that have been governed by the law of property. This has been a consequence of far-reaching commercial changes which may continue in the future.

the producer, i.e. Russian law, should prevail over Japanese law as governing initial ownership; the latter, he concludes, would be applicable basically as the lex loci protectionis. 698 See Article 9 of the Rome I Regulation and Article 16 of the Rome II Regulation. 699 On a similar note, the universalist school, see e.g. Drobnig, RabelsZ 40 (1976), 198: “… erscheint es ideell wie praktisch unerträglich, sich damit abzufinden, dass die originäre Inhaberschaft eines Urheberrechts von Land zu Land anders beurteilt warden kann.” See also in this sense, Haimo Schack, Urheber- und Urhebervertragsrecht, 4th ed., Tübingen 2007, para. 912, p. 467, and for further arguments in this respect Jürgen Basedow, “Foundations of Private International Law in Intellectual Property”, in Basedow, Kono and Metzger, pp. 3-29 at pp. 18-23.

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Section 4: Persons 1.

Scope and History of the Law of Persons

a) The law of persons – a remainder of the Middle Ages 367. The law of persons is a rather heterogeneous concept. It encompasses such diverse issues as the ability to acquire rights or to be indebted to a creditor; the beginning and end of human life; the capacity to make contracts or to commit acts of legal significance; the determination of name and gender; or the status of a person as a merchant (or perhaps in modern times, as a professional or consumer).⁷⁰⁰ Some of these issues relate only to natural persons, others to both natural and legal persons (legal entities); with regard to the latter, some additional questions arise concerning, for instance, the internal procedures to be followed within a legal entity to make a declaration valid. These issues have very little in common. Many of them emerge not independently, but as preliminary or incidental questions in a context rooted in another area of the law, for example in family law or contract law. Very understandably, the common law jurisdictions have chosen to deal with these matters separately. 368. On the European continent, however, a general concept of personal status (statut personnel, Personalstatut) has been inherited from the Middle Ages. The barbarian conquest of the Roman Empire led to a coexistence of socalled vulgar Roman law and the various Germanic laws. Roman law kept its binding force for the indigenous population,⁷⁰¹ while the conquerors lived under their laws.⁷⁰² As Germanic peoples such as the Burgundians and the Lombards started to enact statutes dealing not only with personal relations but also with real property, the binding force of the laws exclusively connected by personal criteria was superseded by territorial sovereignty, and the mix of the indigenous population with the conquerors occurring over the centuries struck a further blow to the prevalence of the personality principle.⁷⁰³ About 1200, a clear distinction was already acknowledged between 700 Most of the subjects listed supra are treated by Alfred von Overbeck, “Persons”, IECL, Vol. 3, Chap. 15 (completed in 1970); see also Kurt Siehr, “Personal Law”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 2, Oxford, 2012, pp. 1269-1272; also in German under the heading “Personalstatut”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. II, Tübingen 2009, pp. 11441146. 701 Max Kaser, Das römische Privatrecht, Vol. 2, 2nd ed., Munich, 1975, p. 27. 702 See the comprehensive study by Eduard Maurits Meijers, “L’histoire des principes fondamentaux du droit international privé à partir du Moyen Age”, Recueil des cours 49 (1934), 543-686 at pp. 549-566; see also Max Gutzwiller, Geschichte des internationalen Privatrechts, Basel, 1977, p. 7. 703 Gutzwiller, pp. 8-9; Meijers, Recueil des cours 49 (1934), 553, discusses the marriage of the Lombard king Ratchis with a Roman wife in 744; contemporary writers con-

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statuta personalia and statuta realia, and by the seventeenth century the scope of personal laws was further diminished by the spin-off of the statuta mixta.⁷⁰⁴ In more recent times, the law of persons as understood in a comprehensive way has further petered out through the emergence of specific conflict rules for a number of family relations such as marriage, descent or maintenance. The remainder of personal laws is, therefore, little more than a collective denomination for a number of rather inconsistent legal issues. b) Divergent policies 369. Moreover, the remaining areas of application of personal law are governed by divergent policy considerations. An example is given by the reassignment of gender and the consequential adoption of a new name on the one hand, and the general principles governing the choice of names for natural persons on the other. While the substantive law of more and more countries allows transsexuals to apply for a reassignment of gender and a change of their name, only some of them consider such changes as being subject to the law governing personal status.⁷⁰⁵ The latter approach would include the possibility of conferring new names on foreigners. While States in other contexts are usually prepared to register names of individuals resulting from foreign laws, the adoption of a name of the opposite sex by a foreign transsexual is often excluded or subject to very strict conditions.⁷⁰⁶ At least in Germany, the restrictions laid down in a statute enacted in 1980, which in a comparative perspective was one of the first laws on the matter, were allegedly motivated by the concern that Germany might otherwise become the target of an international “tourism” or migration of transsexuals,⁷⁰⁷ i.e. a public policy concern. 370. On the other hand, some countries seem to grant more latitude when it comes to the adoption of names under general principles. As a matter of substantive law, many common law jurisdictions and some other countries basically leave the choice of a name to the individual concerned or his or

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sidered it a betrayal that he – for political reasons –conveyed the morning gift in the Roman form (sponsalitium) and not in the Lombard form (morgencap), but at the same time it is evidence of a gradual loss of weight of the personality principle. Gutzwiller, p. 141 cites the Dutch jurist Johannes Voet saying: “Nobilissima statutorum divisio est, quia alia personalia sunt, alia realia, alia mixta.” See Jürgen Basedow and Jens Scherpe, eds., Transsexualität, Staatsangehörigkeit und internationales Privatrecht, Tübingen, 2004, with about 20 national reports; see also Mary Ann Glendon, “Introduction: Family Law in a Time of Turbulence” (completed 2003), IECL,Vol. 4, Introd., Sect.14 referring to the case law of European Court of Human Rights on the matter. See Basedow and Scherpe, pp. 3-4 for Germany, Markus Roth, in Basedow and Scherpe, p. 53 for Austria and Jens Scherpe, in Basedow and Scherpe, p. 62 for Sweden. Basedow and Scherpe, p. 9.

Chapter 3 – New Domains for Party Autonomy

her parents and only provide for a safeguard against abuses.⁷⁰⁸ These jurisdictions have no grounds to concern themselves, at the level of private international law, with the law applicable to names. Other States provide in their conflict statutes for the application of personal law without specifying names as being covered.⁷⁰⁹ A third group of States has enacted specific conflict rules for names; they designate either the national law, for example in Germany,⁷¹⁰ or the law of the respective person’s domicile, for example in Switzerland.⁷¹¹ But both countries mentioned afford a degree of choice to the persons involved: in Switzerland, a foreigner may claim the application of his national law, and in Germany a rather detailed conflict rule permits a choice of the applicable law, although with certain limitations, to spouses and to parents of newly born children.⁷¹² The case law of the European Court of Justice indicates that these limitations are still too strict and that more liberty is required by virtue of the European treaties.⁷¹³ 371. The example shows that the policies involved in the individual issues covered by personal law may be very specific. It follows from the heterogeneous nature of both the issues relating to the personal law and the underlying policies that a general solution for all issues classified as “personal” is not possible. While the European Commission has, in a public consultation on the future treatment of civil status records, asked whether citizens should be

708 Von Overbeck, IECL, Vol. 3, Chap. 15, Sects. 44 et seq. 709 See Article 3 para. 3 of the French Civil Code, see infra footnote 716; on its application to names, see Audit and d’Avout, nos. 132-133, pp. 127-128; Mayer and Heuzé, nos. 507, 515, pp. 383, 389. The silence of Asian private international law codifications (China, Japan, Korea, Vietnam) as well as many Latin American statutes on the law applicable to names does not always allow for a clear assignment of the respective jurisdiction to the first or second group of jurisdictions detailed here. 710 See Article 10 EGBGB in Germany; similar conflict rules referring to the national law can be found, for example, in Belgium, Article 37 and 38 of the 2004 Code, Bulgaria, Article 53 of the 2005 Code, Russia, Articles 1195 and 1198 Civil Code, Slovenia, Article 14 of the Act of 1999, Tunesia, Article 42 of the Act of 1998. 711 See Article 37 of the Law of 1987; another example for a country subjecting the determination of a name to the law of domicile is Brazil, Article 7 of the Introductory Law of the Civil Code. 712 See for Switzerland, Article 37 of the 1987 law; the choice of the national law is meant to ensure that the person can bear an identical name in Switzerland and his or her foreign home country, see Andreas Bucher and Andrea Bonomi, Droit international privé, Bâle, 2001, no. 610 at p. 164; Monique Jametti Greiner and Thomas Geiser in Honsell, Vogt and Schnyder, Art. 37 nos. 25 et seq.; see for Germany, Article 10 of the Introductory Law of the Civil Code; see also Stefan Leible, “Parteiautonomie im IPR – Allgemeines Anknüpfungsprinzip oder Verlegenheitslösung ?”, in HeinzPeter Mansel et al, eds., Festschrift für Erik Jayme, Vol. 1, Munich 2004, pp. 485-503 at pp. 499-500. 713 See ECJ, 2 October 2003, Case C-148/02 (García Avello v. Belgian State), [2003] ECR I-11613; 14 October 2008, Case C-353/06 (Grunkin and Paul), [2008] ECR I-7639.

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allowed to choose the applicable law,⁷¹⁴ an across-the-board answer for the various aspects of personal status appears to be excluded. Our enquiry for a possible rule of party autonomy will therefore focus on a single example: capacity. 2.

Capacity and the Protection of Adults

a) The rigidity of personal law 372. By its very nature, the law governing the legal capacity of a person seems to be susceptible of being chosen by will only to a minor degree. For reasons of logic, a person lacking that capacity would not seem able to make a declaration having the effect of subjecting him or her to a different law that in turn would acknowledge his or her capacity: no one can contract out of incapacity. Conversely, it would be possible in theory that capable persons make a declaration subjecting themselves to a law depriving them of that capacity. This would, however, impair the interests of market participants who often trust that all private actors in that market are invested with legal capacity in accordance with the laws governing that market and irrespective of any undisclosed private arrangements. A case-by-case enquiry into the capacity of contracting partners would raise transaction costs excessively. While the law relating to capacity is meant to protect the incapable from the effects of their own acts, the private international law has to balance this policy aim against the protection of legitimate interests and the trust of market participants. 373. As a consequence, many legal systems provide for two conflict rules on capacity: one designating the law that is generally applicable and the other for the protection of bona fide contracting parties. The following considerations will not address the latter,⁷¹⁵ but only the former conflict rules. According to a long tradition dating back to the French Civil Code of 1804, such conflict rules have been explicitly laid down in national legislation. The connecting factor they often employ is either the citizenship of the person in question⁷¹⁶ 714 European Commission, Green Paper – Less Bureaucracy for Citizens: Promoting Free Movements of Public Documents and Recognition of the Effects of Civil Status Records, COM (2010) 747 final of 14 December 2010, question 10. 715 The most prominent example of such a rule is perhaps Article 13 of the Rome I Regulation: “In a contract concluded between persons who are in the same country, a natural person who would have capacity under the law of that country may invoke his incapacity resulting from the law of another country, only if the other party to the contract was aware of that incapacity at the time of the conclusion of the contract or was not aware thereof as a result of negligence.“ See also infra, para. 600. 716 This has very clearly, although unilaterally been stated in Article 3 para. 3 of the French Civil Code: “Les lois concernant l’état et la capacité des personnes régissent les français, même résidents en pays étranger.” For similar unilateral rules see for example in Chile and Ecuador Article 14 Civil code, for bilateral conflict rules of the corresponding content see for example in China Article 11 of the Act of 2010, for

Chapter 3 – New Domains for Party Autonomy

or his or her domicile.⁷¹⁷ No exception for a law chosen by the person in question has ever been acknowledged. b) First traces of party autonomy 374. In this respect, the law is less settled in common law jurisdictions. Here, capacity is usually discussed in relation to the specific acts committed, i.e. capacity to marry as distinct from capacity to enter into commercial contracts, etc. While the law is not entirely clear on this point, there is a widespread view that the capacity to contract is determined either by the law of the domicile of the party in question or by the law applicable to the contract.⁷¹⁸ The latter connection to the law governing the contract seems to include that a law chosen by the parties to the contract will also determine their capacity. That view would have the effect of extending party autonomy to the parties’ capacity. Such an extension is, however, rejected by English authors, at least in respect of cases where the law chosen by the parties is unrelated to the contract.⁷¹⁹ In the United States, the binding force of the parties’ choice of the applicable law in respect of capacity is suggested by the Restatement Second, unless either the chosen law has no substantial relationship to the parties of the transaction or compliance with the choice would be contrary to a fundamental policy of a State that has a materially greater interest than the chosen State in the matter.⁷²⁰ Australia may have opened the door for party autonomy in this area a bit wider: following the views of Sykes and Pryles, the Australian Law Reform Commission has recommended, in its 1992 Report on choice of law, that capacity should either be governed by the law of the relevant party’s residence or by the proper law

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Egypt Article 11 of the Civil code, in German law Article 7 para 1 Introductory Law of the Civil Code or in Korea § 13 of the Act of 2001. See for Switzerland, Article 35 of the law of 1987; for Argentina Articles 6 and 7 of the (old) Civil Code, for Brazil Article 7 of the Introductory Law of the Civil Code; for Mexico Article 13 para. II of the Civil Code for the Federal District, for Quebec Article 3083 Civil Code, for Venezuela Article 16 of the Act of 1998. See already von Overbeck, IECL, Vol. 3, Chap. 15, Sect. 29; for the United Kingdom see Cheshire, North and Fawcett, p. 751 referring to Bodley Head Ltd v Flegon, [1972] 1 WLR 680 (Ch), where the court took the view that an agency contract made between the Russian author Alexander Solzhenitsyn and a Swiss lawyer was subject to Swiss law and that the author’s capacity to enter that contract therefore was also governed by Swiss law; for the United States the rule is laid down in § 198 Rest. Second, Conflict of Laws and in Article 3539 of the Louisiana Civil Code; for Australia, see Homestake Gold of Australia Ltd. v. Peninsula Gold PTY Ltd., [1996] 131 FLR 447 and Nygh, p. 407. Cheshire, North and Fawcett, p. 751; Clarkson and Hill, p. 211; Dicey and Morris, The Conflict of Laws, 13th ed., 2000, pp. 1271-1272. According to § 187 Rest. Second, Confl ict of Laws, Comment d, capacity as such is a matter that cannot be resolved by an explicit provision in the parties’ contract; therefore § 187, para. 2 applies with the content summarised in the text supra, see also Hay, Borchers and Symeonides, pp. 1088-1090.

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of the contract including any such law selected by the parties. In support of this view, the Commission favourably cited the contention of the two authors that “the problems of the scope of essential validity and capacity are analogous and it is not immediately apparent why a different [conflict] rule should be employed for each issue.”⁷²¹ 375. It is too early to make a conclusive assessment of these developments, but the Australian proposals demonstrate that the rigid conflict rules on capacity are perhaps less inescapable than we thought. This may be due to worldwide trends in the substantive law. While the incapacity of married women had been widespread in many jurisdictions of French descent and had given rise to serious problems in private international law, this discrimination on grounds of gender and the consequential problems in private international law have long since disappeared.⁷²² A further key problem area in this context has traditionally been created by minors acceding to majority at different ages under the various national laws. However, while differences in this regard remain, the general legislative trend toward lowering the age of majority – in response to an earlier onset of adolescence – has had the overall effect of making litigation on capacity issues in contracts entered into by minors exceptional. Further changes, such as the availability of credit cards for minors and the increased use of the internet for commercial relations, provide an additional impetus for this trend. In a world of largely anonymous online contracting, the protection of minors may as a practical matter become less viable and less plausible because the other party is not able to check the age and capacity of its partner; as a consequence the protection of this other contracting party may take on a greater relevance than in the era of face-to-face contracting. The traditional protection of bona fide parties⁷²³ proves insufficient in the era of the internet. It only applies to contracts made between persons present in the same country; the localization of the other party is, however, hardly ascertainable in the case of online contracting. It would follow that the law chosen by the parties to govern their contract could and should determine capacity unless the choice is clearly abusive and unrelated to the contracting parties in question. c) Enduring powers to act for incapable persons 376. The aging of society and the progress of medical science and treatment has given rise to a new social problem in many societies of the industrialized world: more and more people lose their legal capacity, either provisionally 721 Edward Sykes and Michael Pryles, Australian Private International Law, 3rd ed., Northryde 1991, p. 614; Australia, The Law Reform Commission, Report no. 58, Choice of law, 1992, paras. 8.57-8.58, p. 1018; see however the reserved report by Nygh, no. 19.54, p. 407. 722 See von Overbeck, IECL, Vol. 3, Chap. 15, Sect. 31, who points out that this was a problem of the past already at his time of writing in the late 1960s. 723 See Article 13 of the Rome I Regulation, supra at footnote 715.

Chapter 3 – New Domains for Party Autonomy

or permanently, as they grow older and succumb to dementia related illnesses. While in former decades this might have triggered an incapacitation of the individual and his or her placement under guardianship, modern legislation provides for different forms of assistance. They are usually less rigid, but may still have the effect that certain important engagements can no longer be entertained by the individual in question without the consent of the assisting person.⁷²⁴ For private international law, these developments have brought about the need for a reconsideration of the older procedural regulations concerning guardianship and its recognition. In 2000 the Hague Convention on the International Protection of Adults was concluded.⁷²⁵ The Convention follows the basic pattern of the previous Convention on the Protection of Minors: it lays down rules on jurisdiction, orders the competent courts to apply their own law and provides for the recognition of those decisions in other contracting States. An important difference from the model of the Convention on the Protection of Minors concerns enduring powers of representation, an important aspect in our context. 377. Many of the adults protected by the Convention will have lived in conditions of full legal capacity before their personal faculties become impaired to the point that they need protection and representation in business matters. These persons are often able to select the individual(s) who will have the powers of representing them if they lose the ability to care for themselves later on. This practice is said to have developed in the United States and Canada, but it has gradually spread also across continental Europe.⁷²⁶ Such enduring powers of attorney may be bestowed, in accordance with Article 15 of the Convention, either under an agreement or by a unilateral act. While Article 15 basically refers to the law of the adult’s habitual residence at the time the declaration is made, this is not more than a default rule. The declaration may in fact designate the law applicable to the powers of attorney by selecting either the adult’s national law or the law of a former habitual 724 See the comparative survey by Anne Röthel, “Guardianship of Adults”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 808-810; also in German under the heading “Betreuung, rechtliche Fürsorge für Erwachsene”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen 2009, pp. 200-203. 725 Convention on the International Protection of Adults concluded on 13 January 2000, in Hague Conference on Private International Law, ed., Collection of Conventions 1951 – 2009, The Hague 2009, pp. 426 et seq. In summer 2011 the Convention was in force for Estonia, Finland, France, Germany, Switzerland and – within the United Kingdom –for Scotland, see the status table at the website of the Hague Conference. 726 Paul Lagarde, “La Convention de la Haye du 13 janvier 2000 sur la protection internationale des adultes”, Rev. crit. dr. int. pr. 89 (2000), 159-179 at pp. 174-175, with further references; for corresponding provisions in other continental jurisdictions, see Kurt Siehr, “Das Haager Übereinkommen über den internationalen Schutz Erwachsener”, RabelsZ 64 (2000), 715-751 at pp. 738-739.

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residence of the adult or the law in which his or her property is located, with respect to that property.⁷²⁷ The grounds for the limitation of party autonomy to the choice of the laws specified above are not quite clear. The adult may have good reasons – under the circumstances of the case – for designating the law of his own intended future habitual residence⁷²⁸ or the law of the representative’s habitual residence; such a choice would be invalid however. Once more, on the side of the framers of the Convention, i.e. the delegates of State Governments, we can observe a basic distrust of both party autonomy and the ability of private individuals to make reasonable use of it. This is in strange contrast to the very concept of enduring powers of attorney, which are predicated on the assumption that human beings can best see to their own future themselves. Nevertheless, the (circumscribed) permission to choose the applicable law has to be acknowledged as an important step. 378. Classified in accordance with the traditional system of private international law, this conflict rule concerns agency; it is however meant to extend the binding force of the adult’s own will beyond the end of his or her capacity to perform binding juristic acts. It thereby qualifies the scope and effect of the basic conflict-of-laws rule governing that capacity irrespective of whether the applicable law is the national law or the law of the domicile of the person in question. Just like the Australian approach to the law governing capacity to contract,⁷²⁹ the Hague Adults Protection Convention is an important indicator of a general development of private international law in this area: as the formerly rigid conflict rules soften, a certain preparedness to accept individual choices of the applicable law is visibly growing. Section 5: Family 1.

The Family, Family Law, and Basic Conflicts Law Orientations

a) From social institution to family law 379. The family is primarily a social institution that performs, to different degrees in the various countries, a number of important functions for its members and society at large: upbringing of the young, care for the old, mutual financial support, emotional stabilization, the affirmation and transfer of values and social morality. While its roots – sexual attraction and kin727 See Kurt Siehr, “Protection of Adults”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 1387-1389; in German also under the heading “Erwachsenenschutz”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen 2009, pp. 448-451; id., RabelsZ 64 (2000), 739-740; see also Eric Clive, “The New Hague Convention on the Protection of Adults”, YBPIL 2 (2000), 1-23 at pp. 21-22. 728 See Siehr, RabelsZ 64 (2000), 740. 729 See supra, para. 374.

Chapter 3 – New Domains for Party Autonomy

ship – are of a biological and immutable nature, the social appearance of the family has differed widely over time and as between different cultures and societies. But in any event, the family is placed somewhere between the individual and society at large. It can perform its functions because it enjoys a certain autonomy, namely the non-intervention of social institutions, in particular religious organizations and the State – a non-intervention which nowadays is often safeguarded by constitutional law and human rights.⁷³⁰ However, both the religious and secular institutions of society have at all times tried to gain influence on the family and to shape it. This is the background of family law. In many jurisdictions the family is still governed by religious norms that may even be administered by religious tribunals; in other parts of the world the secularization subsequent to the French Revolution has brought about a separate and independent State law on family relations that has superseded or at least supplemented the religious law.⁷³¹ The co-existence, in a comparative perspective, of State law and religious law on family matters requires lawmakers to supplement private international law by further conflict rules on interpersonal and interreligious conflicts; in pertinent cases, the first connection usually operates at the international level and the applicable personal law is then determined, in a second step, in accordance with the domestic interpersonal or interreligious conflict rules of the law designated by private international law.⁷³² 380. Family law splits up the complex social organism of the family into a number of bilateral relations:⁷³³ the formation and dissolution of marriage and – in more recent times – of quasi-marital partnerships of a heterosexual or 730 Glendon, IECL,Vol. 4, Introd. Sect. 6, refers to the “legal tenet that the state should interfere with the internal affairs of the marriage-based family as little as possible.” Ingeborg Schwenzer, “Grundlegung eines modernen Familienrechts aus rechtsvergleichender Sicht”, RabelsZ 71 (2007), 705-728 at p. 711, even posits a principle of non-intervention (Prinzip der Nichteinmischung). 731 See the Surveys over “Christian Family Law” (Paul Heinrich Neuhaus), “Jewish Family Law” (Ze’ev Falk), “Islamic Family Law” (Norman Anderson), “Hindu Family Law” (Duncan Derrett and Krishnamurthy Eyer) and “Customary Family Law” (Raymond Verdier) in IECL, Vol. 4, Chap. 11. 732 See for example Article 15 of Council Regulation (EU) no 1259/2010 implementing enhanced cooperation in the area of the law applicable to divorce and legal separation (“Rome III”), OJ 2010 L 343/10 and the similar provision of Article 16 of the Hague Maintenance Convention of 1973 cited supra in footnote 46. For the corresponding provision of Article 4 para. 3 of the Introductory Law of the German Civil Code, see Bruno Menhofer, Religiöses Recht und Internationales Privatrecht, Heidelberg, 1995, pp. 126 et seq. Thorough studies on interpersonal and interreligious law have been published by Kurt Lipstein and István Szászy, “Interpersonal Conflict of Laws”, IECL, Vol. 3, Chap. 10; Klaus Wähler, Interreligiöses Kollisionsrecht im Bereich privatrechtlicher Rechtsbeziehungen, Cologne, 1978. 733 In his large comparative treatise Hans Dölle, Familienrecht, Vol. 1, Karlsruhe, 1964, p. 10, describes the family law of the German Civil Code as not being an order of the family, but of a more or less complete system of individual relations of its members.

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a homosexual kind; the legal effects of marriage or of such quasi-marital unions on the personal and property relations of the partners; the formation of relations of kinship and of guardianship; and the effects of kinship or guardianship on the relations between the persons involved.⁷³⁴ This process may be referred to as a bilateralization of otherwise more complex family relations. Where the persons involved are adults and aware of the consequences, the bilateralization favours a contract-like approach and thereby appears to support party autonomy in private international law. This will be studied in greater detail below with regard to matrimonial property, divorce and maintenance. Yet, we will see that the strong impact of religion and public policy⁷³⁵ has drawn narrow limits on the recognition of the parties’ choice in most countries. 381. It is noteworthy that the public intransigence cannot be ascertained only in countries where religious or State law affirms a conservative Leitbild of the family, but also in tolerant jurisdictions which allow a great variety of different forms of family life at the level of substantive law; accordingly, “prohibitive public policy” and “permissive public policy” have been distinguished.⁷³⁶ An example of the first group of laws is the US Defense of Marriage Act (DOMA), which allows the single States of the United States to deny effect to same-sex relations established and treated as marriages in other States of the Union.⁷³⁷ An example for the intransigence of tolerant States is the rejection, by Sweden, of the proposal for a Rome III Regulation on divorce and legal separation. As Swedish law allows for divorce by consent without any impediment and for a unilaterally initiated divorce after a short period of deliberation of not more than six months, these rules have traditionally been implemented by the general application of the law of the forum to both domestic and international cases in Swedish courts.⁷³⁸ The 734 See the explanation of the structure in the volume on Persons and Family by Glendon, IECL, Vol. 4, Introd., Sect. 2. 735 The public interest was stressed, in the early 1960s, by Dölle, p. 8, explaining the mandatory nature of numerous legal rules on family law; the particular interest of religion for the family is explained by Dölle and Gündisch, pp. 20-21. 736 See Pålsson, IECL,Vol. 3, Chap. 16, Sects. 144 and 146. 737 Defense of Marriage Act, Public Law, 104-199, of 21 September 1996, 110 Stat. 2419; Section 2 is codified as 28 USC §1738 C; on the first applications of that law, see Symeon Symeonides, “Choice of Law in the American Courts in 2002: Sixteenth Annual Survey”, Am. J. Comp. L. 51 (2003), 1-88 at pp. 80-82; on subsequent legislation of not less than 41 states of the US, so-called mini-DOMAs, see Symeon Symeonides, “Choice of Law in the American Courts in 2009: Twenty-Third Annual Survey”, Am. J. Comp. L. 58 (2010), 227-304 at p. 278; see also Linda Silberman, “Rethinking Rules of Conflict of Laws in Marriage and Divorce in the United States: What Can We Learn from Europe ?”, Tulane L. Rev. 82 (2008), 1999-2020 at p. 2003. 738 The Swedish substantive provisions on divorce are laid down in 5 kap. 1 – 3 § of Äktenskapsbalk (1987:230); the basic applicability of the law of the forum and some narrow exceptions are regulated in 3 kap. 4 § Lag (1904:26 s. 1) om vissa interna-

Chapter 3 – New Domains for Party Autonomy

libertarian approach to divorce and marriage enshrined in the substantive law of Sweden has thus equally been granted to foreign plaintiffs and imposed on foreign defendants through the application of the lex fori. In the deliberations preceding the adoption of the Rome III Regulation of the EU, Sweden was not prepared to accept any exceptions to this tolerant approach; yet the application of foreign law would have imposed some restrictions on the exit from marriage in some instances, through, for example, longer minimum periods of separation required by the foreign law. Because of Sweden’s refusal to approve the initial Commission proposal based on Article 65 EC (now: 81 TFEU), the Rome III Regulation had at last to be adopted in the specific legislative procedure of an enhanced cooperation under Article 326 et seq. TFEU between those Member States willing to participate, i.e. without Sweden.⁷³⁹ It is an unfortunate consequence of the – voluntary – enhanced cooperation procedure that Member States such as the Netherlands, which did not veto Rome III when the Commission made its initial proposal under Article 81 TFEU (65 EC), now do not participate because they, too, believe that the application of foreign law under Rome III will overly restrict their liberal approach to divorce.⁷⁴⁰ b) Traditional choice-of-law approaches and party autonomy 382. In the conflict of laws relating to family matters there are three main approaches to the issue of the applicable law. Some jurisdictions, such as Sweden, apply the law of the forum without any significant exception; this is also the basic rule in the other Nordic States⁷⁴¹ as well as in the common law jurisdictions.⁷⁴² The rule is most likely due to the former conservative Leitbild of the family prevailing in many parts of the Western world, one

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tionella rättsförhollanden rörande äktenskap och förmynderskap; see Michael Bogdan, Svensk internationell privat- och processrätt, 5th ed., Stockholm, 1999, p. 176; the law is similar in other Nordic states, see Helge Thue, Internasjonal privatrett, Oslo 2002, p. 352. See Articles 326 et seq. TFEU and on the institutional aspects, Editorial Comments, Enhanced cooperation: A Union à taille réduite or à porte tournante, Com. Mkt. L. Rev. 48 (2011), 317-327. When the Rome III Regulation was adopted, the following Member States participated: Austria, Belgium, Bulgaria, France, Germany, Hungary, Italy, Latvia, Luxembourg, Malta, Portugal, Romania, Slovenia, Spain, see Recital 6 of Regulation 1259/2010, OJ 2010 L 343/10. See P. Vlas, “Mijlpalen in het IPR – Over de Brusselse TGV, Boek 10 BW en andere IPR-ontwikkelingen”, WPNR 2011, 514-520 at p. 518; for a survey over the views taken by the various Member States, see Katharina Boele-Woelki, “For Better or for Worse: The Europeanization of International Divorce Law”, YBPIL 12 (2010), 1-26 at pp. 9-12. See supra footnote 738. See for divorce Cheshire, North and Fawcett, p. 966, seting forth the historical explanation for the traditional common law rule; for Australia, see Nygh, no. 26.9, p. 539; for the US, see Rest. Second, Conflict of Laws § 285 and Hay, Borchers and Symeonides, p. 692; see also Pålsson, IECL, Vol. 3, Chap. 16, Sect. 125.

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that did not allow for the adoption or affirmation of foreign family standards, not even in cases involving foreigners. On a more technical note, the rule is sometimes explained by the fact that proceedings in matrimonial and family matters are conducted in the courts of the State where the parties are domiciled and that the lex fori is, therefore, just another denomination of the law of domicile which is considered as the law of the closest connection. A reconsideration of the rule is suggested by both the liberalization of the family Leitbild and by the destabilization of domicile in the open society. A second basic approach to choice of law in family matters refers to the citizenship of the persons involved. The nationality principle may be traced back to Article 3 of the Napoleonic Code of 1804. Its worldwide approval⁷⁴³ can be explained by the influential writings of the Italian scholar and politician Mancini,⁷⁴⁴ by the heyday of the nation State penetrating all sectors of life in the nineteenth century and by the practical convenience it offered continental European countries dealing increasingly with the legal disputes of émigrés in those years.⁷⁴⁵ Again, the historic changes of more recent times suggest a reconsideration: the ideal of the nation State has gone pale; former émigré States have become the target of extensive immigration, and citizenship as a connecting factor is often equivocal and does not always, as it used to do, express a close connection with the culture of a country. The third approach refers to the domicile of the persons involved; it is widespread in Latin America⁷⁴⁶ but is to some extent also implemented

743 To take the example of divorce proceedings, the nationality principle is not only acknowledged in many European states, such as Germany (Article 17 of the Introductory Law of the Civil code), Italy (Article 31 of the Law of 1995) and Turkey (Article 14 of the Act of 2007), but also in the Middle East, see e.g. for Egypt Article 13, para. 2 of the Civil Code and for Tunisia Article 49 of the Act of 1998, and in Asia, see for China Article 26 of the Act of 2010 allowing, however, for party autonomy in respect of divorce by consent, for Japan Articles 25 and 27 of the Act of 2006 and for Korea §§ 37 and 39 of the Act of 2001. 744 See supra, para. 93. 745 For the historical development of the nationality principle, see Jürgen Basedow, “Das Staatsangehörigkeitsprinzip in der Europäischen Union”, IPRax (2011), 109-116 at pp. 109-111; the sociological background in the European emigration of nineteenth century is further explored in Jürgen Basedow and Barbara Diehl-Leistner, “Das Staatsangehörigkeitsprinzip im Einwanderungsland”, in Erik Jayme and Heinz-Peter Mansel, eds., Nation und Staat im Internationalen Privatrecht, Heidelberg 1990, pp. 13-43. 746 See with regard to the law applicable to divorce for Argentina, Article 164 of the (old) Civil Code, for Uruguay Article 2396 of the Civil Code, for Venezuela Article 23 of the Act of 1998; in many Latin American countries the restrictive substantive laws on divorce are reflected by further requirements giving effect to the lex fori. For the general debate about nationality and domicile as main connecting factors in Latin America, see Jürgen Samtleben, Internationales Privatrecht in Lateinamerika – Der Código Bustamante in Theorie und Praxis, Tübingen, 1979, pp. 13 et seq. and pp.

Chapter 3 – New Domains for Party Autonomy

in common law jurisdictions.⁷⁴⁷ The notion of domicile which used to be a rather rigid concept defined by divergent national rules, has gradually softened and become more flexible in order to accommodate the greater mobility of modern times. This is reflected by the replacement, in more recent instruments, of domicile with habitual residence.⁷⁴⁸ 383. As a result of the basic divergence of connecting factors, private international law cannot attain its major target, i.e. to provide the persons involved with a sufficient certainty as to the application of law to their personal relations. In fact the applicable law may depend on the court seized by the plaintiff. This is an unfortunate outcome in a world where more and more people have connections with several countries where they must anticipate legal proceedings. Given the loose ground on which the various connecting factors are built, party autonomy may in fact be expected to provide for greater legal certainty. Moreover, it enables the persons involved to take into account, when choosing the applicable law, the planning of their own future. Party autonomy could finally prove an effective vehicle for the unification of private international law. While States will often not be prepared to give up their respective traditional approaches to international family law, they might at least agree with shifting the choice-of-law decision to the private parties involved. This line of reasoning appears to guide the current efforts made within the European Union to bridge the gap between the countries defending nationality and those favouring habitual residence as the connecting factor.⁷⁴⁹ The following enquiry will provide a more detailed analysis of the approval of party autonomy in three selected areas of family law: the effects of marriage, in particular matrimonial property; divorce; and maintenance. 2.

The Effects of Marriage: Marital Property

a) The main property regimes 384. Many modern conflicts statutes distinguish the personal effects of marriage from its property effects, i.e. the effects marriage produces on the property and debts the spouses acquire before or after marriage. Our following considerations will focus on these property effects, which differ widely in a comparative perspective. Three models, each with certain variants, can 248-253, also available in Spanish under the title Derecho internacional privado en América Latina – Teoría y práctica del Código Bustamante, Buenos Aires, 1983. 747 See supra footnote 742 and the following text. 748 This is generally the case in the modern Hague Conventions; see also Article 8 of the Rome III Regulation, see Fallon, Rev. trim. dr. fam. (2012), 297-301; an example in national legislation is provided by the Belgian Code of 2004, see Article 55 for the law applicable to divorce; or for Germany Article 14, para. 1 no. 2 and Article 17 for spouses without a common citizenship. 749 See Erik Jayme, “Party Autonomy in International Family and Succession Law: New Tendencies”, YBPIL 11 (2009), 1-10 at p. 3.

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be identified:⁷⁵⁰ (1) the common law and – following Roman law⁷⁵¹ – some southern European jurisdictions such as Catalonia are based on a clear separation of the spouses’ property. The relations between the spouses basically do not differ from those between other private subjects engaged in joint ventures or cooperation projects. In England, however, the judges have been conferred wide powers to reallocate assets of the spouses by means of property adjustment orders in divorce cases; this is sometimes said to give rise to a deferred community of property. (2) Early Germanic laws such as those of the Franks were the basis of the later Coutume de Paris which served as a model for the Napoleonic Civil Code of 1804 that later guided legislation in many other countries, in particular in Latin America but also in some States of the United States. In these jurisdictions, assets and debts acquired during marriage (or in some countries, even those acquired before marriage) become community property of the spouses. (3) In more recent times, a number of countries have adopted what usually is referred to as participation systems. Assets and debts of the spouses remain separate during the marriage, but on dissolution of the marriage each partner partakes in the assets of the other, either by way of a transfer of such assets or by compensation payments. Such systems prevail, for example, in the Scandinavian countries and in Germany. b) Dumoulin and French conflicts law 385. The clearly perceptible differences of substantive law raised conflicts issues already at a very early stage, and as far back as the sixteenth century we can find the first traces of party autonomy in this field. In 1524 the French jurist Charles Dumoulin delivered an opinion, his consilium 53, which is still considered as the starting point of party autonomy in the conflict of laws.⁷⁵² The spouses De Ganey had been living in Paris and had purchased, during mar750 See Walter Pintens, “Matrimonial Property Law”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 2, Oxford, 2012, pp. 1158-1162; also in German under the heading “Ehegüterrecht” in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen 2009, pp. 350-354; for a worldwide survey see: Paolo Cendon, I regimi patrimoniali fra coniugi e la circolazione delle cose mobili, in Francesco Galgano, Franco Ferrari and Gianmaria Ajani, eds., Atlante di diritto privato comparato, 4th ed., Bologna 2006, pp. 167-187. 751 For Roman law see Max Kaser, Das römische Privatrecht – 2. Abschnitt: Die nachklassischen Entwicklungen, 2nd ed., Munich, 1975, pp. 173-174. 752 Franz Gamillscheg, Der Einfluss Dumoulins auf die Entwicklung des Kollisionsrechts, Berlin and Tübingen, 1955, pp. 42 et seq.; Gutzwiller, pp. 74 et seq.; see also Friedrich K. Juenger, “Marital Property and the Conflict of Laws: A Tale of Two Countries”, Columbia Law Review 81 (1981), 1061-1079 at p. 1062; Armand Lainé, Introduction au droit international privé, Vol. 1, reprint Glashütten im Taunus, 1970 of the edition Paris, 1888, pp. 228 et seq. The opinion is printed in Caroli Molinaei Consilia et responsa, Paris 1621, pp. 666 et seq.

Chapter 3 – New Domains for Party Autonomy

riage, real property located in Lyon. Whereas assets acquired during marriage became community property of the spouses under the Coutume de Paris, they remained separate property in accordance with the Roman-law based droit écrit that was in force in Lyon. After both spouses had died, the heirs raised the question whether the real property had been the sole property of the husband or whether it formed part of the community of property of both spouses. Dumoulin pointed out that the Coutume de Paris allowed spouses to agree on a different regime for their property relations. Where such a marital contract as in the case of the couple in question had not been made, the spouses must be taken as having tacitly chosen the property regime of their common domicile. Such tacit or implied contract was considered to have the same effect as an express contract; in particular its effects were not limited to the territory of the Coutume de Paris and included assets located in other jurisdictions. 386. It has been doubted whether the inventive idea of the tacit contract can actually be considered as an affirmation of party autonomy.⁷⁵³ Still, historical correctness is one matter and the perception of history by posterity another. To date, there is no doubt that French law ascribes party autonomy concerning matrimonial property to the writings of Dumoulin in general and to his consilium 53 in particular.⁷⁵⁴ Dumoulin provided guidance when it came to the ascertainment of the applicable law in the absence of an express agreement. In such cases the Cour de Cassation instructed the lower courts to give effect to a presumed choice of the law of the first matrimonial domicile as governing matrimonial property.⁷⁵⁵ Thereby, the Court also inferred the so-called principle of immutability from the spouses’ tacit agreement: the property regime was fi xed at the time of marriage and was not affected by later changes of nationality, domicile or habitual residence. Immutability as favoured by the Cour de cassation ensures the stability of the matrimonial property regime without, however, sacrificing flexibility completely. The presumption in favour of an agreement on the law of the first matrimonial domicile may in some instances be successsfully rebutted. Moreover, the 753 Gamillscheg, p. 121 concludes “… dass Dumoulin im Gebiet des Kollisionsrechts der Begründer einer Theorie der Parteiautonomie im Sinne von Verweisungsfreiheit ist, kann aus den dafür angezogenen Texten ohne Gewaltsamkeit nicht entnommen werden.” 754 Mayer and Heuzé, no. 771 at p. 596; Audit and D’Avout, no. 78 at p. 72; see also no. 862 at pp. 757-758 with references to the case law of the Cour de Cassation which has however been criticised for its lack of consistency, see Georges Khairallah, “La volonté dans le droit international privé commun des régimes matrimoniaux”, in Mélanges en l’honneur de Mariel Revillard – Liber amicorum, Paris, 2007, pp. 197208 at p. 205; see also Henri Batiffol and Paul Lagarde, Traité de droit international privé, Vol. 1, 8th ed., Paris 1993, no. 220 at p. 378 and no. 228 at p. 387. 755 Cass. civ., 19 September 2007, Rev. crit. dr. int. pr. 97 (2008), 99, with annotation by Pierre Gannagé, pp. 102-108 at p. 105; Mayer and Heuzé, no. 775, pp. 598-599 with many further references to previous judgments.

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spouses may during marriage expressly opt for a different law. Thus, the following principles have guided the development of French law prior to the Hague Convention of 1978:⁷⁵⁶ (1) the recognition of an express choice, before or after the time of marriage, of the law governing the whole of the spouses’ property; (2) in the absence of such a choice the presumed tacit choice of the law of the first matrimonial domicile; (3) and, by the operation of the presumed choice of that law, the immutability of the matrimonial property regime. c) A comparative survey over three conflicts principles 387. Contemplated from a comparative perspective, the three principles have survived to very different degrees. Modern legislation has mainly abandoned the idea of a tacit choice of law and established the objective connecting factors for a default solution that will apply in the absence of an express choice of law.⁷⁵⁷ The legislative techniques differ, however: in some instances the objective connecting factors are listed in the statute, in others the conflict rules on property effects simply refer to the analogous rules on the personal effects of marriage. In some countries, such as Germany or Korea, the default rule is laid down as a primary rule which is then subject to the spouses’ choice of law; in others, such as Belgium, China or Switzerland, the commitment to party autonomy has taken the lead, followed by default rules. The practical consequences are the same. 388. As to the principle of immutability, Professor Fritz Juenger had pointed out already 30 years ago: “For a nation of immigrants the rule of immutability, still widely acclaimed in Europe, would be highly impracticable.”⁷⁵⁸ But immutability is losing ground in Europe and other parts of the world as well. This is the case where the spouses are permitted to change the applicable law by a post-nuptial agreement, i.e. by an express choice subsequent to their marriage.⁷⁵⁹ But also the default rules of more recent conflicts legislation display a tendency towards the mutability of connection. The traditional use of nationality, domicile or habitual residence as a connecting factor is no longer supplemented by a reference to the time of marriage; the connecting factors rather refer to the time of judgment, and since the connecting factors 756 See infra para. 390 for the Hague Convention. 757 See for example for Belgium Article 51 of the Code of 2004; for Bulgaria Article 79, para. 3 of the Code of 2005; for China Article 24, 2nd sentence of the Act of 2010; for Germany Article 15 of the Introductory Law of the Civil Code as amended in 1986; for Korea § 37 of the Act of 2001; for Switzerland Article 54 of the Act of 1987. 758 Juenger, Columbia Law Review 81 (1981), 1061-1079 at p. 1071. 759 See in particular for Belgium Article 50, para. 3 of the Code of 2004 which explicitly points out that the subsequent choice of another applicable law only becomes effective for the future; for Germany, in the same sense Kurt Siehr in Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. 10, 5th ed., Munich 2010, Art. 15 EGBG no. 55; under Article 53, para. 2 of the Swiss Act of 1987, a subsequent choice of law has retroactive effect unless the spouses agree otherwise.

Chapter 3 – New Domains for Party Autonomy

may change over time, the matrimonial property regime becomes mutable as well. This observation can be made with regard to the recent codifications of private international law in Asia,⁷⁶⁰ but also in some of the recent European laws.⁷⁶¹ The most radical and consequential solution has been adopted by Article 55 of the Swiss Law: it might be called “reverse immutability”. The law applicable as a result of a change of domicile applies retroactively back to the time of marriage, unless the spouses agree otherwise. The rule thus renders redundant the time-consuming research of foreign law that, under the principle of immutability, is often necessary when spouses have moved to another country and engaged in transactions or litigation. These developments clearly show that present legislators take account of a greater mobility of people which cannot be reconciled with an immutability of the marital property regime from the time of marriage onwards. 389. Quite to the contrary, the first of the above mentioned principles, i.e. the freedom to designate the applicable law by an express choice, has clearly gained ground worldwide. It has been recognized in the United States by the Restatement Second on Conflict of Laws⁷⁶² and is also acknowledged in other common law jurisdictions.⁷⁶³ Only few of the countries that have more recently codified their private international law still reject party autonomy or do not openly admit it.⁷⁶⁴ An unclear and incomplete solution is the one espoused by Slovenia and Bulgaria. Their conflicts statutes permit a choice of the law governing marital property if the law otherwise applicable in accordance with the objective connecting factors grants the spouses the

760 See for Japan Articles 25 and 26 of the Act of 2007; for Korea §§ 37 and 38 of the Act of 2001; for Taiwan Article 48, para. 2 of the Act of 2010; and for China Article 24, 2nd sentence of the Act of 2010. 761 See for Slovenia Article 38 of the Law of 1999; for Bulgaria Article 79, paras. 1-3 of the Code of 2005; for Italy Articles 29 and 30 of the Act of 1995; for Romania Article 20 of the Law of 1992, now Articles 2589 and 2592 of the New Civil Code, and for Poland Article 51 of the Law of 2011. 762 Rest. Second, Conflict of Laws, § 258, para. 2 and comment b; see also Hay, Borchers and Symeonides, p. 684; Juenger, Columbia Law Review 81 (1981), 1061-1079 at p. 1070; it should, however, be noted that the only codification of pertinent conflict rules in the US, the Louisiana Civil Code, does not expressly grant the spouses’ freedom to choose the law applicable to marital property, see Articles 3523-3527. On the other hand, Article 2328 enshrines, with regard to substantive law, the freedom of contract in respect of matrimonial property and may perhaps be interpreted as including the freedom to designate the applicable law, see Symeon Symeonides, “Private International Law Codification in a Mixed Jurisdiction: The Louisiana Experience”, RabelsZ 57 (1993), 460-507 at p. 487. 763 The opinion of the House of Lords in De Nicols v Curlier, [1900] AC 21 (HL) is still cited as authority, see Cheshire, North and Fawcett, p. 1302 and, for Australia, Nygh, no. 27.4, p. 558. 764 See for example for Tunisia Article 48 of the Law of 1998 and for Venezuela Article 22 of the Act of 1998.

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freedom to designate the applicable law.⁷⁶⁵ But this is not more than the recognition of renvoi by the laws which are declared applicable by reason of objective connecting factors; since a renvoi has to be complied with under general rules of both conflicts statutes anyway,⁷⁶⁶ the said provisions are merely repetitions. Regrettably, both conflicts statutes do not clarify the position of their own legislatures: if the law governing marital property by virtue of objective connecting factors is Slovenian or Bulgarian law, would these countries respect the spouses’ choice of law?⁷⁶⁷ The vast majority of modern laws is much more explicit on this point. They either allow for an unlimited choice of law⁷⁶⁸ or for the choice of the law of a State that is connected with the spouses or with one of them through nationality, habitual residence or sometimes the situs of their property.⁷⁶⁹ d) Unification of conflicts law 390. The principles outlined above have also guided the efforts to unify private international law in this area. So far, only the Hague Convention of 1978 has had a certain success.⁷⁷⁰ It has taken effect for France, Luxembourg and the Netherlands; given its universal character, see Article 2, it has completely superseded the national conflict rules of these countries. Its provisions, laid down in more than 30 Articles, create a rather complicated legal framework. With regard to the principles set forth above, it recognises party autonomy separately for ante-nuptial and post-nuptial agreements, but in both cases only for a limited range of eligible laws, see Articles 3 and 6; in particular, 765 See Article 39 para. 2 of the Slovenian law of 1999 and Article 79 para. 4 of the Code of 2005. 766 See for Slovenia Article 6 and for Bulgaria Article 40. 767 For Bulgaria this possibility is explicitly rejected by Jordanka Zidarova and Vessela Stančeva-Minčeva, “Gesetzbuch über das Internationale Privatrecht der Republik Bulgarien”, RabelsZ 71 (2007), 398-456 at p. 430. 768 See for example for Austria § 19 of the Law of 1978. 769 This is the solution in the majority of modern statutes, see for Germany Article 15, para. 2 of the Introductory Law of the Civil Code as amended in 1986; where German law is applicable and no choice permitted under Article 15, the incorporation of a foreign matrimonial property regime is however invalidated by § 1409 of the Civil Code; for Belgium the limited choice is allowed by Article 49 of the Code of 2004; for Poland Article 52 of the Law of 2011; for Switzerland Article 52 of the Law of 1987; for Korea § 38, para. 2 of the Law of 2001; for Japan Article 26, para. 2 of the Act of 2006; for Taiwan Article 48, para. 1 of the Law of 2010; for China Article 24, 1st sentence of the Law of 2010. 770 Convention on the Law Applicable to Matrimonial Property Regimes, done on 14 March 1978, in Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 242 et seq.; for a detailed analysis see Hélène Péroz and Éric Fongaro, Droit international privé patrimonial de la famille, Paris, 2010, pp. 149 et seq.; Julia Burghaus, Die Vereinheitlichung des Internationalen Ehegüterrechts in Europa, Frankfurt am Main, 2010, pp. 28-35, both with many further references.

Chapter 3 – New Domains for Party Autonomy

the laws of the nationality or of the habitual residence of either spouse at the time of designation may be elected. As a default rule, Article 4 provides for the application of the law of the first habitual residence after marriage. The principle of immutability has virtually been eliminated by a large number of provisions. Article 9, paragraph 2 permits contracting States to provide for exceptions in favour of the legitimate expectations of third parties. While the Convention reflects the tendencies arising from the above comparative investigation, it is characterized by the efforts made within the Hague Conference to reach a compromise through the adoption of a large number of restrictions and exceptions which make the operation of the Convention unnecessarily difficult and burdensome, in particular for countries where issues of marital property in international relations have only a minor significance. 391. Within the European Union, a new attempt at unification has been initiated in 2011. The European Commission has submitted two Proposals for Council Regulations, one dealing with matters of matrimonial property regimes,⁷⁷¹ the other with the property consequences of registered partnerships.⁷⁷² Both Proposals are based on Article 81, paragraph 3 TFEU, which carries two important consequences: first, three Member States, namely Denmark, Ireland and the United Kingdom, will participate only if they make notifications to that effect. Second, the European Council will have to adopt the Regulation by unanimity of the participating States. Consequently, every Member State may veto the adoption at this stage. If that occurs, a sufficient number of at least nine Member States may, however, apply for the further legislative procedure of so-called enhanced cooperation under Articles 326 et seq. TFEU. 392. The content of the Commission Proposal on matrimonial property regimes is less detailed than the Hague Convention. Like the existing Rome Regulations, the instrument is meant to be of universal application and will therefore supersede existing conflict rules in all participating Member States, see Article 21. The primary conflict rule is the recognition of party autonomy found in two provisions, Article 16 in general and Article 18 for a change of the applicable law during marriage; Article 16 thus, in substance, deals with 771 European Commission, Proposal for a Council Regulation on Jurisdiction, Applicable Law and the Recognition and Enforcement of Decisions in Matters of Matrimonial Property Regimes, COM (2011) 126 final of 16 March 2011; see also the preparatory Green Paper on Conflict of Laws concerning Matrimonial Property Regimes, including the Question of Jurisdiction and Mutual Recognition, COM (2006) 400 of 17 July 2006, see Burghaus, pp. 283 et seq.; Dieter Martiny, “Die Kommissionsvorschläge für das internationale Ehegüterrecht sowie für das internationale Güterrecht eingetragener Partnerschaften”, IPRax (2011), 437-458 at pp. 448-452 on the applicable law. 772 European Commission, Proposal for a Council Regulation on Jurisdiction, Applicable Law and the Recognition and Enforcement of Decisions regarding the Property Consequences of Registered Partnerships, COM (2011) 127 final of 16 March 2011.

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ante-nuptial agreements only. Both provisions limit the range of available laws, however. Before and during marriage the spouses may select the law of the State of habitual residence of one of them or the law of the State of which one of them is a citizen at the time of the choice. In addition, the general rule on party autonomy in Article 16 allows the designation of the law of the State “of the habitual common residence of the spouses or future spouses”. However, the habitual common residence would also be the place where each spouse is habitually resident, and the law of that place can be chosen under other options granted by Article 16; the additional option referring to the habitual common residence thus appears redundant. A practical need could, however, emerge in the case of an ante-nuptial agreement of future spouses who, at the time of the agreement, have habitual residences in different States but who would like to select the law of their intended future common habitual residence located in a third State as the law governing marital property. Perhaps the reference to the “habitual common residence of the … future spouses” is meant to cover that situation; if so, it should be reworded and rather refer to the “future habitual common residence” or to the “intended habitual common residence.” 393. The law chosen by the parties before or during marriage or the law determined by objective criteria “shall apply to all the couple’s property”, no dépeçage, for example for immovable property, being permitted. The drafters consider such dépeçage as an “undesirable fragmentation of the unity of the matrimonial propert y”.⁷⁷³ While this is an understandable argument when the applicable law is designated by objective criteria such as the common habitual residence under Article 17, it appears as a paternalistic limitation when the applicable law is selected by agreement of the spouses. There may be good reasons to subject real property situated in a country inside or outside the European Union to the lex situs, either because the courts and authorities of that country will apply that law anyway or because it facilitates transactions in regards to that property. Especially where the spouses enter into a post-nuptial agreement on the law applicable to matrimonial property, they will be fully aware of the benefits and inconveniences of such a dépeçage in their individual case and there is no sound reason for excluding it. 394. The principle of immutability is maintained for the designation of the applicable law on objective grounds in accordance with Article 17; where the spouses move their common habitual residence into a new State, this does not affect the law applicable to marital property, which will remain the law of the first common habitual residence. Yet, the spouses are not precluded from changing the applicable law by post-nuptial agreement under Article 18. Such change of the applicable law will, however, only be effective prospectively. A retroactive effect agreed upon by the spouses may not affect the validity of previous transactions or the rights of third parties deriving 773 COM (2011) 126 final, p. 8, Comment on Article 15.

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from the law previously applicable, Article 18, paras. 2 and 3. Following the Rome I and Rome II Regulations, the proposal contains a rule permitting the Member States to give effect to their overriding mandatory provisions, Article 22. Recourse to that Article may not be uncommon in the future in Member States which consider the legal regime of real property located in those countries as essential for their political, social or economic organization. e) Conclusion 395. The development of private international law in respect of matrimonial property regimes is characterized by centuries-old efforts to overcome the division of marital property into separate portions or units designated by the location of the respective assets. The main vehicle for those attempts have been, ever since Charles Dumoulin, nuptial agreements designating one single applicable law. However, the freedom to select the applicable law, suppressed in many countries in the past, has only gradually gained ground. While it is clearly advancing in more recent codifications and in uniform law instruments, legislators embarking on this road are far too timid. As a consequence they limit the range of available laws without taking into account the wide array of possible party interests. 396. Here again, the limitation of the array of available laws raises the question of its rationale. Can the spouses be expected to designate an entirely unrelated law even though that will give rise to practical inconveniences for them ? What could be their motivation ? There might be an apprehension that one of the spouses will try to cheat the other by selecting a law that is particularly beneficial to him- or herself and detrimental to the other, assuring the other: “Darling, you just have to sign. It’s for the benefit of our family.” But if that is the reason for limiting choice, could that beneficial (and correspondingly detrimental) law not also be a law that is sufficiently related to one of the spouses ? Put in other words: is the proximity of the couple to a given law a sufficient guarantee for substantive fairness and justice ? Would it not be more pertinent to respond to such apprehensions by the avoidance of a choice-of-law agreement on the grounds of mistake or fraud ? In the alternative, one might think of the enforcement of the forum’s public policy, requiring a certain minimum standard for the protection of a spouse to be maintained by marital agreements.⁷⁷⁴ 774 The German Constitutional Court has declared in some – domestic – cases that marital agreements excluding, for instance, maintenance claims of a spouse are even in emergency situations not covered by the spouses’ freedom of contract if concluded under conditions of duress or particular emotional constraints, see BVerfG, 6 February 2001, NJW (2001), 957. The specific guarantee of fundamental rights in the framework of public policy, see Article 6 of the Introductory Law of the German Civil Code, suggests analogous limits of party autonomy in private international law.

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397. Or is the reluctance to grant free choice of law intended to protect third parties, i.e. creditors who are unaware of a choice, by the spouses, of a particular marital property regime ? Such concerns are of course justified, but they are not confined to situations where the spouses have chosen the applicable law. The legitimate expectations of creditors may need protection against an unexpected marital property regime irrespective of whether it is the result of an objective connecting factor such as the spouses’ first common habitual residence or of their choice of the applicable law. This is the background of the exception made for real property, which is subject to the marital property regime of the lex situs in some jurisdictions,⁷⁷⁵ and it also explains the specific conflict rules enacted for the protection of third parties that can be found in many conflicts statutes.⁷⁷⁶ These rules and provisions are themselves considered sufficient for the protection of third parties, no further limitation of free choice being required. While the laws available for designation by the spouses under many national conflicts statutes will certainly meet most practical needs, there may be specific cases where the choice of a non-eligible but more appropriate law would be invalid without any reasonable justification existing for that invalidity. 398. At the same time modern legislative instruments are gradually abandoning the principle of immutability, opening the door for more flexibility and for being more in line with the practical needs of an international society where cross-border changes of habitual residence have become a common occurrence. In this world, when it comes to the administration of a person’s estate, it is very inconvenient to apply the marital property regime of the law of a foreign country where the deceased established the first common habitual residence together with his or her spouse decades earlier. In accordance with the assessment previously made, it would appear that the time has come for a fresh start permitting party autonomy which allows for an adjustment of the marital property regime to changes in the living conditions of the 775 See for the United States Rest. Second, Conflict of Laws, §§ 233-234; Hay, Borchers and Symeonides, pp. 666-670; for the United Kingdom the role of the lex situs is rather considered as a possible veto against the operation of the law otherwise governing marital property, see Cheshire, North and Fawcett, pp. 1300 and 1302; for Australia, Nygh, no. 27.17, p. 562. A similar although very abstract and almost enigmatic reservation is made in Article 3a, para. 2 of the Introductory Law of the German Civil Code: “Where referrals in the third and forth sections (dealing with family law and succession, J.B.) subject the property of a person to the law of a state, they shall not relate to assets which are not located in that state and are governed by special provisions of the law of the state where they are located.” (Translation adapted with some changes from Julia Mörsdorf-Schulte). 776 See for example for Belgium Article 44 of the Code of 2004, for Germany Article 16 of the Introductory Law of the Civil Code as amended in 1986; for Switzerland Article 57 of the Law of 1987; for Japan Article 26, para. 3 of the Law of 2006; for Taiwan Article 48, para. 3 of the Law of 2010.

Chapter 3 – New Domains for Party Autonomy

spouses, which is unrestricted in terms of the available laws and which may also be used for a dépeçage in conformity with the spouses’ interests. That liberty would have to be balanced with protections ensuring the application of a law foreseeable to third parties in accord with their legitimate interests. 3.

Divorce

a) The significance and decline of marital status 399. Throughout history, the law has attributed particular significance to the beginning and end of marriage. Compliance with the legal requirements for the formation and dissolution of marriage distinguished this form of cohabitation from other forms such as concubinage. It allowed the identification of a couple’s legitimate offspring who, in feudal society, were the only children who could lawfully succeed their parents in property and seigneurial rights. Without marriage and in the absence of effective birth control, promiscuity would have generated multiple descendants of competing lines. This would have led to a fragmentation of property among the various progeny in succession, to a self-destruction of dynasties and to a threat for the whole feudal system. When feudalism gave way to the bourgeois society, the dynastic function of marriage lost some of its significance; instead, marriage was increasingly interpreted as the breeding ground and nucleus of human society at large as well as of the nation State. Depending on political ideology, marriage was now either considered as a kind of private preserve protected from the interference of public powers or as a place where essential social functions such as elderly care, education and the conveyance and affirmation of societal values are performed.⁷⁷⁷ Whatever the perspective has been, States have persevered in regulating marriage in a rather strict manner. Only the restrictions on the formalities and, gradually, also the substantive requirements for the formation of marriage were loosened, while dissolution was still subject to narrow constraints. In the modern era, a third phase of the development of the law of marriage has been triggered by the dissemination of effective birth control and the successive grant of equal rights to women; consequently, women have acquired greater independence. As they have progressively determined their own ways of life, the traditional allocation of roles in marriage and family has been abandoned. As a result, marriage has lost much of its traditional economic function. Since other social functions such as child-raising or elderly care can be performed, albeit with some difficulty, by single persons as well, modern family law has in many countries yielded to the pressures to facilitate the dissolution of marriage.⁷⁷⁸ 777 See already supra paras. 379 et seq. 778 For a succinct historical and comparative survey see Dagmar Coester-Waltjen, “Marriage”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 2, Oxford, 2012, pp. 1154-1158; also in German available under the heading “Ehe” in Basedow, Hopt and Zimmer-

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400. The laws of most States of the Western world have made it easy both to enter into and exit out marriage. As to the celebration of marriage, the minimum age has been lowered to late-adolescence, and most substantive impediments to marriage, except for bigamy and consanguinity, have been repealed. As to the form of marriage, States across the globe will usually recognize a marriage that has been celebrated in accordance with the laws of the place of marriage, irrespective of whether the formalities required by the law applicable to the substance of the marriage have been complied with. Even that law will usually acknowledge the formal validity of a marriage celebrated in accordance with the lex loci celebrationis.⁷⁷⁹ In a comparative perspective, not only entrance to marriage, but also exit from it, is much easier than it used to be. As expressed by Martiny: “The legal significance of marriage and marital status is declining.”⁷⁸⁰ Legal systems that formerly provided for a variety of forms of dissolution – annulment, avoidance, divorce⁷⁸¹ – have retained only one single form, i.e. divorce. There is hardly any State left that rejects divorce completely, as for example the laws of Chile, Ireland, Malta and Spain did in the past under the influence of the Catholic Church. Moreover, it is less and less that the law requires specific reasons for divorce; the disruption of a marriage lasting for a certain minimum period of time is sufficient. Present-day legislation is much more concerned with the consequences of divorce – in particular the consequences for the couple’s children – than about the sufficiency of reasons given by a plaintiff lodging an application for divorce. These changes of the substantive law environment clearly have perceptible repercussions for private international law in respect of the dissolution of marriage. b) Basic orientations of the conflict of laws 401. Beginning in the course of the nineteenth century, three basic patterns of conflict rules have emerged for dealing with family law in general and divorce proceedings in particular: (1) as pointed out earlier,⁷⁸² the common

779 780

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mann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen 2009, pp. 346-350; see also Glendon, “Introduction: Family in a Time of Turbulence”, IECL, Vol. 4, Introd., Sects. 6-10 (completed 2003). The locus regit actum rule is “next to universally accepted”. See Lennart Pålsson, “Marriage and Divorce”, IECL, Vol. 3 Chap. 16, Sect. 25. Dieter Martiny, “Objectives and Values of (Private) International Law in Family Law”, in Johan Meeusen, Marta Pertegás, Gert Straetmans and Frederik Swennen, eds., International Family Law for the European Union, Antwerpen, 2007, pp. 69-99 at p. 78. Annulment used to be the sanction for the celebration of a marriage which occurred despite the existence of legal impediments, and avoidance the remedial vehicle for defects of consent (mistake, fraud, threat); both had retroactive effect. Divorce leads to a dissolution of the marriage effective ex nunc. See supra, para. 382.

Chapter 3 – New Domains for Party Autonomy

law jurisdictions, the Nordic States and Switzerland⁷⁸³ adhere to the lex fori, thereby shifting the issue of the applicable law to the rules on jurisdiction.⁷⁸⁴ (2) In contrast, most countries with a civil law background consider jurisdiction and the applicable law basically as two separate issues: while many continental European and Asian States have espoused the nationality principle, (3) several Latin American jurisdictions have turned to domicile or habitual residence as the main connecting factor. These are not more than broadly idealized patterns of regulation. The reality of the conflict of laws in divorce matters is much more complex. The attraction of the lex fori has been growing in many countries, whether as a means for imposing national standards of divorce or for speeding up divorce proceedings. And the nationality principle has dispersed into a wide variety of conflict rules mixing elements of nationality and domicile. The recent adoption of the Rome III Regulation by the European Union will consolidate that complexity. Although it has replaced numerous national laws of Member States which are no longer in force, the following discussion will take account of those national laws which paved the way for the European instrument. c) The decline of nationality as a connecting factor and its consequences 402. The development towards complexity is primarily due to a change in the laws of citizenship: contrary to what happened in many countries in the nineteenth century, women marrying a foreigner no longer lose their premarital nationality such that they acquire the husband’s nationality by operation of law. They usually keep their citizenship of origin and may receive that of their husband in addition. As a result, the former principle of unity of a couple’s citizenship is lost in many marriages of mixed origin. Where children acquire the citizenship iure sanguinis from their parents, dual citizenship is often the result in subsequent generations. A further important change has been the use of the laws on citizenship for the purposes of integration policy. As postulated by Mancini, nationality was considered, over large periods of the nineteenth and twentieth centuries, as an ethnic and cultural tie between an individual and the community he was born in, a pre-governmental link that has only at a later stage been reflected by the various States’ laws on citizenship. This view prevailed in European continental countries as long as they were the point of departure for millions of émigrés who were considered as maintaining their links with their former

783 See Article 61 of the law of 1987; only where the spouses have a common foreign nationality and one of them lives abroad will the common national law be applied under para. 2 of that Article. In 2011, the Netherlands have also turned to the lex fori principle, see infra, para. 405. 784 For the jurisdictional aspects of the lex fori rule in English common law see already supra, para. 13.

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home countries.⁷⁸⁵ The situation and the policies reversed, however, when these countries became the destination of large flows of immigrants following World War II. Now, the need to integrate these populations triggered amendments of the laws on citizenship, motivated by the political wish to assimilate the immigrants and their offspring. The thresholds for naturalization were lowered, and a gradual transition to the acquisition of nationality iure soli, i.e. by reason of birth within the country, occurred. Again, the result is often dual citizenship acquired iure sanguinis from the parents and iure soli from the country of birth. 403. For private international law, the result of these changes is twofold: first, nationality has in many cases lost its unambiguousness as a connecting factor, and second, it represents a cultural, ethnic or emotional tie of fewer and fewer persons with a given State. The nationality principle is thus deprived of part of its persuasiveness and has been replaced in many countries by what are termed cascade connections. In numerous modern conflict statutes, nationality is still the primary connecting factor as far as the couple has a common nationality;⁷⁸⁶ however, where that nationality has been acquired by one of the spouses only through marriage and by operation of law without reflecting a true link between that spouse and the respective country, it is doubtful whether that conflict rule can still be maintained in the European Union.⁷⁸⁷ In the absence of a common nationality, the main trend in modern legislation designates the law of the common habitual residence as a substitute connecting factor;⁷⁸⁸ some countries, such as Belgium or China, 785 A fervent supporter of the nationality principle wrote in the 1920s that “the émigré citizens maintain the links with the home country, speak the language of the home country, celebrate the feasts of the home country...”, see Ernst Frankenstein, Internationales Privatrecht, Vol. 1, Berlin, 1926, pp. 36-37 (author’s translation, J.B.); see also Jürgen Basedow, “Das Staatsangehörigkeitsprinzip in der Europäischen Union”, IPRax (2011), 109-116 at p. 110. 786 See for Austria §§ 20, 18 and 9 of the Law of 1978; for Bulgaria Article 82 of the Code of 2005; for Germany Articles 14 and 17 of the Introductory Law of the Civil Code as amended in 1986; for Greece Articles 14 and 16 of the Civil Code; for Italy Article 31 of the Law of 1995; for Japan Articles 25 and 27 of the Law of 2006; for Korea §§ 37 and 39 of the Law of 2001; for the Netherlands Article 1(1)(a) Wet conflictenrecht inzake ontbinding huwelijk en scheiding van tafel en bed of 25 March 1981, Stb. 1981, no. 166 (but see infra para. 405 for the reform of 2011); for Portugal Articles 52 and 55 of the Civil Code; for Slovenia Article 37 of the Law of 1999; for Spain Article 107 of the Civil Code; for Taiwan Article 50 of the Law of 2010; for Tunisia Article 49 of the Law of 1998; for Turkey Article 14 of the Law of 2007. 787 On the prohibition of any discrimination on grounds of nationality laid down in Article 18 TFEU and its significance for private international law, see Jürgen Basedow, “Le rattachement à la nationalité et les conflits de nationalité en droit de l’Union européenne”, Rev. crit. dr. int. pr. 99 (2010), 427-456, in particular pp. 453-454. 788 See for Bulgaria Article 82 of the Code of 2005; for the Netherlands Article 1(1)(b) Wet conflictenrecht inzake ontbinding huwelijk en scheiding van tafel en bed, Stb. 1981, no. 166; for Portugal Articles 52 and 55 of the Civil Code; for Spain Article 107

Chapter 3 – New Domains for Party Autonomy

apply the law of this place without having prior recourse to nationality.⁷⁸⁹ In some of the countries following the nationality principle we find deviating solutions at the second stage of the cascade,⁷⁹⁰ for example the cumulative application of both national laws in Slovenia⁷⁹¹ or the law of the country of the spouses’ last common nationality if one of them is still a citizen of that State.⁷⁹² Where the spouses have neither a common nationality nor a common habitual residence, the connection by necessity becomes accidental. At this final stage of the cascade, legislators will either designate the law of the last common habitual residence if one of the spouses has maintained it;⁷⁹³ the law of the closest connection,⁷⁹⁴ which is not easily determined; or simply the law of the forum,⁷⁹⁵ which does not appear unreasonable in the absence of any meaningful connection of both spouses with a single State. This is only a rough summary of more recent legislation. In many countries the connections outlined above are superseded by public policy provisions of a prohibitive or permissive character; while the older statutes had recourse to the lex fori to restrict divorces possible under the foreign applicable law,⁷⁹⁶

789

790

791 792

793 794

795

796

of the Civil Code; for Taiwan Article 50 of the Law of 2010; for Tunisia Article 49 of the Law of 1998; for Turkey Article 14 of the Law of 2007. See for Belgium Article 55 of the Code of 2004; for China Article 25 of the Law of 2010 for divorce by mutual consent; both countries refer to the law of the spouses’ common nationality as a subordinate solution; see also for Venezuela Article 23 of the Law of 1998; see also for Argentina Article 164 of the (old) Civil Code and for Uruguay Article 2396 of the Civil Code and supra, footnote 746. In his broad comparative survey completed in May 1974, Pålsson, “Marriage and Divorce”, IECL, Vol. 3, Chap. 16, Sects. 130-132, lists not less than 8 substitute connections which could be identified at the time of his research. For Slovenia see Article 37, para. 2 of the Law of 1999. This intermediate solution has been espoused by the law in Austria, see §§ 20 and 18 para. 1 no. 1 of the Law of 1978; for Germany, see Article 14 and 17 of the Introductory Law of the Civil Code; for Hungary see § 40 of the Law Decree of 1979; in a slightly modified form it is also laid down in Articles 16 and 14 of the Greek Civil Code. This is the solution of the countries listed in the previous footnote. This is, for example, the solution of German law, see Article 14(1) no. 3 with Article 17 of the Introductory Law of the Civil Code; similar for Italy, Article 31 of the Law of 1995; for Korea see § 37, no. 3 of the Law of 2001 and for Japan Article 25, 3rd sentence of the Law of 2006. See for Belgium Article 55, § 1, no. 4 of the Code of 2004; for the Netherlands Article 1(1)(c) Wet conflictenrecht inzake ontbinding huwelijk en scheiding van tafel en bed of 25 March 1981, Stb. 1981, no. 166; but see now infra footnote 804; for Turkey Article 14, para. 1 of the Law of 2007. See for example for Germany, Article 17, para. 4 of the Introductory Law of the Civil Code in the old version effective before the amendment of 1986. A similar rule is still in force in Louisiana, see Article 3521 Civil Code.

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the more recent acts rather allow for divorce where the foreign applicable law does not.⁷⁹⁷ d) The development towards party autonomy 404. For many years, party autonomy has not played any role whatsoever in international divorce law. The broad comparative investigation conducted by Lennart Pålsson in the 1970s does not refer to party autonomy.⁷⁹⁸ This finding in respect of private international law is in stark contrast to the significance of party autonomy or professio iuris in the interpersonal law of multiethnic, multi-religious and multi-cultural societies. From the perspective of legal history it has been a common occurrence that spouses descending from different communities could choose the law governing the legal relations of the couple. There is sufficient evidence for this proposition from Ancient Egypt, from the Roman Empire and from the European Middle Ages.⁷⁹⁹ To date, the professio iuris is a wide-spread conflict rule determining the applicable law of marriage and divorce in many multi-religious countries of the Middle East.⁸⁰⁰ In Lebanon, for example, spouses of a different reli797 This is the very common rule nowadays, see for example § 20, para. 2 of the Austrian Act of 1978; for Bulgaria Article 82, para. 3 of the Code of 2005; Article 17, para. 1, 2nd sentence of the Introductory Law of the Civil Code in Germany; for Belgium Article 55, § 3 of the Code of 2004; for Slovenia Article 37, paras. 3 and 4 of the Law of 1999; for Switzerland Article 61, para. 3 of the Law of 1987. It is noteworthy that the more recent extra-European statutes such as those of China, Japan, Korea, Taiwan, Tunisia and Venezuela do not consider the right to divorce as a basic right requiring a special public policy provision. 798 Lennart Pålsson, “Marriage and Divorce”, IECL, Vol. 3, Chap. 16 completed in 1974. 799 Fritz Sturm, “Parteiautonomie als bestimmender Faktor im internationalen Familien- und Erbrecht”, in Dietrich Bickel et al., eds., Festschrift für Ernst Wolf, Cologne, 1985, pp. 637-658 at pp. 637-638; for the Middle Ages see Gutzwiller, p. 8, who equally refers to the possibility that members of one community “profess” the law of another community; Meijers, Recueil des cours 49 (1934), 558-559, considers the professio juris to have been an important tool when the mixing of peoples in the Middle Ages required a replacement of the personality of laws; the subject has been studied in greatest depth by Karl Neumayer, Die gemeinrechtliche Entwicklung des internationalen Privat- und Strafrechts bis Bartolus, Munich, 1901, pp. 147 et seq. 800 See in particular Pierre Gannagé, “La pénétration de l’autonomie de la volonté dans le droit international privé de la famille”, Rev. crit. dr. int. pr. 81 (1992), 425-455, in particular pp. 433-439; Lipstein and Szászy, IECL, Vol. 3, Chap. 10, Sects. 21-25 and 33; Wähler, pp. 185-186. In modern Egypt, the former right of non-muslims to opt for the jurisdiction of either their own religious courts or the Shari’a courts was abolished in 1956, see Menhofer, p. 80. In a colonial setting, the professio juris was often the most important first step in identifying the legal community of persons, see for Indonesia at the time of Dutch domination R.D.Kollewijn, “Rechtskeuze. Een Nederlands-Indiese Rechtsspiegel aan het International Privaatrecht voorgehouden”, in Rechtsgeleerde Opstellen van de Hand van Oud-Leerlingen aangeboden aan Paul Scholten, Haarlem, 1932, pp. 279-300 at pp. 281 et seq. Despite the great significance of interpersonal law in Israeli family law, party autonomy does not appear to be

Chapter 3 – New Domains for Party Autonomy

gion are permitted to designate the religious authority having jurisdiction over their marriage; that authority will apply its own law.⁸⁰¹ The tolerance of the State authorities in these countries is due to the absence of a State family law binding all subjects. In Europe, however, State legislation on family matters has progressively superseded religious law over the last 200 years. In the political struggles with the Catholic Church and other religious organizations, the European States became uncompromising both internally and in external relations. Consequently, party autonomy which had been accepted in interpersonal conflicts of laws over centuries was not admitted in private international law when that discipline emerged and developed in the course of the nineteenth and twentieth centuries. 405. The rigid position of European legislatures gradually started to slacken from the 1970s onwards. This was the time when the conservative ideas of family life which had been restored after World War II gave way to liberalization, when frontiers in Europe became more permeable and when people were increasingly confronted with family conceptions that differed from their own national ones.⁸⁰² Instead of the preservation of disrupted marriages, the speedy conduct of divorce proceedings became a political priority. This had repercussions for private international law. The Netherlands was, in 1981, the first country to allow spouses to choose the law applicable to the dissolution of marriage; but given the aim of accelerated divorce the choice was limited to the lex fori, i.e. to Dutch law.⁸⁰³ The recent Dutch codification has turned the Dutch lex fori from an eligible law into the basic rule, but it permits the spouses to designate the law of their common nationality in order to avoid difficulties resulting from the non-recognition of the Dutch divorce decree in the country of their common nationality.⁸⁰⁴ Much wider is the admission of party autonomy laid down in the Chinese Law of 2010: without

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recognised except to the extent that persons may of course change their religious affi liation, see Talia Einhorn, Private international law in Israel, Alphen aan den Rijn, 2009, nos. 444-454 at pp. 174-176. Gannagé, Rev. crit. dr. int. pr. 81 (1992), 437-438. See Dieter Martiny, in Meeusen, Pertegás, Straetmans and Swennen, eds., International Family Law for the European Union, Antwerpen, 2007, pp. 69-99 at pp. 77-81, on this development and its impact on international family law. See Article 1 (4) Wet conflictenrecht inzake ontbinding huwelijk en scheiding van tafel en bed of 25 March 1981, Stb. 1981, no. 166. The provision was also meant to facilitate divorce for foreigners whose national law was more restrictive than the Dutch law, see Strikwerda, pp. 100-101. See Article 56, paras. 1 and 2 of the Wet van 19 mei 2011 tot vaststelling en invoering van Boek 10 (Internationaal privaatrecht) van het Burgerlijk Wetboek (Vaststellings- en Invoeringswet Boek 10 Burgerlijk Wetboek) of 19 May 2011, Stb. 2011, no. 272; see K. Boele-Woelki and D. van Iterson, “The Dutch Private International Law Codification: Principles, Objectives and Opportunities”, Electronic Journal of Comparative Law 14.3 (2010), 1-26 at p. 20; see also supra, para. 381 on the relation between the new Dutch conflict rules on divorce and the Rome III Regulation.

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any limitation as to the eligible laws, it permits the contractual designation of the law applicable to divorce where the dissolution of the marriage is mutually agreed.⁸⁰⁵ 406. For a better understanding of the progressive inclination of legislatures towards the admission of party autonomy, it is helpful to refer to some more recent national statutes which recently have been replaced by EU law and therefore no longer represent the law in force. In 1986, Germany cautiously opened the gate for party autonomy. Under German conflicts law divorce was basically subject to the law governing the general or personal effects of marriage at the time the divorce application was notified; that law might be determined to a limited degree by an agreement of the spouses. Eligible laws were the law of common nationality where a spouse had dual nationality and, where the spouses did not have a common nationality, the law of the country of citizenship of either of them provided that they resided in a country whose citizenship was held by neither of them or that they did not have a habitual residence in the same country.⁸⁰⁶ The narrow limits of party autonomy arising from this rule gave evidence of the legislature’s preoccupation not to venture too far with the freedom of contract in divorce matters. A similar motivation emerges from the development of divorce conflict rules in Spain. When the basic conflict rule with cascade connections was enacted in 1990, no room for a choice of the applicable law was left, although the spouses were entitled, with regard to the personal effects of marriage governed by another conflict rule, to choose the applicable law.⁸⁰⁷ In 2003 the Spanish legislature, while not openly addressing party autonomy in divorce matters, went a step further towards its recognition: where under the basic cascade conflict rule a foreign law applied, a divorce by consent was nevertheless to be governed by Spanish law provided that one of the spouses was a Spaniard or habitually resident in Spain;⁸⁰⁸ thus, the substantive agreement on the dissolution of marriage had an indirect choice-of-law effect. As compared with the Spanish approach, the Belgian Code of 2004 provided for a straightforward solution: the spouses could choose either of 805 See Article 26 of the Law of 2010; a divorce without consent is always subject to the lex fori, i.e. to Chinese law, under Article 27. 806 See Article 17 and Article 14, para. 3 of the Introductory Law of the Civil Code as amended in 1986; these provisions have now been replaced by the Rome III Regulation of the EU, see the text in paras. 407 et seq. 807 See Article 9, para. 2 of the Civil Code as amended by the Law 11/1990 of 15 October, Boletín Oficial del Estado of 18 October 1990, p. 30527, French translation in Rev. crit. dr. int. pr. 80 (1991), 624 and Alegría Borrás, Non-discrimination à raison du sexe et modification du droit international privé espagnol, ibid., pp. 626-634 at p. 629. 808 See Article 107, para. 2, subpara. 2 (b) as amended in 2003, now replaced by the Rome III Regulation of the EU, see infra, para. 407; Alfonso Luís Calvo Caravaca and Javier Carrascosa González, Derecho internacional privado, Vol. 2, 11th ed., Granada, 2010, no. 33 at p. 170.

Chapter 3 – New Domains for Party Autonomy

their national laws or Belgian law.⁸⁰⁹ The Belgian law made it clear that the agreement had to be made at the time of the proceedings and thereby excluded a designation of the applicable law in a marital agreement concluded at an earlier stage. e) Rome III: Priority of party autonomy 407. Although a number of other recent conflict statutes do not deal with party autonomy in divorce matters, a certain tendency towards its admission emerges from this comparative report. It becomes even more manifest in the Rome III Regulation of the European Union on the law applicable to divorce and legal separation.⁸¹⁰ Since the Regulation, under its Article 4, is of universal application, it has superseded the national conflict rules of the 16 Member States now participating in this so-called enhanced cooperation;⁸¹¹ for the other 12 Member States, international divorce proceedings are still governed by their national conflict rules.⁸¹² The greater significance accorded by the Rome III Regulation to the contractual choice of the applicable law already arises from the structure of the instrument: the provisions on party autonomy (Articles 5-7) take the lead, and the objective connection by 809 Article 55, § 2 of the Belgian Code of 2004, which has been characterised as a cautious breakthrough of party autonomy by Marie-Claire Foblets in Erauw, Fallon et al., p. 302. It has now been replaced by the Rome III Regulation of the EU, see the text in para. 407. 810 Council Regulation (EU) no. 1259/2010 of 20 December 2010 implementing enhanced cooperation in the area of the law applicable to divorce and legal separation, OJ 2010 L 343/10; under its Article 21 it took effect on 21 June 2012, but it is unclear whether this date refers to the day when the application is lodged or is notified to the defendant, or to the date of the judgment. On the Regulation see Gwendoline Lardeux, “Rome III est mort. Vive Rome III !”, Recueil Dalloz (2011), 1835-1841; Petra Hammje, “Le nouveau règlement (UE) no. 1259/2010 du Conseil du 20 décembre 2010 mettant en œuvre une coopération renforcée dans le domaine de la loi applicable au divorce et à la séparation de corps”, Rev. crit. dr. int. pr. 100 (2011), 291-338; Jürgen Basedow, “European Divorce Law – Comments on the Rome III Regulation”, in Confronting the Frontiers of Family and Succession Law – Liber amicorum Walter Pintens, Antwerpen, 2012, pp. 135-150; id., “Das internationale Scheidungsrecht der EU – Anmerkungen zur Rom III-Verordnung”, in Öff nung und Wandel – Die internationale Dimension des Rechts II. Festschrift für Willibald Posch, Vienna, 2011, pp. 17-33; Viarengo, Riv. dir. int. priv. proc. 47 (2011), 601-624; Fallon, Rev. trim. dr. fam. (2012), 291-317. 811 These Member States are: Austria, Belgium, Bulgaria, France, Germany, Hungary, Italy, Latvia, Luxembourg, Malta, Portugal, Romania, Slovenia and Spain, see Recital 6; Greece and Lithuania have later opted in. On the enhanced cooperation in accordance with Article 326 et seq. TFEU, see Fausto Pocar, “Brevi note sulle cooperazioni rafforzate e il diritto internazionale private europeo”, Riv. dir. int. priv. proc. 47 (2011), 297-306. 812 These Member States are Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, Ireland, Netherlands, Poland, Slovakia, Sweden and the United Kingdom.

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a cascade of connecting factors that becomes relevant only in the absence of a contractual choice is regulated in the subsequent Article 8. Under Article 5, paragraph 2, the pertinent agreement of the spouses may be concluded “at the latest at the time the court was seized”; put in other words, the law applicable to an eventual divorce may already be fi xed much earlier, for example in a marital agreement concluded when the marriage is celebrated, or at any time during marriage.⁸¹³ The range of eligible laws is wider than in any of the pre-existing national conflict statutes of Member States. The spouses may choose the law of the State where they are habitually resident at the time the agreement is made, or the law of their last (common) habitual residence provided that one of them still resides there at the time of the agreement. The Regulation further allows the spouses to designate the national law of either spouse, but it avoids the issue of dual nationality.⁸¹⁴ Finally, the law of the forum is eligible as well. 408. Just like any other designation of the lex fori, this is an implicit reference to the rules on jurisdiction which have been unified in the European Union by the Brussels IIbis Regulation.⁸¹⁵ Under Article 3 of the Brussels IIbis Regulation, the applicant, in divorce proceedings, may not only seize the courts of a Member State where the spouses are habitually resident or were last habitually resident insofar as one of them still resides there, but also other courts: in the event of a joint application, the forum State will have jurisdiction if either spouse is habitually resident in that country, and for unilateral applications it is sufficient if the applicant has been a resident of the forum State for at least 12 months or, if he is a national of that Member State, for not more than 6 months. In all these cases, the law of the forum State may be chosen by the parties as the law governing divorce. This may extend the array of eligible laws to virtually all Member States participating in the Rome III Regulation; the only requirement to be fulfilled by the applicant is to establish a habitual residence in the forum State 12 months prior to the application. But this potentiality does not appear to deter legislatures any longer. And why should it ? In today’s Europe, with divorce readily available everywhere, no spouse will any longer deliberately choose a habitual residence for the sole purpose of getting divorced.

813 Hammje, Rev. crit. dr. int. pr. 100 (2011), 320. 814 See Recital 22: “… how to deal with cases of multiple nationality should be left to national law, in full observance of the General Principles of the European Union”. The wide-spread national rule giving priority, in case of dual nationality, to the citizenship of the forum state, can however hardly be considered as being in line with the prohibition of discrimination on grounds of nationality under Article 18 TFEU, see already Basedow, supra at footnote 783. 815 Council Regulation (EC) no. 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) no. 1347/2000, OJ 2003 L 338/1.

Chapter 3 – New Domains for Party Autonomy

409. From the wording of Article 5, paragraph 2 (d) Rome III, it is not quite clear whether the law of the forum has to be chosen in that capacity, i.e. whether at the time the choice is made a forum must already have been elected by the plaintiff or whether it is sufficient that the law chosen by the spouses at some point in the past turns out to be the lex fori when divorce proceedings are ultimately initiated. The English and French language versions do not take a clear stand, whereas the equally authoritative German version seems to limit a choice of the lex fori to a point in time when the case is already pending.⁸¹⁶ Suppose a Franco-Spanish couple, when celebrating their marriage, concludes a marital agreement that contains, inter alia, a choice-oflaw clause subjecting an eventual divorce to the laws of Luxembourg where the spouses expect to move in the future. At the time of the agreement, Luxembourg is of course not yet a forum State if that concept is understood as relating to a pending case. Provided, however, that one of the spouses actually becomes a resident of Luxembourg later on, and that this spouse lodges a divorce application with a court in Luxembourg which will then be competent under Article 3 of the Brussels IIbis Regulation, the choice made in the marital agreement would appear to satisfy the requirements of Article 5, paragraph 1(d) of the Rome III Regulation at the time the court is seized. The agreement on the application of the law of Luxembourg would be a valid choice of the law of the forum since the choice has subsequently become the choice of the lex fori. This solution is consistent with the requirement enunciated in Article 5 paragraph 2 that the agreement must be made “at the latest at the time the court was seized.”⁸¹⁷ It is a reasonable solution since it enables couples to fi x the law applicable to their marriage and an eventual dissolution in conformity with plans they have made with regard to their future whereabouts. In this perspective, the Rome III Regulation would even validate a choice-of-law clause that identifies the law applicable to eventual divorce proceedings, without giving the name of any specific jurisdiction, through a mere reference to the law of the court that may be seized of the matter one day.

816 Under Article 5, para. 2 (d) the spouses may choose “das Recht des angerufenen Gerichts”, i.e. the law of the court addressed, which appears to require that an application has already been lodged; this is also true for the Dutch version. The English, French, Italian, Portuguese and Spanish versions refer only to the law of the forum without specifying whether a present or a future forum is intended. 817 Author’s emphasis; Viarengo, Riv. dir. int. priv. proc. 47 (2011), 617, admits a choice at any time “in costanza del matrimonio”; this might be interpretated in the sense that the marriage would have to be celebrated before the choice of the law applicable to later divorce proceedings can be made. The wording of the provision does not impose such a limit in time; a choice of law prescribed in a marital agreement that was concluded in view of an imminent marriage would also appear to be valid.

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f) Conclusion 410. It follows from these observations that party autonomy has been realized by the European Union in respect of the dissolution of marriage to a much wider extent than in any national law so far. The only comparable conflicts rule is that of China, which permits an unlimited choice of the applicable law for divorce by mutual consent; the European rules on party autonomy are, by contrast, also applicable to a contested divorce. Another difference between both rules concerns the simplicity of the Chinese rule as opposed to the extreme complexity of the European rule, whose far-reaching meaning becomes clear only from a reading of the Rome III Regulation together with the Brussels IIbis Regulation. Future legislation should perhaps rather aspire to the simplicity of the Chinese rule, without limiting its purview to divorce by consent. Again, the protection of the weaker spouse from surprising – and detrimental – clauses in marital agreements should be effected not by a limitation of the array of eligible laws, but by provisions ensuring the informed and authentic consent of the spouses. 4.

Maintenance

a) Basic conflicts orientations 411. Economic support, whether in kind or by the payment of money, whether between spouses, between parents and children or even between more distant relatives, is one of the basic functions of the family. The substantive laws display a great variety of solutions concerning the extent and duration of support obligations, the interdependence with the matrimonial property regime, the ranking of multiple creditors and multiple debtors, the involvement of support enforcement agencies or social security systems, etc.⁸¹⁸ Yet, the development of private international law in this area appears to be less influenced by national considerations on the choice of the applicable law. Predominant are discussions addressing jurisdiction, the cooperation of national courts and authorities, and the recognition and enforcement of foreign awards. These considerations have led to a number of uniform law instruments which are mainly outside the scope of this enquiry.⁸¹⁹ But some 818 See the broad study by Dieter Martiny, Unterhaltsrang und –rückgriff, Vol. 1 and 2, Tübingen, 2000, which contains comparative surveys in relation to numerous aspects. 819 The major conventions are: Convention on the recovery abroad of maintenance, done at New York on 20 June 1957, UNTS 268, 3, with 65 contracting parties; Convention on the Law Applicable to Maintenance Obligations towards Children, done at The Hague on 24 October 1956, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague, 2009, pp. 38 et seq., with 13 contracting parties; the Convention Concerning the Recognition and Enforcement of Decisions relating to Maintenance Obligations towards Children, done at The Hague on 15 April 1958, ibid., pp. 41 et seq., with 19 contracting parties; Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obliga-

Chapter 3 – New Domains for Party Autonomy

of them have also dealt with the law applicable to maintenance obligations and have recently opened the door to party autonomy. 412. The choice-of-law rules adopted in those international conventions and at the national level may be distilled to four or five basic patterns. For different reasons, two of them focus on the debtor’s position. (1) In the common law jurisdictions, it is again the lex fori that governs claims for maintenance.⁸²⁰ Where the creditor is permitted to lodge a claim with the court of his or her habitual residence, the lex fori will often be identical to the law of the creditor’s habitual residence. In the United States, however, jurisdiction exclusively based on the plaintiff ’s (i.e. the creditor’s) habitual residence seems to be considered as incompatible with the due process clause of the US Constitution, which requires, for the defendant’s protection, some minimum contacts of the latter with the forum State.⁸²¹ The Uniform Interstate Family tions, done at The Hague on 2 October 1973, ibid., pp. 212 et seq., with 23 contracting states; Convention on the Law Applicable to Maintenance Obligations, done at The Hague on 2 October 1973, ibid., pp. 230 et seq., with 14 contracting states; InterAmerican Convention on Support Obligations adopted by the 4th Inter-American specialised Conference on Private International Law, Montevideo on 15 July 1989, RabelsZ 56 (1992), 157 et seq., with 13 contracting states; Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance, done at The Hague on 23 November 2007, Collection of Conventions 1951 – 2009, pp. 502 et seq., not yet in force; Protocol on the Law Applicable to Maintenance Obligations, done at The Hague on 23 November 2007, ibid., pp. 564 et seq., not yet in force but provisionally applied by all EU Member States except for Denmark and the United Kingdom, see Council Decision (2009/941/EC) of 30 November 2009 on the Conclusion by the European Community of the Hague Protocol of 23 November 2007 on the Law Applicable to Maintenance Obligations, OJ 2009 L 331/17, Article 4, and recitals 10 – 12 on the participating Member States. A uniform law instrument with particular significance for the 50 States of the United States and for both their mutual relations as well as their relations with foreign countries is the Uniform Interstate Family Support Act (UIFSA), last amended or revised in 2001 under the auspices of the National Conference of Commissioners on Uniform State Laws, available on a website of the University of Pennsylvania: http:// www.law.upenn.edu/bil/archives/ulc/uifsa/final2001.htm; on that instrument see Hay, Borchers and Symeonides, pp. 741-742. 820 For English law see Cheshire, North and Fawcett, p. 1068; for Australia Nygh, no. 27.41, p. 571 and no. 27.51, p. 573; for Canada Janet Walker, Conflict of Laws, Halsbury’s Laws of Canada, Markham, Ont., 2006, HCF-202 at p. 678, HCF-205 at p. 680 and HCF-208 at p. 686; but see for Quebec Articles 3094-3096 of the Civil Code, referring to the law governing divorce for post-divorce inter-spouse maintenance and to the law of the creditor ‘s habitual residence with regard to child support. 821 First required by International Shoe Co. v. Washington, 326 US 310 at 316 (1945); the minimum contacts have to be balanced against interests of the forum state and the plaintiff, see World-Wide Volkswagen Corp. v. Woodson, 444 US 286 at 292 (1980); in an article dealing with the negotiations on what later came to be the Hague Choice of Court Convention of 2005, Ronald Brand, member of the US delegation, summarises the case law by positing two tests: (1) whether there is a sufficient nexus be-

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Support Act has therefore conceived of a system providing for the cooperation between the courts of different States of the Union: the plaintiff may file in his local forum, the initiating tribunal, which will then forward the action to the so-called responding tribunal of the State where the defendant is present; it will be up to that court to issue a support order under its lex fori.⁸²² (2) A second model that is wide-spread in Islamic countries considers maintenance obligations as part of the debtor’s personal status and consequently subjects them to the debtor’s national law or to the husband’s national law in the case of inter-spouse maintenance.⁸²³ The practical application of this conflict rule may be difficult and delay proceedings on account of the need to apply foreign law in those instances where the maintenance debtor is a foreigner. 413. Modern policy orientations have turned away from the debtor and have focused on the position of the creditor. Since his claim for maintenance depends on economic needs, it is the country where these needs arise whose laws should govern maintenance. This view is further underpinned by the consideration that institutions granting support to a maintenance creditor in the alternative, such as charities or social security, have been conceived and are operating on the basis of the local law of the creditor’s country. It follows that the applicable law should be determined by a connection of the creditor. (3) Accordingly, corresponding to a third model this is sometimes his citizenship,⁸²⁴ but usually his habitual residence or domicile⁸²⁵; the latter solution is more in line with the localization of the economic needs. However, for the post-divorce maintenance obligations between spouses, it is usually the law governing divorce that applies.⁸²⁶ (4) A fourth model provides for an alternative connection of maintenance claims or a cascade of

822 823

824 825

826

tween the defendant and the forum state, and (2) whether the circumstances make it fair and reasonable to exercise jurisdiction, see Ronald Brand, “Due Process, Jurisdiction and a Hague Judgments Convention”, Univ. Pittsburgh L. Rev. 1999, 661-706 at p. 687. Section 303 UIFSA; see also Hay, Borchers and Symeonides, pp. 740-741. See for Egypt Articles 13 and 15 of the Civil Code; these provisions have (sometimes almost verbatim) been copied in many other Middle East countries, see for Algeria Article 14 Civil Code, for Iraq Article 21 Civil Code, for Iran Articles 963-964 Civil Code, for Jordan Article 16 Civil Code, for Kuwait Article 45 Civil Code, for Libya Article 15 Civil Code, and for Syria Article 16 Civil Code. This is the solution in Taiwan, see Article 57 of the Law of 2010. The Hague Conventions of 1956, 1973 and 2007, supra at footnote 819. All conventions depart from the basic rule outlined supra; some of them add further laws that may possibly be applied. Outside the contracting states of the Hague Conventions the basic rule can also be found in Korea, § 46 of the Law of 2001, and in Quebec, Article 3094 Civil Code. See Article 8 of the Hague Convention of 1973; see also Article 3096 of the Civil Code in Quebec; the rule has not been adopted in the Hague Protocol of 2007, see its Article 5.

Chapter 3 – New Domains for Party Autonomy

residual connections in order to uphold maintenance awards. These conflict rules are meant to foster the enforcement of maintenance claims existing under any of the laws taken into consideration. They have been elaborated in the successive Hague Conventions, and the model is also enshrined in the Inter-American Convention; the range of the contemplated laws and the approaches pursued vary, however. Under Article 6 of the Inter-American Convention, the court will choose the law of the habitual residence of either the creditor or the debtor, whichever is more favourable to the creditor. Under the 2007 Hague Protocol, the lex fori is to apply where the creditor is unable to obtain maintenance under the law of his habitual residence, see Articles 3 and 4. The widest range of laws is taken into account by Article 29 of the Chinese Law of 2010: the laws of the habitual residences and nationalities of both creditor and debtor, and the law of the place where the (debtor’s ?) assets are located. (5) A fifth model that deserves closer attention in our context allows for party autonomy and has been approved by the 2007 Hague Protocol. b) Party autonomy and its exceptions under the 2007 Hague Protocol 414. It appears that the Hague Maintenance Protocol of 2007 has for the first time permitted party autonomy in maintenance matters. Under its Article 7, the debtor and the creditor may agree on the application of the lex fori “for the purpose only of a particular proceeding in a given State”, i.e. in view of pending or imminent divorce proceedings.⁸²⁷ Moreover, Article 8 permits the parties to “at any time designate one of the following laws as applicable to a maintenance obligation a) the law of any state of which either party is a national at the time of the designation; b) the law of the state of the habitual residence of either party at the time of designation; c) the law designated by the parties as applicable or the law in fact applied, to their property regime; d) the law designated by the parties as applicable or the law in fact applied, to their divorce or legal separation.” This is now the law in force in 26 Member States (excluding Denmark and the United Kingdom) as the European Union has decided in favour of the provisional application of the Protocol as from 18 June 2011.⁸²⁸ 415. While the array of eligible laws under Article 8 is wider than in other recent instruments, in particular those of the European Union, the negotiators apparently felt insecure about the novel idea of party autonomy relating to choice of law on maintenance. As one delegate put in, “the whole idea of 827 See Alberto Malatesta, “La Convenzione e il Protocollo dell’Aja del 2007 in materia di alimenti”, Riv. dir. int. priv. proc. 45 (2009), 829-848 at p. 844. 828 See supra footnote 819.

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party autonomy and choice of law on maintenance was new within the EU and therefore it is better to err on the side of the status quo rather than on the side of innovation, if there is no consensus for the latter.”⁸²⁹ This explains the number of exclusions from party autonomy in Article 8 paras. 3 to 5. First, under Article 8, paragraph 3, party autonomy is not available in respect “of a person under the age of 18 years or of an adult who, by reason of an impairment or insufficiency of his or her personal faculties, is not in a position to protect his or her interest”. The exclusion of minors takes account of the fact that they would be unable to bind themselves anyway; they could only be bound by an agent’s declaration, which might however be tainted by the agent’s own interest. While this exception is reasonably clear, the second exclusion of “vulnerable adults” has been vaguely framed. It may give rise to litigation years after a (presumedly valid) choice of law has been made; such a perspective of legal uncertainty is hostile to parties who otherwise would make use of party autonomy. 416. Accordingly, the concept of vulnerable adult in Article 8, paragraph 3 of the Hague Protocol should be interpreted narrowly: it presumably can be traced back to decisions of the German Constitutional Court which invalidated claims for maintenance by pregnant women who were acting under emotional duress.⁸³⁰ While such waivers will have to be assessed under the law of the creditor’s habitual residence in any event, see Article 8, paragraph 4 of the Hague Protocol, the exclusion of vulnerable adults under paragraph 3 refers to other agreements which are clearly detrimental to a vulnerable adult. That interpretation does not avoid an overlap of Article 8, paragraph 3 with a third limitation of party autonomy under Article 8, paragraph 5. Where the application of the law chosen by the parties would lead to manifestly unfair or unreasonable consequences for any of them, that law will not apply unless the parties were fully informed and aware of the consequences of their designation at the time of the agreement. While the parties’ choice should certainly be made on the basis of full information, this prerequisite means something different in the case of a choice of the applicable law as opposed to any particular agreement on the substance of the transaction. Spouses may agree, in the context of the celebration of their marriage, on the law applicable to maintenance claims arising after a divorce that may occur 10 or 15 years later. The full information required by Article 8, paragraph 5 can only relate to the content of the chosen law at the time of the agreement; later changes of that law concerning, for example, the ranking of several maintenance creditors represent a risk that has to be borne by both spouses and cannot lead to an invalidation of the choice-of-law clause given

829 Paul Beaumont, International Family Law in Europe – the Maintenance Project, the Hague Conference and the EC: A Triumph of Reverse Subsidiarity, RabelsZ 73 (2009), 509-546 at p. 521 in footnote 26. 830 See supra footnote 774.

Chapter 3 – New Domains for Party Autonomy

that similar changes could equally have occurred in the law that would have been applicable in the absence of a contractual choice. 417. In summary, the resolved turn of the European Union towards party autonomy in the law of maintenance is an ambiguous piece of legislation. On the one hand, the commitment to party autonomy goes further than in European instruments relating to other areas of family law. On the other, the broad, vague and overlapping exceptions indicate that the framers were wary of their own courage; they have created legal uncertainty and may have considerably reduced the significance of the basic admission of party autonomy in legal practice.⁸³¹ So far, practical experience with the rules reported above is lacking. A noteworthy advantage of the application of the Hague Protocol in the European Union consists in its possible interpretation by the European Court of Justice, which will be authoritative for the 25 participating Member States; thus, the restoration of legal security lies in the hands of the European judges. What can be said with sufficient certainty at the present stage is only that the Hague Conference and the European Union have levelled an additional playing field for party autonomy. 5.

Conclusion

418. It follows from the preceding survey over some sectors of family law that party autonomy is progressively being acknowledged as a choice-of-law method in this domain. Beyond marital property, where it has long been accepted, it is gaining ground in maintenance and even outside the field of patrimonial interests with regard to divorce. However, these areas cannot necessarily be taken as partes pro toto signalling the wholesale recognition of party autonomy in international family law. In a public consultation concerning the recognition of the effects of civil status records, the European Commission in fact some time ago asked (i) whether the possibility of citizens choosing the applicable law would not favour such recognition and (ii) in which civil status situations that choice might be applied.⁸³² A superficial look at some other sectors of family law suffices to show that no general answer is possible. There are undoubtedly further candidates for the admission of party autonomy, for example regarding the formal and perhaps also the material requirements in connection with the celebration of marriage,⁸³³ 831 Malatesta, Riv. dir. int. priv. proc. 45 (2009), 846, rightly points to the “acrobazia linguistica” and the “estrema vaghezza” of Article 8 which turns it into a “disciplina piuttosto complicata”; Jayme, YBPIL 11 (2009), 5: “...the broad and vague language of the Hague Protocol reduces the importance of party autonomy ... given that the validity of each agreement may be questioned in a dispute.” 832 European Commission, Green Paper – Less bureaucracy for citizens: promoting free movement of public documents and recognition of the effects of civil status records, COM (2010) 747 final of 14 December 2010, Question 10. 833 The public consultation of the EU Commission has triggered numerous comments which cannot be reported in this context. Some have been particularly elaborated

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and one might also think of the relation between parents and children.⁸³⁴ On the other hand, in light of the public interests involved in the determination of status, it is difficult to see how the ascertainment of parentage could be left to a law chosen by the parties.⁸³⁵ 419. From the specific areas examined above, it also emerges that party autonomy is usually granted, in international family law, only as among a limited number of eligible laws. Legislatures see the need to prevent abuse, to protect the weaker party and to foreclose the exercise of party autonomy to the detriment of third parties. There appears to be a wide-spread belief that these risks are minimized if the law chosen is somehow connected to the persons in question: by the citizenship or the habitual residence of one or both parties, or by the pendency of proceedings between the parties when the lex fori has been designated. It is doubtful, however, whether the existence of minimum contacts can guarantee an informed choice and avoid abuses. This would require appropriate provisions of substantive law whose potential absence in the law chosen by the parties cannot be compensated by the existence of some minimum contacts between them and the country where that law is in force. The limitations of party autonomy are the result of political compromises and cannot be characterized as rational responses to existing fears; they will therefore probably disappear in the future. Instead, the substantive requirements for a choice of law deserve closer scrutiny. Section 6: Succession 1.

Historical Evolution and Conflict Taboos

420. In the private international law of inheritance we can find traces of very old concepts concerning the relationship between man and property. Thus, the wide-spread conflict rule that the succession in real property is subject to the lex situs can best be explained by its historical roots in the feudal society of the European Middle Ages. Where all land belonged to the Crown and private holders could acquire only a temporary title lasting for the period of their feud, the legal position of the land was governed by an inextricable mix of what today would be classified as sovereign and private rights of the seigneur; accordingly, the position of the vassal could not be governed by any and published in academic journals, see for example the comments of the Academic Advisory Board of the Association of German Registrars: “Der freie Verkehr öffentlicher Urkunden und die gegenseitige Anerkennung der Rechtswirkungen von Personenstandsurkunden in der Europäischen Union – Stellungnahme des Wissenschaftlichen Beirats des BDS zum Grünbuch ‘Weniger Verwaltungsaufwand für EU-Bürger’”, Das Standesamt (StAZ) 2011, 165-175 at p. 174. 834 See Sturm, Festschrift Ernst Wolf, p. 657, who accurately points out that parents in general cannot be expected to choose a law that is detrimental to their children. 835 See Stellungnahme, supra at footnote 833, p. 175 rejecting party autonomy also for adoption.

Chapter 3 – New Domains for Party Autonomy

law different from that of the seigneur. As the modern State evolved, feudal ties gave way to the pairing of clearly distinct sovereign powers and private rights; the former are not being affected by a transfer of the latter regardless whether that transfer has been implemented under the lex situs or under a foreign law. Yet, many jurisdictions have adhered to the lex situs as being applicable to succession in immovables.⁸³⁶ Professor Symeonides has talked about a “situs taboo” with regard to common law jurisdictions,⁸³⁷ but that taboo is by no means confined to the common law.⁸³⁸ In any event, reference to the lex situs by necessity leads to the scission of the estate under diverse laws where the estate comprises land in different jurisdictions. That scission is further deepened where the estate is composed of immovables and movables; given their very nature, movables cannot reasonably be subject to the law of a location which may be purely accidental. A different connecting factor is needed. 421. A further principle of ancient origin that still appears to have an impact on the current conflict rules of private international law relates to the heirship of family members, in particular that of the surviving spouse and the offspring, and to an individual’s ability to modify otherwise applicable rules of succession and dispose of his or her assets at will. The ancient rule reserving the assets of the deceased to family members was already abandoned in Roman law, but it subsisted over several hundred years in the laws of the Germanic conquerors. It was only the progressive influence of the Catholic Church that gradually reduced its impact, giving way to the partial recognition of the individual’s liberty to make a will, at first only for pious matters (ad pias causas), i.e. for the benefit of churches and monasteries, later also in favour of individual legatees and heirs.⁸³⁹ The tension between the two principles – heirship of the family and the decedent’s liberty to make a will – has brought about a great number of intermediate solutions in the various 836 See for the Common Law of England: Cheshire, North and Fawcett, pp. 1264 and 1277 et seq.; for Australia Nygh, no. 38.5, p. 768, no. 38.8 at p. 769 and no. 38.23, p. 774; for the United States: Rest. Second, Conflict of Laws, § 236 et seq. and the critical comments by Hay, Borchers and Symeonides, pp. 1286-1290; for Canada Walker, HCF-254 at pp. 763-764; for France Mayer and Heuzé, no. 803-804 at pp. 618-619; Audit and D’Avout, nos. 886 et seq. at pp. 782 et seq.; this solution also applies to wills, no. 891 at p. 787. 837 Symeon Symeonides, RabelsZ 57 (1993), 460-507 at p. 491. 838 See for example for France the previous footnote; for Bulgaria Article 89 para. 2 of the code of 2005 (subject tot he designation of the decedent’s national law as the law governing the whole estate), for China Article 31 of the act of 2010; for Turkey Article 20 para. 1 2nd sentence of the law of 2007. 839 See Inge Kroppenberg, “Freedom of Testation”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 759-762; also available in German under the heading “Testierfreiheit” in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. II, Tübingen 2009, pp. 1481-1485.

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jurisdictions: in some countries, only part of the estate is subject to the decedent’s dispositions; in others the heirs appointed at will have to compensate dispossessed family members through money payments; and in others again, the judge has wide discretion to quash the decedent’s will by imposing family provisions or so-called clawback orders in favour of disinherited family members.⁸⁴⁰ These solutions differ widely, and they have emerged as compromises from intense political debates in the respective countries. This may explain why the designation of the law applicable to succession by the decedent has for a considerable time not been contemplated as being either admissible or a viable conflict rule; the private choice of the applicable law was primarily seen as a potential threat to the compromise attained in the substantive law of the respective jurisdiction. Instead, most countries have identified the law governing succession by referring – either for movables exclusively or for the whole estate – to the last citizenship⁸⁴¹ or to the last domicile/habitual residence of the deceased.⁸⁴² 840 See for a short survey Anatol Dutta, “Succession and Wills in the Conflict of Laws on the Eve of Europeanisation”, RabelsZ 73 (2009), 547-606 at pp. 581-583; for a broad comparative survey of the development of substantive law id., “Entwicklungen des Pflichtteilsrechts in Europa”, FamRZ 2011, 1829-1840; see also Walter Pintens, “Die Europäisierung des Erbrechts”, ZEuP (2001), 628-648 at pp. 638-643; Inge Kroppenberg, “Compulsory Portion”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 337-341; also available in German under the heading “Pfl ichtteilsrecht” in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. II, Tübingen 2009, pp. 1156-1160; Alain-Laurent Verbeke and Yves-Henri Leleu, “Harmonisation of the law of succession in Europe”, in Arthur Hartkamp, Martijn Hesselink, Ewoud Hondius, Chantal Mak and Edgar du Perron, eds., Towards a European Civil Code, 4th ed., Alphen aan den Rijn, 2011, pp. 459-479 at p. 468. 841 This conflict rule reflects the law in many continental European countries, see for example for Austria §§ 9 and 28 of the law of 1978, for Germany Article 25 of the Introductory Law of the Civil Code; for Greece Article 28 of the Civil Code; for Italy Article 46 of the law of 1995; for Portugal Articles 31 and 62 of the Civil Code; for Spain Article 9, para. 8 of the Civil Code; for Sweden 1 kap. 1 § Lag (1937:81) om internationella rättsförhållanden rörande dödsbo. But it is also widespread in other parts of the world, see for Japan Article 36 of the law of 2006; for Taiwan Article 58 of the law of 2010; for Egypt Article 17 Civil Code; and for Tunisia Article 54 of the law of 1998, where the provision is rather unclear but to be interpreted in the sense that the succession is primarily subject to the decedent’s national law and only in the absence of such a law to the law of the last habitual residence, see Ali Mezghani, Commentaires du code de droit international privé, no place of publication indicated, 1999, p. 131. 842 This is the solution in the common law jurisdictions with regard to movables, see with regard to both intestate succession and wills for England Cheshire, North and Fawcett, p. 1264; for Australia Nygh, no. 38.2, p. 767 and no. 38.7, p. 769; for Canada Walker, HCF-254 at pp. 763-764; for the US Rest. Second, Conflict of Laws, §§ 260, 263 and Hay, Borchers and Symeonides, pp. 1290 and 1301; for France Audit and D’Avout, no. 889 at p. 785; for Switzerland see Articles 90 and 91 of the law of 1987;

Chapter 3 – New Domains for Party Autonomy

2.

The Trend Towards Party Autonomy

422. Over the last 30 or 40 years, a general trend in international legislation towards the recognition of the decedent’s ability to designate the law applicable to succession is undeniable. It is of course limited to testamentary succession and to the rare agreements on succession; the following considerations will focus on wills. In the post-World War II period, only very few jurisdictions would respect a decedent’s choice of the law applicable to his or her succession.⁸⁴³ Moreover, the room left for choice was extremely narrow. An example is provided by § 3 – 5.1 of the Estates, Powers and Trusts Law of the State of New York. The provision validates a testamentary designation of the law applicable to the decedent’s succession only where three conditions are simultaneously met: (1) the testator is not domiciled in the State of New York at the time of death; (2) he has property situated in the State of New York to which a testamentary disposition relates; and (3) he elects the laws of the State of New York to govern that disposition.⁸⁴⁴ A similar provision allowing for the choice of the lex situs can be found in German law with regard to immovables located within Germany;⁸⁴⁵ as this conflict rule only applies in German courts, that choice is tantamount to the lex fori. It is obvious that provisions of this kind are rather enacted in the interest of local authorities dealing with the estates of foreigners, and less so in the interest of individuals planning the succession in estates located in several jurisdictions. 423. Apart from the New York provision noted above, US conflicts law does not appear particularly inclined to admitting party autonomy in the area of succession. The Restatement Second on the Conflict of Laws refers to the law for China Article 31 of the law of 2010; for Venezuela Article 34 of the law of 1998; it is also acknowledged in many uncodified laws, see e.g. Norway, see Thue, p. 510. 843 See Gunther Kühne, Die Parteiautonomie im internationalen Privatrecht, Bielefeld, 1973, pp. 34-42; for some former rules in Latin American countries such as Peru, Guatemala and Mexico permitting the designation of the law applicable to a succession at least to forum descendants, see Karin Dreher, Die Rechtswahl im internationalen Erbrecht, Frankfurt 1999, pp. 26-28; François Boulanger, Droit international des successions, Paris, 2004, no. 68 at p. 75; Andrea Bonomi, “Successions internationales: conflits de lois et de juridictions”, Recueil des cours 350 (2010), 71-418 at pp. 198 et seq. 844 See § 3-5.1 (h) of the Estates, Powers and Trusts Law (EPT) codified in the 2010 New York Code, see http://law.justia.com/codes/new-york/2010/ept/article-3/part-5/3-51/: “(h) whenever a testator, not domiciled in this state at the time of death, provides in his will that he elects to have the disposition of his property situated in this state governed by the laws of this state, the intrinsic validity, including the testator’s general capacity, effect, interpretation, revocation or alteration of any such disposition is determined by the local law of this state. The formal validity of the will, in such case, is determined in accordance with para. (c).” 845 Article 25, para. 2 of the Introductory Law of the Civil Code as amended in 1986.

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designated in a will only in relation to its construction and interpretation, not with regard to other substantive issues such as its validity.⁸⁴⁶ This is also the position taken in the Uniform Probate Code⁸⁴⁷ and in the Louisiana Civil Code.⁸⁴⁸ These rules may be helpful in US interstate cases where courts apply similar rules on interpretation and construction of wills. In international cases, however, given the very large number of legislative provisions on interpretation that can be found in some civil codes of the world, the value of a split between the law applicable to interpretation and the law governing validity of the will appears doubtful. The judge might be led by that split to interpret a will under the law of country A in a certain way which is incompatible with the law of country B that governs its validity; consequently, he will have to quash the respective provision. It follows that once a choice of the applicable law is permitted with regard to construction and interpretation, there is a strong case for allowing it also in respect of other substantive issues. 424. A broader discussion – at the levels of theory and policy – of party autonomy with regard to succession started only in the 1960s.⁸⁴⁹ Resolutions of the 1963 congress of the Union Internationale du Notariat Latin and of the Institut de droit international adopted in 1967 affirmed and strengthened scholarly recommendations.⁸⁵⁰ This debate cleared the way for pertinent discussions at the Hague Conference which then led, in 1989, to the adoption of the Hague Succession Convention.⁸⁵¹ While the Convention has been ratified only by the Netherlands and has not taken effect so far, its impact on the legal development in national conflicts legislation has been undeniable, particularly in respect of the admission of party autonomy. The Convention is built on three basic principles: (1) instead of permitting the scission of an estate into its movable and immovable parts in accordance with the situs, 846 Rest. Second, Confl ict of Laws § 264 with Comment (e). 847 Section 2-703 Uniform Probate Code, cited in Hay, Borchers and Symeonides, p. 1299. 848 Louisiana Civil Code, Article 3531. 849 See Boulanger, no. 68 at p. 75; see in particular Alfred von Overbeck, “La professio juris comme moyen de rapprocher les principes du domicile et de la nationalité en droit international privé”, in Liber amicorum Baron Louis Frederiq, Vol. 2, Gent, 1965, pp. 1085-1112 at pp. 1088-1090; Hans Dölle, “Die Rechtswahl im internationalen Erbrecht”, RabelsZ 30 (1966), 205-240 at pp. 229-233; see also the further references by Kühne, pp. 44-49. 850 The resolution of the Union du Notariat Latin is reproduced in von Overbeck, previous footnote, pp. 1085-1086; the Institut de droit international adopted a resolution allowing the testator to opt for either his/her national law or the law of his/her domicile, see Annuaire de l’Institut de droit international 52 II (1967), 558 no. 2. The debates are reproduced in 52 I (1967), 528-655 and II (1967), 464-522. 851 Convention on the Law Applicable to Succession to the Estates of Deceased Persons concluded on 1 August 1989, in Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague, 2009, pp. 358 et seq.

Chapter 3 – New Domains for Party Autonomy

the Convention “governs the whole of the estate of the deceased wherever the assets are located.”⁸⁵² (2) The law governing the succession is determined by the last citizenship of the deceased or, where he was habitually resident in another country for more than five years, by the last habitual residence.⁸⁵³ The change of the connecting factor is meant to take account of the gradual integration of migrants into the host society; but since it is obviously arbitrary to assume that integration as perfected after a habitual residence of five years’ duration, this aspect of the rule is not more than a rebuttable presumption. (3) A further rule intended to reduce the effects of the arbitrary change of the connecting factor after a five years’ residence is the broad, albeit limited, admission of party autonomy. A designation of the applicable law will be effective only if at the time of the designation or of his or her death, the testator was a national of that State or had his or her habitual residence there.⁸⁵⁴ Moreover, the lex situs may be designated with an effect limited to assets located in the respective country.⁸⁵⁵ 3.

Party Autonomy and Forced Heirship Restrictions in Present Conflicts Statutes

425. These rules on party autonomy have been influential at the national level and, furthermore, are on the verge of impacting the European Union’s conflict rules on inheritance. The domestic law of the Netherlands simply refers to the Hague Convention, which is applied by Dutch courts as national law although it has not taken effect as a treaty.⁸⁵⁶ More recent legislation in Quebec, Belgium, Finland and Poland has equally approved of party autonomy in private international law and has essentially embraced the list of eligible laws laid down in the Hague Convention.⁸⁵⁷ It should be noted, however, that the Finnish legislator included the law applicable to the decedent’s marital property regime in the list of eligible laws. Further legislation that 852 853 854 855 856

See Article 7, para. 1 of the 1989 Succession Convention. See Article 3 of the Convention. See Article 5, para. 1 of the Convention; Bonomi, Recueil des cours 350 (2010), 200. Article 6 of the Convention; Bonomi, Recueil des cours 350 (2010), 201. See Article 1 of the Wet conflictenrecht erfopvolging of 4 September 1996, Stb. 1996 no. 457, now replaced by the analogous provision of Article 145 of the Vaststelling en invoering van Boek 10 (Internationaal privaatrecht) van het Burgerlijk Wetboek (Vaststellings- en Invoeringswet Boek 10 Burgerlijk Wetboek) of 19 May 2011, Stb. 2011, no. 272. 857 See for Quebec Article 3098, para. 2 of the Civil Code; for Finland see Ärvdabalk of 5 February 1965, no. 40 as amended by the Lag om ändring av ärvdabalken of 13 December 2001, no. 1228, Finlands Författningssamling 2001, 3454, 26 kap. 6 §; an English translation is available at http://www.finlex.fi/en/laki/kaamokset/1965/ en19650040.pdf; for Belgium see Article 79, para. 1 of the Code of 2004; for Poland see Article 64 para. 1 of the Law of 2011 which does not permit, however, the election of the lex situs of any immovable belonging to the estate.

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at first sight only more restrictively confers a right to designate the law applicable to succession has been enacted in Switzerland in 1987⁸⁵⁸, in Italy in 1995⁸⁵⁹, in Korea in 2001⁸⁶⁰, in Estonia in 2002⁸⁶¹ and in Bulgaria in 2005⁸⁶². At closer inspection, however, the differences between these provisions on party autonomy and those of the Hague Convention model are of minor significance. For instance, where the national legislator has established nationality as the primary connecting factor, the permissibility of party autonomy might be limited to the designation of the law of the habitual residence (and vice versa). Thus, in practice, the laws available to a testator are almost the same under the above-referenced national laws and the Hague Convention: one of these laws is the one applicable by the respective national conflicts statute in the absence of private choice, the other one capable of being designated by the testator. Of greater relevance might be a different deviation from the Hague Convention: under some of the statutes listed above, a designation of either the national law or the law of the habitual residence is invalidated where the pertinent connecting factor does not subsist at the time of the testator’s death.⁸⁶³ Contrary to the conflict regulations noted above, no limitation of the eligible laws was imposed by the private international law of Romania until 2009; the New Civil Code, abandoning the nationality principle in favour of the decedent’s last habitual residence, has however drastically reduced the testator’s possible options and only permits the election of his or her national law.⁸⁶⁴ 426. While the approval of – limited – party autonomy in matters of succession thus reflects a broad trend in modern legislation, the protection of family members from disinheriting wills is regulated in a less uniform way. The Hague Convention makes only a very limited reservation: the election of the 858 See Articles 90, para. 2 and 91, para. 2 of the act of 1987. The designation of the national law as lex hereditatis by a foreigner becomes ineffective, however, if the decedent is no longer a citizen of that state at the time of his death. 859 See Article 46, para. 2 of the law of 1995 which allows the designation of the law of the testator’s habitual residence provided that it subsists until the time of death. 860 See § 49, para. 2 of the law of 2001 with a rule corresponding to the Italian one, see previous footnote, but also permitting the designation of the lex situs for immovable property. 861 See § 25 of the Private International Law Act of 27 March 2002 permitting the designation of a national law of the testator provided that the citizenship subsists at the time of death; an English translation of the Act is available at http://www.legaltext. ee/text/en/X30075.htm. 862 See Article 89, para. 3 of the Code of 2005 permitting the designation of the decedent’s national law. 863 See supra the footnotes 858, 859 and 861 for Switzerland, Italy and Estonia. 864 See Article 68 para. 1 of the law of 1992; see now Article 2634 of the New Civil Code; on this change see Catalina Avasilencei, La codification des conflits de lois dans le nouveau Code civil roumain: und nouvelle forme en attente d’un contentieux, Rev. crit. dr. int. priv. 101 (2012), 247-275 at pp. 273 et seq.

Chapter 3 – New Domains for Party Autonomy

lex situs for single assets is without prejudice to the application of the mandatory rules of the law generally governing succession whether determined by objective factors or by the testator’s designation.⁸⁶⁵ Where the designation of the law relating to the succession in the whole estate deprives a spouse or child of an inheritance, forced heirship or family provision he or she would otherwise have received, no exception to the validity of the designation of the applicable law is, however, provided; nevertheless, contracting States may enter a reservation for such cases.⁸⁶⁶ At the national level the solutions are split: while Estonia, Finland, Korea and Switzerland have not enacted any specific barrier to the choice of the applicable law and might, therefore, turn to the general reservation of public policy in extreme cases,⁸⁶⁷ the other jurisdictions listed above provide for more rigid limitations of testamentary freedom. 427. In Belgium, Bulgaria and (formerly) Romania the mandatory rules of the law that would govern succession in the absence of a testamentary designation of the applicable law will be enforced without any restriction.⁸⁶⁸ The Italian legislator has been less interventionist and protects only the rights to forced heirship granted by Italian law in those cases where such provisions would benefit a person habitually resident in Italy as concerns the succession in an estate of an Italian citizen.⁸⁶⁹ This is a narrow and specific public policy provision apparently motivated by the aim of preventing impoverished Italian residents from becoming dependant on social security payments financed by the Italian taxpayer.⁸⁷⁰ Again, however, the wording of the law granting the enforcement of such mandatory rights appears to be of an uncompromising rigidity. This is different in Quebec. There, the decedent’s designation of the law applicable to succession will only be invalidated “to the extent 865 866 867 868

See Article 6, 2nd sentence of the 1989 Hague Convention. See Article 24 of the Convention. See Bonomi, Recueil des cours 350 (2010), 220. See for Belgium Article 79, para. 2 of the Code of 2004 and for Bulgaria Article 89, para. 3 of the Code of 2005; for the former Romanian law see Article 68 para. 1 of the law of 1992; this rule was said to inhibit the exclusion of Romanian succession law with regard to immovables and commercial undertakings located in Romania since the succession in these assets was governed by the lex situs under Article 66, see Octavian Căpățînă, “Das neue rumänische Internationale Privatrecht”, RabelsZ 58 (1994), 464-522 at p. 495. The New Civil Code of Romania only permits the election of the testator’s national law as the law governing succession; in turn it does not limit the effects of party autonomy by referring to forced heirship provisions any more, see Articles 2633-2636 of the New Civil Code. 869 See Article 46, para. 2, 2nd sentence of the Italian law of 1995. 870 For a thorough theoretical discussion of this provision see Patrizia de Cesari, Autonomia della volontà e legge regolatrice delle successioni, Padova, 2001, pp. 192 et seq., who rejects its classification as a specific public policy rule at p. 196 with references to the opposite view in footnote 66. The author characterises the provision as “substantive private international law”, see p. 201.

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that [it] deprives the married or civil union spouse or a child of the deceased, to a large degree, of a right of succession to which, but for such designation, he or she would have been entitled.”⁸⁷¹ This provision grants a certain discretion to the judge that will often be needed in order to take account of either minor differences between the laws involved or changes in the market values of assets belonging to the estate which have occurred between the time the will was made and the decedent’s death. Unlike the Belgian and Bulgarian provisions, the Quebec rule does not require the judge to enter into a detailed analysis of the distribution of the estate under two different laws. 428. Party autonomy in matters of succession will receive additional backing from a recently adopted regulation of the European Union which is to apply from 17 August 2015.⁸⁷² With regard to the law applicable to succession, the Regulation aspires towards a uniform regime for the whole estate, suppressing the principle of scission in accordance with the situs of the assets, see Article 23. Subject to an escape clause applicable in the case of a closer connection Article 21 basically subjects the estate to the law of the decedent’s last habitual residence. At the same time Article 22 grants the testator a limited right to designate his national law instead. Contrary to the Hague Convention, the choice of a former national law or the choice of the law of a present or future habitual residence is excluded. Moreover, the testator may designate neither the law governing his or her matrimonial property regime nor the lex situs for single assets located in the respective country. Apparently, the admission of party autonomy is exclusively driven by the European Commission’s intention to soothe Member States which have so far adhered to the nationality principle. The practical needs of testators residing in a multi-jurisdictional Union have not been adequately contemplated.⁸⁷³ A 871 Article 3099, para. 1 of the Civil Code of Quebec (author’s emphasis). 872 Regulation (EU) no. 650/2012 of the European Parliament and of the Council of 4 July 2012 on Jurisdiction, Applicable Law, Recognition and Enforcement of Decisions and Acceptance and Enforcement of Authentic Instruments in Matters of Succession and the Creation of a European Certificate of Succession, OJ 2012 L 201/107; see also the Proposal for a Regulation of the European Parliament and of the Council on Jurisdiction, Applicable Law, Recognition and Enforcement of Decisions and Authentic Instruments in Matters of Succession and the Creation of a European Certificate of Succession, COM (2009) 154 fi nal of 14 October 2009; the rules of the Proposal are also printed and commented upon in Max Planck Institute for Comparative and International Private Law, “Comments on the Commission’s Proposal for a Regulation of the European Parliament and of the Council on on Jurisdiction, Applicable Law, Recognition and Enforcement of Decisions and Authentic Instruments in Matters of Succession and the Creation of a European Certificate of Succession”, RabelsZ 74 (2010), 522-720. 873 See the critical comments of the Max Planck Institute, RabelsZ 74 (2010), 606-613; Eva Lein, “A Further Step towards a European Code of Private International Law. The Commission Proposal for a Regulation on Succession”, YBPIL 11 (2009), 107-141

Chapter 3 – New Domains for Party Autonomy

specific reservation in favour of the mandatory provisions of law applicable in the absence of the decedent’s choice has not been suggested. However, Article 30 now provides for the application of binding provisions of the lex situs of assets forming part of the estate provided that those provisions are applicable irrespective of the law governing the succession. The Succession Regulation is one of the most difficult projects the European Commission has tackled so far in the area of conflict of laws. At this stage it is too early for a final assessment which will depend on practical experience to be gathered with the application of the new instrument. But in the context of our analysis it is fair to say that testators under the law of the EU will have the right to choose the law governing their succession by either relocating their habitual residence to another country or by electing their national law in their will; the latter alternative will be a true option if they are living outside their home country. 4.

Conclusion

429. The trajectory of party autonomy in matters of succession is remarkable. Let us recall that it was rejected in the 1920s by Niboyet as a “surprising solution” that had never seriously been contemplated⁸⁷⁴ and that Rabel, in the 1950s, still considered its – rather limited – admission by the State of New York as “a very anomalous rule” which he did not consider as apt to indicate a principle.⁸⁷⁵ While some of the more recent laws on private international law are still silent on this point,⁸⁷⁶ the testator’s ability to choose the law applicable to succession from among a number of eligible laws can at present undoubtedly be considered as an emerging principle of private international law. What may be called an “irresistible extension” of party autonomy⁸⁷⁷ was advanced first by individual legal scholars before being seized upon by non-governmental organizations; the latter’s resolutions were then adopted by the Hague Succession Convention which later served as a blueprint for a

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at pp. 132-133; yet, the proposal has been classified as “liberal” by Andrea Bonomi, “Prime considerazioni sulla proposta di regolamento sulle successioni”, Riv. dir. int. priv. proc. 46 (2010), 875-914 at p. 890; on a similar note the final text of the Regulation has been characterized as “profundamente liberal” by Javier Carrascosa González, El Reglamento Sucesorio Europeo 650/2012 de 4 de julio 2012 – Análisis crítico, Granada 2014, p. 121. Niboyet, Recueil des cours 16 (1927), 6 with footnote 1. Ernst Rabel, The conflict of laws – A comparative study, Vol. 4, Chicago 1958, p. 462. This still relates to the majority of the more recent conflict statutes, see the Acts of China, Japan, Latvia, Lituania, Slovenia, Taiwan, Tunisia, Turkey, Ukraine and Venezuela. See Alfred von Overbeck, “L‘irrésistible extension de l’autonomie en droit international privé”, in Nouveau itinéraire en droit – Hommage a François Rigaux, Brussels, 1993, pp. 619-636 at pp. 628-632.

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number of items of national legislation. The European Regulation further reinforces this tendency. 430. It is a common feature of the instruments presented above that they confine the testator’s right to choose the applicable law to a limited number of eligible laws: the national law at the time of designation or death; the law of his or her habitual residence at the time of designation or death; the lex situs with regard to assets located in the respective country; and perhaps the law governing the matrimonial property regime of the testator and his or her spouse. The origin of this limitation is the wish to overcome the traditional split between jurisdictions connecting succession to domicile and those applying the law of citizenship, and also the desire to reconcile the “situs taboo”⁸⁷⁸ – which for its part engenders a scission of the estate – with a system offering a uniform and comprehensive connection of the whole estate to a single law. While these reasons are quite understandable, no arguments have been forwarded for the exclusion of the choice of other laws. The simple possibility that the testator might deprive close family of their forced heirship exists also with regard to the laws acknowledged as eligible and therefore is not a sufficient reason for excluding the choice of other laws. And a practical demand for the designation of a law not included in the list may very well be conceived: where a testator who is a national and resident of country A owns a company or an intellectual property right in State B which forms the major part of his estate, there might be good reasons for electing the law of B as governing the whole estate. In a similar vein, the law of State B might be more appropriate for governing succession where the heirs and legatees are habitually resident in B and potential disputes will likely be conducted in the courts of State B. Again, the testator has superior knowledge and is in a better position than the State when it comes to predicting future legal relations concerning his or her estate. This is the basis of party autonomy requiring an unlimited right to elect the applicable law, similar to what is ungrudgingly acknowledged in the field of contract law and is recognized even for the consumer and employment contracts which are subject to numerous mandatory provisions in many jurisdictions.⁸⁷⁹ Where considered necessary, the protection of close family members has to be implemented not by a limitation of the eligible laws, but by specific and countervailing provisions. 431. Another feature that is common to some of the national statutes but difficult to reconcile with the individual’s need for a clear and stable legal framework in a multi-jurisdictional world is the requirement that the connection to the law chosen by the decedent must subsist at the time of his or her death.⁸⁸⁰ Where the testator has carefully planned the future of his estate and elected the law of his habitual residence as governing his inheritance, he 878 See supra para. 420. 879 See supra para. 196. 880 See supra para. 425 at footnote 863.

Chapter 3 – New Domains for Party Autonomy

might nonetheless be compelled to relocate at a later date, for example to the country which is home to the son or daughter who will care for him until his death. Why should the result of the thorough plans he made for his estate be subject to a different law that he did not take into account at the time of drafting and that may invalidate his dispositions ? The reason is that private international law has traditionally looked with some distrust at estate planning and the election of the lex hereditatis. However, party autonomy is not, in the first place, a means for disinheriting close family members, but rather a tool for responsibly ordering personal wealth in light of future contingencies. Abuses have to be countered by specific and targeted provisions, not by the exclusion of party autonomy. 432. It is unclear whether and to what extent observance of national provisions on forced heirship has to be compelled where, in an international setting, foreign law applies to succession. The doubts are partly due to the questionable legitimacy of forced heirship, itself a relic of primitive forms of the organization of economic production in family networks; accordingly, the estate of a person was considered as belonging to the family. In our times, wealth is rather produced by the individual and through contractual ties; consequently, inherited wealth does not respond to the recipients’ just desserts.⁸⁸¹ To protect a legal institution of vanishing legitimacy and significance with overriding mandatory rules is anachronistic and should be abandoned.⁸⁸² Arguably, the differences between the law applicable to the succession as determined by the decedent’s designation as opposed to the otherwise applicable law containing forced heirship provisions are of minor significance given that the laws of so many jurisdictions already contain some kind of mandatory family provision. Where the differences are, however, a matter of degree and not of principle, an individual valuation and comparison of the substantive laws as ordered by the public policy reservation is much more appropriate than the drafting of rigorous overriding mandatory provisions.⁸⁸³ In particular, the application of ordre public would enable the court to assess the difference between the actual benefit a close family member is to receive under the elected law and what he or she would have been granted under the law applicable in the absence of a designation by the deceased. The need for such discretion has been made explicit by Ar-

881 See Jens Beckert, Inherited Wealth, Princetown, 2008; the title of the German original of this book (“Unverdientes Vermögen”, Frankfurt am Main, 2004) gives much better expression to the dual character of inheritance: It is often neither earned nor deserved. 882 Dutta, RabelsZ 73 (2009), 582 reporting the state of the discussion with approximately 20 further references in footnote 223; with a similar thrust, also Lein, YBPIL 11 (2009), 233. 883 See Dutta, RabelsZ 73 (2009), 575, Josep M. Fontanellas Morell, La professio iuris sucesoria, Madrid 2010, no. 187 at p. 304, pointing to the substantive nature of the analysis.

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ticle 3099 of the Civil Code of Quebec.⁸⁸⁴ Moreover, the test of public policy would allow taking into account the closeness of the relation of the pending case with the forum State, a need made clear by the Italian rule.⁸⁸⁵ The sole existence of a disinherited close family member, perhaps a resident and a national of a remote country somewhere in the world, can hardly be considered as a sufficient reason to set aside the decedent’s designation of the law applicable to his or her succession; some minimum contacts with the forum State must be ascertainable. Section 7 : Procedural Dispositions 1.

Information on Foreign Law: the Division of Labour between the Parties and the Court

433. This enquiry has so far dealt with the possibilities for private actors to plan their future cross-border activities in a multi-jurisdictional environment by determining the law governing those activities ex ante. The designation of the applicable law has been considered as an instrument relevant for planning irrespective of any eventual disputes and litigation. Where that private election has not occurred and the applicable law is determined through objective connecting factors such as situs, nationality, habitual residence or the place of the wrong, there may still be room for private action influencing the choice-of-law analysis at the time of litigation. And even where the parties have chosen the applicable law ex ante, they may still wish to alter that choice ex post in court. Although the pertinent rules have an obvious impact on the practical significance of conflict rules, they are usually attributed to the law of procedure. They vary considerably from country to country and have been the object of comparative investigations for a considerable time.⁸⁸⁶ 434. The interest in this debate has been revitalized by the adoption of uniform instruments on private international law in the European Union.⁸⁸⁷ Is the subsistence of diverse procedural provisions on the application of foreign law compatible with the adoption of uniform conflict rules given that such 884 See supra para. 427. 885 See Article 46, para. 2, 3rd sentence of the 1995 Act and supra para. 427. 886 See Maarit Jänterä-Jareborg, “Foreign Law in National Courts”, Recueil des cours 304 (2003), 181-385; Imre Zajtay, “The Application of Foreign Law”, IECL, Vol. 3, Chap. 14 (completed in 1970); Dierk Müller, ed., “Die Anwendung ausländischen Rechts im internationalen Privatrecht”, Berlin and Tübingen, 1968, both with many further references, the latter with several national reports. 887 Jänterä-Jareborg, Recueil des cours 304 (2003), 227-228; Carlos Esplugues, José Luis Iglesias and Guillermo Palao, “Application of Foreign Law”, Munich, 2011, with many national reports on European jurisdictions; Clemens Trautmann, Europäisches Kollisionsrecht und ausländisches Recht im nationalen Zivilverfahren, Tübingen, 2011 with a broad comparative analysis based on the law of many European countries.

Chapter 3 – New Domains for Party Autonomy

procedural diversities might undermine the uniformity of private international law in practice ? This is a pressing question on the European agenda. The scholarly interest is, however, more often stimulated by the theoretical question whether foreign law should be classified as a matter of law which the court has to know and apply ex officio in accordance with the principle iura novit curia or whether foreign law is equivalent to facts which will not be taken into account by the judge unless pleaded by a party.⁸⁸⁸ This debate certainly addresses a central issue, namely the division of labour between the parties and the court in establishing the legal basis of the court’s decision. However, the present study rather focuses on the ability of the parties to influence that legal basis by private disposition. Since in litigation that ability is not more than a coda to the efforts of the parties to plan their cross-border relations ex ante through choice of law, some short remarks on the matter must suffice here. There are essentially three types of private impact to be had on the law applied by the court at the stage of litigation: (1) the pleading of foreign law; (2) procedural agreements and (3) identical or corresponding allegations of the parties with regard to the content of the applicable law. 2.

Strategic Options for the Parties

a) Pleading of foreign law 435. Under many modern conflict statutes, the court has to apply and ascertain foreign law ex officio, i.e. irrespective of whether a party invokes foreign law or not; in some of these countries the court may summon the parties to provide information on the foreign law or otherwise to cooperate with the court.⁸⁸⁹ The goal generally pursued is to apply the foreign law in the same way as it would be in its country of origin.⁸⁹⁰ While mandatory judicial no888 Zajtay, IECL, Vol. 3, Chap. 14, Sects. 1-10; Jänterä-Jareborg, Recueil des cours 304 (2003), 277 et seq. on Scandinavian and pp. 280 et seq. on Latin American approaches; Carlos Esplugues et al., “General Report on the Application of Foreign Law by Judicial and Non-judicial Authorities in Europe”, in Esplugues, Iglesias and Palao, 3 -97 at pp. 18 et seq. and 30 et seq.; for the USA see Hay, Borchers and Symeonides, pp. 602 et seq. 889 See for example for Switzerland Article 16 of the Federal Law of 1987; for Italy Article 14 of the law of 1995; for Venezuela Article 60 of the law of 1998; for China Article 10 of the law of 2010, leaving however the provision of information on the foreign law to the parties where they have elected that law; in Tunisia, Article 32 of the law of 1998 primarily puts the burden on the shoulders of the court; however, where the court cannot ascertain the foreign law within a reasonable time or because of its lack of knowledge, a party making a claim based on foreign law has to establish its content. 890 This objective, while generally recognised in legal literature, is rarely enunciated in the statutes on private international law, see however for Belgium Article 15 § 1, 2nd sentence of the Code of 2004: “The foreign law is applied in accordance with the

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tice of foreign law is nowadays prescribed in most jurisdictions of the United States,⁸⁹¹ the traditional common law approach which is still applied in the United Kingdom is radically different. A court in Great Britain will apply foreign law only if it is pleaded and proved by the parties; although the court is bound by the choice-of-law rule even if the parties make no reference to it, “the conflict of laws dimension of a case may be lost” where no party pleads foreign law.⁸⁹² Pleading of foreign law is, however, voluntary; where the parties, by common accord, abstain from pleading foreign law, it may appear as a complicity or collusion amounting to a veiled choice of law or even to a fraus legis, but it is referred to as an inevitable consequence of the judicial system.⁸⁹³ It also follows from the basic approach of the English common law that the parties can agree on the content of foreign law and that the judge will accept that agreement.⁸⁹⁴ Both abstaining from pleading foreign law and agreeing on its content “raise an important strategic issue for litigants”.⁸⁹⁵ In particular, the parties may employ these paths of conduct to opt for the lex fori where the applicable choice-of-law rules do not allow for party autonomy and where the otherwise indicated law is something other than the lex fori. While there is little doubt that such an agreement will be respected when made at the time of litigation, one might also conceive of a prior agreement not to plead foreign law, an agreement that is concluded much earlier, perhaps already when they enter into the transaction in question. If the courts enforce such agreement, mandatory conflict rules will lose much of their significance.

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interpretation it receives abroad.” Similarly, Article 8 para. 1 of the Ukrainian Law of 2005: “When applying the law of a foreign State, a court or other agency shall establish the content of its norms according to the official interpretation thereof, practice of application, and doctrine in the respective foreign State.” See Hay, Borchers and Symeonides, pp. 605-607; the responsibility of the judge for ascertaining the foreign law even in the absence of expert testimony has only recently been affirmed in the Court of Appeals for the 7th Circuit by a panel featuring highly respected voices of the US judiciary, see Bodum USA, Inc. v. La Cafetière, Inc. 621 F. 3d 624 at 628 (7th Cir. 2010). See the National Report by Elizabeth Crawford and Janeen Carruthers, “United Kingdom”, in Esplugues, Iglesias and Palao, pp. 391-409 at pp. 391-392; see also Jänterä-Jareborg, Recueil des cours 304 (2003), 236 et seq. Crawford and Carruthers in Esplugues, Iglesias and Palao, pp. 393-394; see also Trautmann, Europäisches Kollisionsrecht und ausländisches Recht im nationalen Zivilverfahren, Tübingen, 2011, pp. 65-66. Islamic Republic of Iran v Denyse Berend, [2007] EWHC 132, where a list of agreements on the content of French law is reproduced in para. 5; counsel of both parties were explicitly “commended [by the court] for the way in which this litigation has been prepared and presented. The issues have been significantly narrowed. In particular, they have agreed 12 important propositions…”; see also Crawford and Carruthers in Esplugues, Iglesias and Palao, p. 394. Richard Fentiman, Foreign Law in English Courts. Pleading, Proof and Choice of Law, Oxford, 1998, p. 159.

Chapter 3 – New Domains for Party Autonomy

b) Procedural agreements 436. A further means of private disposition of the legal basis of a dispute is presented by procedural agreements. As pointed out above, the classification of foreign law as a matter of fact implies the possibility and validity of the parties’ agreements on the content of the foreign law; this has clearly been demonstrated by the practice of English courts. But such agreements may also posit the application of the lex fori (or perhaps of a different law) without addressing its content. They are also admitted in some jurisdictions which require the judge to apply foreign law ex officio. In France, Article 12 of the New Code of Civil Procedure has even provided an explicit legislative basis, stating that “the parties, by means of an express accord and for rights which they can freely dispose of, [may] bind [the judge] by the qualifications and legal points to which they intend to limit the debate”.⁸⁹⁶ While this provision was initially considered as the legal basis for the recognition of procedural agreements (accords procéduraux) relating to the applicable law in transborder cases, it is currently no longer cited by French courts in this context. But such agreements are still very common and are qualified as autonomous or sui generis agreements of private international law.⁸⁹⁷ 437. Two prerequisites for such an agreement appear to be generally accepted: it must be concluded after the commencement of litigation, and it must relate to dispositive rights.⁸⁹⁸ The first requirement limits the practical use of such procedural agreements for the purpose of planning legal relations on a long-term, advance basis; it is, however, unclear whether a prior mutual commitment of the parties to enter such a procedural agreement in the case of an eventual litigation would be honoured and enforced by French courts. As to the second requirement, namely the dispositive character of the rights involved, it would generally have to be assessed under the law applicable in accordance with French conflict rules. Thus, the Cour de cassation honoured such a procedural agreement concerning an action for interspousal maintenance (prestation compensatoire) because of its dispositive nature.⁸⁹⁹ But the same court invalidated an agreement on the application of French law to the divorce proceedings of a Moroccan couple since the pertinent 896 See Article 12, para. 4 Nouveau code de procédure civile (author‘s translation). 897 See Bénédicte Fauvarque-Cosson, “L’accord procédural à l’épreuve du temps – Retour sur une notion française controversée”, in Le droit international privé: Esprit et méthodes – Mélanges en l’honneur de Paul Lagarde, Paris, 2005, pp. 263-284 at pp. 265-266; Trautmann, pp. 93-94; see also the national report by Samuel Fulli-Lemaire and Daniel Rojas Tamayo, France, in Esplugues, Iglesias and Palao, pp. 185-199 at p. 189; see also Jänterä-Jareborg, Recueil des cours 304 (2003), 274-275 and 351. 898 See Fauvarque-Cosson, in Esplugues, Iglesias and Palao, p. 265; Trautmann, p. 94; Fulli-Lemaire and Rojas Tamayo, in Esplugues, Iglesias and Palao, p. 191. 899 Cass. 11 March 2009, Bull. civ. 2009 I, no. 50; see the commentaries by François Boulanger, “La soumission à la loi française des effets pécuniaires d’un divorce relevant de la loi marocaine”, JCP éd. gén. 2009 no. 190; Jacques Massip, Répertoire du notariat defrénois 2009, pp. 1858-1861.

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treaty between France and Morocco provided for the application of the spouses’ national law.⁹⁰⁰ In light of the progressive replacement of national conflict rules with EU regulations permitting party autonomy in additional fields such as divorce, this requirement is gradually losing its significance and perhaps also its legitimacy.⁹⁰¹ Outside the ambit of French law, procedural agreements have explicitly been recognized in Belgium⁹⁰² and in the Hague Maintenance Protocol of 2007, the latter allowing the parties, inter alia, the choice of the lex fori and thus, arguably, presupposing a pending litigation.⁹⁰³ c) Allegations in law 438. Where explicit procedural agreements are not recognized, the courts would be expected to research the applicable law ex officio, which will however often pose an excessive burden for them. Under the laws of most countries, duties of cooperation are therefore incumbent on the parties.⁹⁰⁴ To the extent that the parties are actually requested to provide information on the foreign law, new opportunities for tacit or open procedural cooperation are granted. Even courts which are bound to apply foreign law ex officio will often tolerate such cooperation, at least in those sectors where the parties could have agreed on the applicable law or where the nature of the dispute does not affect the public interest. Moreover, where the pertinent conflict rules, such as the Rome I Regulation, allow the parties to choose the applicable law at any time, i.e. also after the beginning of a lawsuit, the parties’ identical or corresponding allegations with regard to the legal framework of the case may even be interpreted as a tacit choice of law perfected during the proceedings. Thus, where both sides’ pleadings exclusively referred to German law, the Bundesgerichtshof has invariably considered this fact as an expression of a tacit – subsequent – choice of German law governing the relation of the parties.⁹⁰⁵ It should be repeated, however, that this practice is limited to areas of the law, where party autonomy, by virtue of the relevant conflict rules, is ensured or where public interests are not at stake.

900 Cass. 11 March 2009, Bull. civ. 2009 I, no. 49; see the commentaries cited in the previous footnote; in the same sense for an action seeking, under French law, a declaration of the nullity of a marriage whose validity was governed by Romanian law, Cass. 11 February 2009, Bull. civ. 2009 I, no. 27. 901 See Lardeux, Recueil Dalloz (2011), 1839 with regard to the Rome III Regulation on divorce. 902 See Rigaux and Fallon, p. 266 with further references and Pertegás, in Erauw and Fallon, p. 85. 903 See Trautmann, pp. 134 and 146; for the Hague Maintenance Protocol see also supra para. 414. 904 See some legislative provisions to this effect cited supra in footnote 889. 905 See for example BGH, 1 July 1970, NJW (1970), 1733, 1734; the maxim is also published in IPRspr. (1970), no. 13; see further references cited by Trautmann, pp. 35-36.

Chapter 3 – New Domains for Party Autonomy

Section 8: Conclusion 1.

The Extension of Party Autonomy and its Social Background

439. Among the various modes of private ordering, party autonomy has attracted the most scholarly attention in private international law. It connects with the traditional method of the discipline, i.e. the choice of the applicable law out of a range of laws of the jurisdictions involved. It is only the mechanism of selection that is modified: instead of objective connecting factors, the individual’s will determines the applicable law. But what is maintained is the dichotomy of choice-of-law analysis and substantive law that is considered as fundamental to the discipline by many conflicts scholars who posit a separate conflicts justice alongside, or rather, preceding substantive justice.⁹⁰⁶ Thus, party autonomy fits into the conceptual world of private international law and permits the application of some general principles. As explained in the previous chapter, party autonomy is, moreover, supported by the philosophy of the European Enlightenment and its offspring in the present legal order of the world, namely the commitment of the international community to the respect of human rights. 440. Whereas party autonomy was widely rejected during the heyday of the nation State, its renaissance after World War II historically connects to the Middle Ages, when professio iuris played a significant role in the European legal order.⁹⁰⁷ This observation raises the question as to the determining factors in society that favoured the designation of the applicable law by individuals and its recognition by the courts. While such a comparison across centuries is undoubtedly a hazardous endeavour, a certain coincidence comes to the fore: medieval society and present society are characterized by a multicultural composition, by the coexistence of ethnic and cultural minorities in many countries alongside the dominant ethnic and cultural groups. While in medieval times those minorities had entered the countries of their des906 The foundation for this dichotomy has been laid by Gerhard Kegel, “Begriffs- und Interessenjurisprudenz im Internationalen Privatrecht”, in Festschrift Hans Lewald, Basel, 1953, 259-288 at pp. 270 et seq., where he characterizes conflicts justice (“internationalprivatrechtliche Gerechtigkeit”) as the “application of the locally better law” (“Anwendung des örtlich besseren Rechts”) as opposed to substantive justice aiming at the “application of the substantively better law” (“Anwendung des sachlich besseren Rechts”); see also id., Internationales Privatrecht, Munich, 1960, pp. 26-28 at p. 26: “Conflicts justice precedes substantive justice” (“Die internationalprivatrechtliche Gerechtigkeit geht vor der materiellrechtlichen”; author’s translations); in a similar vein Paul Heinrich Neuhaus, Die Grundbegriffe des Internationalen Privatrechts, 2nd ed., Tübingen, 1976, 41-49 at p. 42: “hat das IPR seine eigene Gerechtigkeit”. This approach has been rejected as mechanistic throughout the American Conflicts Revolution; for a more recent critical assessment see Vrellis, Recueil des cours 328 (2007), 326 et seq. 907 See supra para. 404.

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tination as conquerors and lived there in closed and homogeneous groups until integration finally occurred after centuries, the present movement of migrants is of an individual nature which quickly puts the immigrants under pressure to integrate into the majoritarian society of their host country. But then and now there are transitional periods when it is unclear whether a person is still more rooted in the notions and views of the country of origin or whether he or she has arrived in the host country accepting its way of life, including basic legal principles and precepts. Where the cord is not yet fully cut and the new ties have not yet been completely established, where individuals feel at home in two countries (or in none), conflict rules employing objective criteria arrogate determinations of justice and predictions of the person’s future. In the end they are simply arbitrary.⁹⁰⁸ Leaving the election of the applicable law to the professio iuris of the individual concerned appears to be a superior device in such periods of transition. 441. Our empirical assessment of the legal development in various areas and numerous countries has provided clear evidence of a progressive extension of party autonomy in accordance with these observations. While scholars, until some 40 years ago, struggled even with the recognition of party autonomy for the law of contract, i.e. in an area of the law where the freedom of contract is generally acknowledged and ensured at the level of substantive law, our analysis has uncovered various additional fields where the private choice of the applicable law today unfolds more and more bearing: agency, assignment, torts, marriage, maintenance, succession and even property in tangibles and intangibles – no area of the law has remained unaffected. This does not mean that each of these areas is now, across the board, left to party autonomy; often only small sectors relating to a particular activity are liberalized in this sense. But the overall direction of this movement is undeniable. And it is also undeniable that this movement is not confined to single countries and their legislation; it is a broad movement emerging from a comparative investigation. 2.

Political Background: the Role of International Organizations

442. The tendency towards the recognition of party autonomy is not due to a simultaneous move of lawmakers across the globe who are heading in that direction. However, the trend towards codification of private international law that has been caused by the intensification of international commerce and migration⁹⁰⁹ has provided many national legislatures with an opportunity to enhance the freedom afforded private actors for designating the law governing their legal relations and transactions. This occurrence is not limited to Europe; new conflicts statutes in, for example, Quebec, Korea and China have clearly favoured party autonomy, too. On the other hand, it would not be accurate to classify the private international law statutes of specific coun908 On the problem of governmental knowledge, see already supra, para. 91. 909 See supra, para. 5.

Chapter 3 – New Domains for Party Autonomy

tries as promoting party autonomy across the board. For example, the Chinese Act of 2010 has been very bold in areas such as agency or property but conservative in respect of inheritance, not validating a testator’s election of the law applicable to succession. 443. The driving force behind a somewhat inconsistent evolution of national legislation has been the activities of international organizations such as the Institut de droit international, the Hague Conference of Private International Law and, more recently and more effectively, the European Union. It is perhaps due to the group dynamics of deliberations conducted in bodies and committees of an international composition that participants do not confine their views and efforts to the perfection of the local legal order, but are more earnestly looking for solutions which may enhance legal certainty for private actors in international transactions. Moreover, party autonomy is an apt device for political compromises in such international meetings. Attendees prefer regulatory patterns which do not compel the participating States to give up their own traditional legal rules, such as the nationality principle, in favour of corresponding but different rules familiar to other jurisdictions, in this case the connection to the habitual residence. Leaving the matter to the private election of the applicable law may enable States to save face. 3.

Limitations of Party Autonomy

444. The survey over several areas of private law carried out in this chapter has uncovered barriers to, and limitations of, the recognition of party autonomy which adopt different forms: (1) the general exclusion, in a given area of the law, of party autonomy with exceptional admission in only marginal sectors of this field; (2) its basic admission subject to the limitation of a list of eligible laws; (3) requirements concerning the mode of its exercise: the form or explicit articulation of, or the free negotiation over, the designation of the applicable law. These limitations are motivated by different considerations: the general exclusion of party autonomy – limitations of the first type – is usually due to the reliance of the public at large on a uniform system, for example property rights essential for establishing and protecting a specific order of creditors with regard to certain assets and/or for the operation of markets. Where such systemic interests of a State are at issue, mandatory provisions are needed which override the operation of regular conflict rules and which will usually apply under some kind of territorial connection. Our analysis has only slightly touched upon limitations of the third type,⁹¹⁰ although a variety of corresponding rules can be found in modern conflicts instruments. But whatever their purpose may be – clarity for the court and the parties or the protection of the parties – they do not appear as very pertinent. The borderline between explicit and tacit choice of law is far from clear as is the distinction between agreements which are designated as 910 But see para. 314 relating to Article 14 of the Rome II Regulation.

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“freely negotiated” and other agreements. For everyday transactions, formal requirements are of uncertain help where the difference between oral and written communication is increasingly blurred by modern technologies. The more rigorously the mode of designating the applicable law is determined, the greater is the risk that people relying on that election and allegedly protected by such requirements will suffer where the requirements are not met and the designation cannot be subsequently enforced. In light of these considerations, the Rome I Regulation, i.e. an instrument abstaining from particular modal requirements, seems to be the suitable model. 445. What remains are the limitations of the second type, i.e. the restrictions on the number of eligible laws. The compromise character of conflict rules permitting party autonomy and agreed upon in international bodies⁹¹¹ also explains such rather frequent limitations, in particular the confinement (of choice) to the law of habitual residence or citizenship. But we have to maintain that the motivation given for such restrictions, i.e. the protection of either weaker parties or third parties possibly affected by the choice, is not a persuasive explanation. The detrimental effects for those who are meant to be protected by a limitation of the choice may often also result from one of the laws whose election is permitted – and not only from those that are excluded. Such effects are neither alleviated nor do they become less repugnant by the simple fact that there is some minimum contact between the case and the elected law. What the limitations intend to achieve is a protection of substantive rights which would require a different kind of debate. 446. The true question is of a more substantive nature: to what extent can individuals expect that certain minimum rights and benefits granted in their home jurisdiction will also be enforced in a world with permeable frontiers and a multitude of cross-border contacts ? With regard to consumer contracts, Article 6 of the Rome I Regulation has confined the mandatory protection of the consumer’s law to “passive” consumers, excluding those persons who actively engage in cross-border transactions because they should take into account the diverse legal regime of other countries. Is this basic idea not a model for other areas of the law ? Can spouses trust in the limitations imposed by their own divorce law if each of them can, at any point in time, move his or her habitual residence into another country ? And if a person can accumulate wealth located in different countries, how can his close family justifiably expect that it will receive the minimum shares fi xed by a single specific law, perhaps the decedent’s national law or the law of the habitual residence, as if the whole matter were exclusively rooted in this single jurisdiction ? The limitation of eligible laws is nourished by notions arising from a closed society which do not correspond to the social and economic reality of the open society. Where the protection of persons affected by a private election of the applicable law is required in extreme cases, a more substance-oriented approach is needed, either the general public policy reservation or concretized specifications. 911 See supra, para. 443.

Chapter 4

Optional Law in Europe

447. Alongside the substantive private arrangements intended to domesticate international transactions (chapter 1) and the choice of the applicable State law (chapters 2 and 3), a third form of private ordering is emerging from the creation of so-called optional instruments. Contrary to traditional uniform law conventions, they do not replace existing national law within their respective scopes of application; rather, they present an alternative to the national law designated by choice-of-law rules. It is left to the private actors to either adhere to the applicable national law or to opt for the alternative, corresponding institution created by the optional instrument. To this author’s knowledge, optional instruments are a novelty invented and systematically promoted by the European Union that supplement other methods encountered in the europeanization of private law, see below section 1. They raise a number of specific conflicts issues, see below section 2. But at least in theory, the type of legislation is by no means confined to the European Union and similar legislation awarding additional choices to private actors has been enacted in some particular instances at the national level, see below section 3. Section 1: The Europeanization of Private Law 1.

Evolution

448. The initial objective of the European Economic Community was not the harmonization or unification of private law, but the integration of markets. This goal was and is to be achieved by the implementation of so-called basic freedoms, i.e. the free movement of goods, the free movement of workers, the freedom of establishment, the free movement of services and the free movement of capital. Particular provisions of the Treaty have from the very beginning charged and empowered the Community, which is now the Union, to enact implementing legislation designed to remove barriers imposed by national law. The competences of the Union resulting therefrom are spe-

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cific and governed by the principle of conferral.⁹¹² Unlike a sovereign State, the Union does not have a comprehensive legislative competence, and until the 1990s high-ranking representatives of the European Commission took the view that the Community/Union did not have the power to enact a comprehensive body of private law.⁹¹³ Nor did the Commission in those years take any interest in the unification of laws as was undertaken outside the institutional framework of the European Union, for example efforts under the auspices of UNIDROIT, UNCITRAL or the Hague Conference on Private International Law. The Union was, for example, not involved in the negotiations leading to the 1980 United Nations Convention on the International Sale of Goods (CISG).⁹¹⁴ 449. The competences of the Union resulting from the original Treaty of Rome and various subsequent treaties create a patchwork. The Treaties do not directly address any area of the law known to developed systems of private law, whether in the common law world or in civil codes. Whether we think of contract law, the law of obligations, tort law or the law of property, none of these categories is mentioned. Instead, the Treaties deal with the pursuance of certain sectorial policies which may require the adoption of pertinent legal provisions irrespective of their private law or public law nature. The respective instruments contain the – often isolated – provisions required to achieve the policy objective pursued by the Community/Union and do not have a systematic character. Thus, from about 1970 onwards, numerous acts were adopted dealing with specific issues in company law, later on in employment law and after 1985, when the political objective of the Internal Market was enunciated (or revitalized), in consumer contract law, in intellectual property and in the law of unfair competition. Subsequent amendments contained in the Treaty in Amsterdam in 1997 bestowed on the Community/Union legislative powers in respect of both the conflict of laws and anti-discrimination law. From the 1980s onwards, the piecemeal character of European legislation met with growing criticism and aroused a counter-movement from legal scholars who convened expert groups aiming 912 See Article 5, No. 1, of the Treaty on European Union (TEU) as amended by the Treaty of Lisbon, consolidated version in OJ 2010 C 83/13. 913 See, for example, the statement of the then Commissioner for the Internal Market, Martin Bangemann, “Privatrechtsangleichung in der Europäischen Union”, ZEuP (1994), 377-380 at p. 378: “The European Treaties draw narrow limits on the possibility of creating a comprehensive and consistent European private law. There is no Treaty provision that empowers the European Union as to the unification of private law which would, however, be indispensable for activities of the European Union under the principle of conferral.” (Translation by author.) A similar view was expressed and elaborated by the then Director for Approximation of Laws in the Directorate General Internal Market Ivo Schwartz, “Perspektiven der Angleichung des Privatrechts in der Europäischen Gemeinschaft”, ZEuP (1994), 559-580 at p. 570. 914 See supra footnote 240.

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at a more systematic harmonization of private law in the form of principles and restatements.⁹¹⁵ On the basis of this work a new type of comprehensive European legislation is now under preparation and may be expected to surface in the years ahead. 2.

Types of Legislative Instruments

450. Most provisions conferring legislative powers on the Union also determine the type of possible legislation.⁹¹⁶ To the extent relevant for private law, the legislation of the Union consists of decisions, directives and regulations; with regard to the latter, two sub-types have evolved which here will be called mandatory regulations and optional regulations. The issue of a decision is the usual way for the European Union to adopt and implement an international convention in the law of the Union.⁹¹⁷ Referring to instruments of an EU rather than an international origin, a binding effect is imparted also by both directives and regulations. While regulations are directly applicable within each Member State and produce rights and obligations for individual citizens, directives put the Member States under the duty to adjust their internal law. Thus, directives need to be implemented, leaving the choice of form and method of implementation to the Member States. In the area of private law, the directive has so far been the instrument most frequently used by the Union. It is not uncommon that the directives allow for reservations or grant Member States the choice between different models for their implementation or simply establish minimum standards; in consumer law in particular, Member States may provide for a more exacting consumer protection. Since Member States enjoy a certain latitude of transposition, discrepancies as between the Member States’ laws are inevitable. And since such inconsistencies are not effectively ruled out by the courts’ duty to interpret the national law in conformity with a directive,⁹¹⁸ the need for choice-of-law rules subsists for the forum court in order to determine 915 The leading group was the European Commission on Contract Law, chaired by the Danish Professor Ole Lando; for their work product, see Ole Lando and Hugh Beale, eds., Principles of European Contract Law – Parts I & II, The Hague, 2000; Ole Lando, Eric Clive, André Prüm and Reinhard Zimmermann, eds., Principles of European Contract Law – Part III, The Hague, 2003; for a survey of various scholarly activities, see Wolfgang Wurmnest, “Common Core, Grundregeln, Kodifi kationsentwürfe, Acquis-Grundsätze – Ansätze internationaler Wissenschaftlergruppen zur Privatrechtsvereinheitlichung in Europa”, ZEuP (2003), 714-744. 916 See Article 288, TFEU. 917 See the example of the Hague Maintenance Protocol, supra at footnote 819; another example is Council Decision (2001/539/EC) of 5 April 2001 on the conclusion by the European Community of the Convention for the Unification of Certain Rules for International Carriage by Air (the Montreal Convention), OJ 2001 L 194/38. 918 ECJ, 10 April 1984, Case 14/83 (Sabine von Colson and Elisabeth Kamann v. Land Nordrhein-Westfalen), [1984] ECR 1891, cons. 26.

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just which Member State’s implementing legislation applies to the pending case.⁹¹⁹ 451. As a legislative instrument, the regulation provides for greater uniformity since it is directly applicable. But it is not available in all instances everywhere; various Treaty provisions enabling the Union to approximate national laws allow exclusively for the adoption of directives.⁹²⁰ There are now two types of regulations. Mandatory regulations directly establish rights and obligations for the individuals and companies covered by their scope; they must be applied by the courts regardless of the parties’ intentions. In respect of substantive private law examples can be found in the transport policy of the European Union pursued under Articles 91 and 100 TFEU⁹²¹ as well as in the law of competition where numerous so-called block exemption regulations immunize certain categories of agreements against the prohibition of cartels enunciated in Article 101 TFEU.⁹²² While these regulations provide for a framework of rights and obligations which apply without further action or declarations, optional regulations only grant private actors a right to opt for the legal framework established by them. It is in this sense that they are directly applicable: the Member States shall not impair the private actors’ right to opt for such instruments. 452. The optional regulations are not complete codifications of the law relating to their subject, but they are much more comprehensive than mandatory regulations and directives. They bring into being a base of common provisions for the respective legal institution which are common to all Member States. They have their place outside, and in addition to, the national laws of the 28 Member States and are therefore often referred to as a 29th model. They do not harmonize national law, instead creating uniform law which is derived from the legislative power of the Union and not of the Member States. Accordingly, a repeal or amendment of the regulation can only be 919 See Jürgen Basedow, “Conflict of Laws and the Harmonisation of Substantive Private Law in the European Union”, in Mads Andenas et al., eds., Liber amicorum Guido Alpa, London, 2007, 168-185 at p. 178. 920 See for example for the approximation of company law, Article 50, para. 1, TFEU; the same limitation is laid down in Article 115, TFEU, which initially was the sole legislative basis for the approximation of laws for purposes of the Internal Market. While Article 114, TFEU, is now much wider, allowing for the adoption of measures including regulations, in 1986, when that provision was inserted into the Treaty, a common declaration was adopted that the Commission should primarily couch its proposals in the form of directives authored under that provision. 921 See for example Regulation (EC) No. 261/2004 of the European Parliament and of the Council of 11 February 2004, establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No. 295/91, OJ 2004 L 46/1. 922 An example is Commission Regulation (EU) No. 330/2010 of 20 April 2010 on the application of Article 101 (3) of the Treaty on the Functioning of the European Union to Categories of Vertical Agreements and Concerted Practices, OJ 2010 L 102/1.

Chapter 4 – Optional Law in Europe

enacted by the legislative institutions of the European Union. Nevertheless, the application of some of these regulations is not practicable without national provisions which are, however, limited to a supplementary function. So far, the Union has adopted such instruments in the fields of company law and intellectual property. But other measures of this kind are likely to follow. In a strategic paper drafted for the President of the European Commission, the former Commissioner Mario Monti has recommended this solution: “Where upfront harmonisation is not the solution, it is worth while exploring the idea of a 28th regime, an EU framework alternative to, but not replacing national rules. The advantage of the 28th regime is to expand options for business and citizens operating in the Single Market.”⁹²³ Further optional instruments in the above-noted areas and for contract law have already been proposed or announced by the European Commission. Section 2: Optional Instruments of the European Union and the Conflict of Laws 453. The significance of optional instruments as means of private ordering of cross-border legal relations depends on a number of questions relating to private international law: (1) What connections are required between the fact situation in question and the European Union and/or its Member States in order to permissibly elect the optional instrument ? (2) What is the relation between a choice, by the private parties involved, in favour of the optional instrument and the choice-of-law rules of private international law governing the respective area ? (3) Can the parties create their own specific legal regime by selecting certain provisions from the optional instrument and then leaving the rest to the applicable national law ? (4) How will gaps in the optional instrument be fi lled ? Depending on the subject covered by the given optional instrument, the relevance and import of these questions will vary. But they determine the 923 Mario Monti, A New Strategy for the Single Market – At the Service of Europe’s Economy and Society. Report to the President of the European Commission, Barroso, 9 May 2010, p. 93; the document is available at http://ec.europa.eu/bepa/pdf/monti_ report_final_10_05_2010_en.pdf. In a similar vein, the European Economic and Social Committee considers that “an optional instrument would strongly support the functioning of the single market, and represents the most perfect form of voluntary harmonisation in line with the principle of subsidiarity”. See the opinion “The 28th regime – An Alternative Allowing Less Law-making at Community Level”, INT/499 of 27 May 2010 (CESE 758/2010), No. 4. At the time Monti submitted this report the Union had only 27 Member States and he consequently referred to the 28th model; Croatia joined later and became the 28th Member State; an optional law now is the 29th model.

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practical usefulness of the optional instruments for private actors trying to configure the legal regime governing their international relations. The following explanations will deal with these issues for the different areas concerned. 1.

Company Law

a) Corporate forms and legislative basis 454. The first optional instrument ever adopted by the EU in 1985 gave rise to the European Economic Interest Grouping (EEIG).⁹²⁴ The Grouping was the first corporate body created by EU law with the capacity to acquire rights and obligations. Its purpose is to promote the economic activities of its members, but not to make profits for itself. Its creation is based on the assumption that cooperation within the Internal Market by purely national companies “can encounter legal, fiscal or psychological difficulties” which may be overcome by entities of a truly European nature.⁹²⁵ Since companies are artefacts of the law of specific jurisdictions,⁹²⁶ a harmonization of these laws, while otherwise approximating a French Société anonyme to a German Aktiengesellschaft, could not detach a corporate body from the legal order of its incorporation and origin. A legislative act needed for that purpose could not, therefore, be based on the EU power to approximate the national laws under what is now Article 114 TFEU; thus the Community had recourse to the residual powers granted by Article 235 EEC which, in an amended version, is now Article 352 TFEU. While the European Economic Interest Grouping has not been particularly important in legal practice, it has exercised a certain impact on the later regulations issued on the same legislative basis and giving rise to the European Company (Societas Europaea, SE)⁹²⁷ 924 Council Regulation (EEC) No. 2137/85 of 25 July 1985 on the European Economic Interest Grouping (EEIG), OJ 1985 L 199/1; see Rainer Kulms, “European Economic Interest Grouping (EEIG)”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 592-595; in German available under the heading “Europäische wirtschaftliche Interessenvereinigung”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen, 2009, pp. 487-490 with further references. 925 See Recital 2, on the advantage of a “neutral” form of organization that applies to all supranational forms of companies, see Holger Fleischer, “Supranational Corporate Forms in the European Union: Prolegomena to a Theory on Supranational Forms of Association”, Com. Mkt. L. Rev. 47 (2010), 1671-1717 at pp. 1689-1690 with numerous references. 926 See ECJ, 27 September 1988, Case 81/87 (ex parte Daily Mail), [1988] ECR 5483 cons. 19: “companies are creatures of the law, and in the present state of Community law, creatures of national law”. 927 Council Regulation (EC) No. 2157/2001 of 8 October 2001 on the statute for a European Company (SE), OJ 2001 L 294/1; see Gregor Bachmann, “Die Societas Europaea

Chapter 4 – Optional Law in Europe

and to the European Cooperative Society (SCE)⁹²⁸. The European Commission has also submitted a proposal for a European Private Company (SPE) that runs along basically the same lines but has encountered serious opposition and has been withdrawn.⁹²⁹ b) Conditions of eligibility: the international dimension 455. The EEIG, the SE and the SCE are only eligible as corporate forms if there is some international dimension within the group of founding members. The founders of the EEIG must have their central administrations or principal places of business in at least two different Member States.⁹³⁰ In a similar vein, the corporate forms of the SE and SCE require that founding members have a minimum connection to at least two different Member States; however, it has accurately been pointed out that this cross-border element has different “faces”.⁹³¹ In any event, the corporate models offered by EU law are available neither for purely domestic operations nor as subsidiaries of

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und das europäische Privatrecht”, ZEuP (2008), 32-58; Karl Riesenhuber, “European Company (Societas Europaea)”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 569-572, also available in German under the heading “Europäische Aktiengesellschaft (Societas Europaea)”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, pp. 454-458 with further references. Council Regulation (EC) No. 1435/2003 of 22 July 2003 on the statute for a European Cooperative Society (SCE), OJ 2003 L 207/1; Thomas von Hippel, “European Cooperative Society (Societas Cooperativa Europaea)”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 577-579, also available in German under the heading “Europäische Genossenschaft (Societas Cooperativa Europaea)”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, pp. 462-464 with further references. Proposal for a Council Regulation on the Statute for a European Private Company, COM (2008) 396 of 25 June 2008; the legislative procedure has slowed down after concern was voiced by Germany that workers’ co-determination could be evaded; for a survey see Rainer Kulms, “European Private Company (Societas Privata Europaea)”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 634-637, also available in German under the heading “Europäische Privatgesellschaft (Societas Privata Europaea)”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, pp. 468-472 with further references. The proposal was withdrawn, see COM (2013) 685 final of 2 October 2013, Annex, p. 9. See Article 4, para. 2, Reg. 2137/85. See Article 2, Reg. 2157/2001: the founding member companies of the SE must be subject to the laws of at least two different Member States; Article 2, Reg. 1435/2003, at least two of the minimum of five members of a SCE must be seated in different Member States. As Fleischer, Com. Mkt. L. Rev. 47 (2010), 1707-1708, has accurately pointed out, the cross-border element need not necessarily subsist once the supranational entity has been established.

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companies governed by the law of third States unless they cooperate with businesses connected to at least two Member States. The former limitation would have been difficult to implement in the statute of the future SPE since private companies can be established by a single member. The latter limitation, i.e. the exclusion of pure third-State investors, is of minor significance. The free movement of capital ensured by many international instruments⁹³² will enable the companies of most third States to form subsidiaries within the European Union, and such subsidiaries will be entitled to avail themselves of the corporate forms contemplated by EU law on the same footing as genuine companies of EU Member States.⁹³³ c) The residual national law and private ordering 456. The EEIG, the SE and the SCE (the last of which will not be further treated here) must be registered. The application for registration implies the choice of the respective legal regime; a partial choice mixing the European regime with a national company regime is excluded, no cherry-picking being permitted. However, some provisions of the European regimes can be derogated from; moreover, some of the implementing laws enacted by the Member States simply refer to their national law rules on specific types of corporate entities to fill gaps in the European regulation. The EEIG is governed by the provisions of the Regulation in the first place and, except for some issues left to national conflict rules,⁹³⁴ by the internal law of the State of the official address in the second. The official address will be that of the central administration of either the grouping or of one of its members.⁹³⁵ A transfer of the official address into another Member State is possible, although it may result in a change of the applicable law; a transfer into a third State has not explicitly been contemplated and might be prohibited.⁹³⁶ The authorities of the Member State of origin may only prohibit the transfer on grounds of the public interest and subject to judicial review.⁹³⁷

932 See supra, paras. 77-80; under Article 63, TFEU, the free movement of capital is basically also ensured as between Member States and third States, but see Article 64. 933 According to the Court of Justice, the freedom of establishment under Article 54, TFEU, is granted to companies which have the ties with the European Union listed in that provision, and irrespective of the nationality of their directors or shareholders, see ECJ, 25 July 1991, Case C-221/89 (ex parte Factortame), [1991] ECR I-3905, cons. 30; this must equally apply to the application of secondary company law. 934 These issues concern the capacity of natural persons and legal persons to act as founders or directors of the EEIG, see Article 2, Reg. 2137/85; however, the rule states an exclusion that is obvious for many jurisdictions and would be achieved by way of classification anyway. 935 See Articles 2, 6 and 12, Reg. 2137/85. 936 See Articles 13 and 14, Reg. 2137/85; in accordance with Article 13 the official address “may be transferred within the Community”. 937 Article 14, para. 4, of Reg. 2137/85.

Chapter 4 – Optional Law in Europe

457. The SE Regulation contains similar rules taking into account, however, the different purpose of public corporations. The legal regime of the SE consists of the Regulation itself, the SE statutes (by-laws) where authorized by the Regulation, the law enacted for the implementation of the SE Regulation by the Member State in which the SE has its registered office and, finally, the law of the same Member State relating to public limited-liability companies which are incorporated there under the national laws of that country.⁹³⁸ The connecting factor employed in this context, i.e. the registered office of the SE shall be located in the Union, in the same Member State as its head office.⁹³⁹ With the SE being anchored as such, a conflict rule results which avoids the problems arising, in accordance with the theory of the real seat, from a split location of the registered office and the central administration in different countries. Irrespective of a resulting change of the applicable law, the SE, too, may transfer its registered office into another Member State without being subject to either a compulsory winding-up or a loss of its legal personality.⁹⁴⁰ The Member State of origin may only prohibit the transfer of the registered office on grounds of public interest and subject to judicial review, including a review by the European Court of Justice.⁹⁴¹ These restrictions imposed on the Member State of origin are all the more noteworthy as similar limitations are absent should the same Member State want to prohibit a company incorporated under its autonomous national law from moving to another Member State. As the Court of Justice has made clear, the freedom of establishment ensured to companies under Article 54 TFEU does not include the right to leave the country of incorporation.⁹⁴² Consequently the Member State of incorporation may even categorically exclude the emigration of a company. The secondary law constituted by the SE Regulation goes a step further than this case law. 458. It should be noted that the EU regulations on optional corporate forms favour the private ordering of international corporate operations in a dual sense: they make available a corporate structure as an alternative to the types of companies provided by national law, and, by enabling the relocation 938 See Article 9, Reg. 2157/2001; for a closer analysis see Gregor Bachmann, “Das auf die insolvente Societas Europaea (SE) anwendbare Recht”, in Grenzen überwinden – Prinzipien bewahren: Festschrift von Hoff mann, Bielefeld, 2011, 36-49 at pp. 37-39. 939 Article 7, Reg. 2157/2001. It is noteworthy that the English versions of Article 7, Reg. 2157/2001, for the SE and Articles 4 and 12, Reg. 2137/1985, for the EEIG employ different terms (“head office” and “central administration”), while the German and French versions refer to the same notion in both cases: “Hauptverwaltung” and “administration centrale”. It appears to follow that the “head office” of the SE Regulation is the central administration. 940 See the lengthy and detailed provisions of Article 8, Reg. 2157/2001. 941 Article 8, para. 14, Reg. 2157/2001. 942 ECJ, 16 December 2008, Case C-210/06 (Cartesio), [2008] ECR I-9641, cons. 110; see also ECJ, 12 July 2012, Case C-378/10 (VALE Epitési kft), [2012] ECR I-0000, not yet reported, cons. 24 et seq.

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of such entities to other Member States, they indirectly permit the choice of a new residual lex societatis. Thus, the conversion of a company incorporated under the autonomous law of a Member State into a Societas Europaea is not only itself an act of private ordering, it also opens the gate to further acts giving expression to a private choice. 2.

Intellectual Property

459. The territorial nature of intellectual property rights⁹⁴³ turned out to be an impediment to cross-border trade and commerce at an early historical stage. Hence, the US Constitution of 1787 vested the legislative power for copyright and patent not in the single States of the Union, but in the Congress,⁹⁴⁴ thereby extending the territorial scope of such rights beyond State lines to the whole country. In Europe, intellectual property law developed at the level of the much smaller nation-States, and the territorial scope of the corresponding rights has been limited accordingly. This proved obstructive to the establishment of the Common Market since the respect of intellectual property rights had to be acknowledged as an exception to the freedom of trade.⁹⁴⁵ An approximation of the national provisions and regulations could alleviate but not overcome the problem because the territorial confinement of intellectual property rights as such is considered as flowing from the territorial limitation of sovereignty; therefore, the legislators in individual Member States seem to be precluded from extending the scope of an intellectual property right beyond national borders; this appears at least to follow from the Berne and Paris Conventions and is the basis of the present private international law in matters of intellectual property.⁹⁴⁶ The solution consists in the creation of rights covering the whole territory of the European Community/Union; accordingly, such rights must be granted by the Union and not by an intergovernmental cooperation of the Member States. 460. The first so-called unitary right of this kind was created in 1994; it is the Community trademark.⁹⁴⁷ It differs from the national trademark laws which

943 See supra paras. 353 et seq. 944 See See Article 1, Section 8, of the US Constitution. 945 Prohibitions or restrictions on imports, exports or transit are justified under Article 36, TFEU, if needed for the protection of industrial and commercial property. 946 See supra paras. 354 and 355. 947 Council Regulation (EC) No. 40/94 of 20 December 1993 on the Community Trademark, OJ 1994 L 11/1; a consolidated version has been promulgated as Council Regulation (EC) No. 207/2009, of 26 February 2009 on the Community Trademark, OJ 2009 L 78/1; see Roland Knaak, “Community Trade Mark”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 274-277, also available in German under the heading “Gemeinschaftsmarke”, in Basedow, Hopt and Zimmermann, eds.,

Chapter 4 – Optional Law in Europe

had already been established earlier.⁹⁴⁸ The Community trademark comes into existence through a single registration with the Office for Harmonisation in the Internal Market located at Alicante/Spain, and it provides protection in the whole territory of the European Union. The Regulation on the Community trademark has served as a model for two further unitary rights: the Community plant variety right⁹⁴⁹ and the Community design⁹⁵⁰. Over many years the European institutions have struggled over a unitary Community/Union patent along the lines of the other unitary rights. Since an agreement on the issue of which languages would be permitted for applications turned out to be impossible, the “European patent with unitary effect” was at last been created for a group of less than 27 Member States in the legislative procedure of an enhanced cooperation in accordance with Article 326 et seq. TFEU.⁹⁵¹ Our following observations will, however, focus on the

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Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen, 2009, pp. 676-680 with further references. See the first Council Directive (89/104/EEC) of 21 December 1988 to approximate the laws of the Member States relating to trademarks, OJ 1989 L 40/1; a codified version has been promulgated as Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trademarks, OJ 2008 L 299/25. Council Regulation (2100/94/EC) of 27 July 1994 on Community Plant Variety Rights, OJ 1994 L 227/1 as amended, see Joseph Straus, “Plant Variety Protection”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 2, Oxford, 2012, pp. 1281-1285, also available in German under the heading “Sortenschutz”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. II, Tübingen, 2009, pp. 1416-1421 with further references. Council Regulation (EC) No. 6/2002 of 12 December 2001 on Community Designs, OJ 2002 L 3/1; see Annette Kur, “Community Design”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 272-274, also available in German under the heading “Gemeinschaftsgeschmacksmuster”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen, 2009, pp. 674-676 with further references. Council Decision 2011/167/EU of 10 March 2011 authorizing enhanced co-operation in the area of the creation of unitary patent protection, OJ 2011 L 76/53; Regulation (EU) No. 1257/2012 of the European Parliament and of the Council of 17 December 2012 implementing enhanced co-operation in the area of the creation of unitary patent protection, OJ 2012 L 361/1. The background of this decision is a non-official compromise of a large number of Member States to admit only applications made in English, French or German in the future patent regulation, see now Council Regulation (EU) No. 1260/2012 of 17 December 2012 implementing enhanced co-operation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements, OJ 2012 L 361/89. Since the claims of Italy and Spain for the equal treatment of the Italian and Spanish languages were not accepted, the two Member States challenged the Decision permitting an enhanced co-operation in the European Court of Justice, but their action was dismissed, see ECJ, 16 April

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Community trademark. Since the objective of an all-European protection of creations and inventions could not be attained by an approximation of national laws on the basis of Article 114 TFEU (as it has been renumbered by the Treaty of Lisbon) and since the Treaty did not provide for other specific powers to this effect, the regulations adopted up to the Treaty of Lisbon were based on the residual powers bestowed on the Community under what is now Article 352 TFEU.⁹⁵² By providing for a specific legislative basis for unitary intellectual property rights in Article 118 TFEU, the Treaty of Lisbon has, however, made recourse to Article 352 redundant. 461. The Community trademark is obtained by registration.⁹⁵³ It may be owned by any natural or legal person from both Member States and third countries.⁹⁵⁴ By virtue of registration, the Regulation on the Community trademark becomes applicable in respect of: its effects; its use; its transfer, encumbrance and licensing; issues of priority; registration; duration and renewal; and numerous procedural questions relating to administrative procedures, their judicial review and civil proceedings. There is hardly any room left for the parties to replace or supplement the Regulation with a choice of a national law; choice-of-law issues are almost entirely avoided by the comprehensive and detailed, self-standing Regulation on the Community trademark. Nonetheless, gaps have been foreseen and remarkable solutions been devised. For the administrative procedure conducted by the Office for Harmonisation in the Internal Market and for judicial review proceedings, Article 83 refers to “the principles of procedural law generally recognized in the Member States”, thereby excluding recourse to the national law of any specific Member State. 462. Quite different is the rule relating to civil proceedings regarding an infringement or a declaration of invalidity in respect of Community trademarks. Such proceedings are conducted in so-called Community trademark courts, i.e. national courts within the individual Member States. In the absence of pertinent provisions in the Regulation, these courts will apply the lex fori to 2013, joined cases 274/11 and 295/11 (Spain and Italy v. Council), [2013] ECR I-0000, not yet reported. For the progress made towards the Union patent see Joseph Straus, “European Patent”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 628-634, also available in German under the heading “Europäisches Patent – Gemeinschaftspatent”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen, 2009, pp. 543-548 at p. 547. 952 See Recitals 3-5 of Reg. 207/2009 referring to Article 308, EC, the predecessor of Article 352, TFEU. 953 See Article 6, Reg. 207/2009. 954 Article 5, Reg. 207/2009; about one-third of the approximately 1 million applications for Community trademarks that were lodged between 1996 and 2010 originated in countries outside the European Union, see the statistics published on the website of the Office for Harmonisation in the Internal Market: http://oami.europa.eu/ows/rw/ pages/OHIM/statistics.en.do.

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procedural matters,⁹⁵⁵ whereas matters of substance are governed by the national law designated by the private international law of the forum State.⁹⁵⁶ The infringement of a Community trademark gives rise to non-contractual obligations as addressed by the Rome II Regulation. However, neither the general conflict rule of that instrument nor the specific reference to the lex loci protectionis for the infringement of intellectual property rights⁹⁵⁷ provides sufficient guidance with regard to unitary rights. Since the Community trademark has a unitary scope, its “locus protectionis” or “territory” is the whole of the European Union, which so far lacks legal provisions regulating the delictual responsibility of an infringer. Consequently, the Rome II Regulation had to conceive of a sub-connection, i.e. a different connecting factor for that liability. This connecting factor is “the country in which the act of infringement was committed”.⁹⁵⁸ Thus, contrary to the regulations on European companies, the Community trademark Regulation does not offer additional room for private choice when it comes to gap-filling. It is, however, undisputable that it constitutes a significant alternative that may be chosen by private firms instead of or even in addition to⁹⁵⁹ national trademarks registered in the Member States. 3.

Contract Law

a) Development and conceptualization 463. The scholarly activities for a more consistent and comprehensive European contract law were initiated in the 1980s.⁹⁶⁰ In 2001, the European Commission for the first time showed some interest in the matter.⁹⁶¹ Ever since, by a series of documents and measures, it has progressively intensified the policy debate and prompted a large number of European contract scholars to form a network that eventually published a so-called Draft Common Frame of 955 956 957 958

See Article 101, para. 3, Reg. 207/2009. Article 101, para. 2, Reg. 207/2009. See Article 8, para. 1, of the Rome II Regulation. See Article 8, para. 2, of the Rome II Regulation; for a further discussion of the issues arising from this provision, see Jürgen Basedow, “Foundations of Private International Law in Intellectual Property”, in Jürgen Basedow, Toshiyuki Kono and Axel Metzger, eds., Intellectual Property in the Global Arena, Tübingen, 2010, pp. 3-29 at pp. 25-26. 959 See Recital 6 of Reg. 207/2009; the Community trademark may co-exist with identical trademarks under national trademark law, see Knaak, supra footnote 947, p. 275 (English version) and p. 677 (German version). 960 See the references supra footnote 915. 961 Communication from the Commission to the Council and the European Parliament on European Contract Law, COM (2001) 398 final of 11 July 2001; particularly worth mentioning among the further documents is the Communication from the Commission to the European Parliament and the Council – A More Coherent European Contract Law – An Action Plan, COM (2003) 68 final of 12 February 2003.

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Reference (DCFR) on European Contract Law in 2009.⁹⁶² At that time the precise meaning of the DCFR and its significance in the law of the Union was deliberately left open. When a newly formed European Commission came into office in 2010, the Commissioner responsible for justice set up an Expert Group on a Common Frame of Reference in the area of European contract law.⁹⁶³ The mission suggested that the Expert Group would work out a non-binding instrument as had been discussed for several years under the heading of Common Frame of Reference, i.e. a “toolbox” helping to improve further European legislation in the area of contract law. However, upon guidance of the Commission, the group very soon steered towards the adoption of an optional instrument and published a draft in May 2011.⁹⁶⁴ This move had been accompanied by another public consultation concerning the various forms of legislation available to the European Union in the field of contract law.⁹⁶⁵ Against this backdrop, the Commission finally presented a proposal for an optional instrument on European contract law limited to sales in autumn 2011.⁹⁶⁶ It is meant to be available for contracts on the sale of goods as well as for the supply of digital content and related services. It is generally referred to as the Common European Sales Law (CESL) and covers, alongside issues of sales law, also a number of more general topics of contract law such as offer and acceptance, defects of 962 Christian von Bar, Eric Clive and Hans Schulte-Nölke et al., eds., Principles, Definitions and Model Rules of European Private Law – Draft Common Frame of Reference (DCFR) – Outline Edition, Munich, 2009; Christian von Bar and Eric Clive, eds., Principles, Definitions and Model Rules of European Private Law – Draft Common Frame of Reference (DCFR). Full Edition, Vols. I-VI, Munich, 2009; the part on insurance contracts was published separately, see Jürgen Basedow, John Birds, Malcolm Clarke, Herman Cousy and Helmut Heiss, eds., Principles of European Insurance Contract Law (PEICL), Munich, 2009. 963 Commission Decision of 26 April 2010, setting up the Expert Group on a Common Frame of Reference in the Area of European Contract Law, OJ 2010 L 105/109; for the members of that group see the Press Release of the European Commission No. IP/10/595 of 21 May 2010. 964 See the Press Release IP/11/523 containing a link to the so-called feasibility study which in turn contains the Draft Rules as an annex. 965 Green Paper from the Commission on Policy Options for Progress towards a European Contract Law for Consumers and Businesses, COM (2010) 348 final of 1 July 2010; for a broad discussion, see Max Planck Institute for Comparative and International Private Law, “Policy Options for Progress towards a European Contract Law – Comments on the Issues Raised in the Green Paper from the Commission on 1 July 2010”, COM (2010) 348 final, RabelsZ 75 (2011), 371-438, favouring the adoption of an optional instrument. 966 See Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law, COM (2011) 635 final of 11 October 2011; on that proposal see Dirk Staudenmayer, “Der Kommissionsvorschlag für eine Verordnung zum Gemeinsamen Europäischen Kaufrecht”, NJW (2011), 3491-3498; the author chaired the working group of the European Commission preparing the proposal.

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consent, interpretation, and prescription – but does not deal with aspects involving third parties such as assignment, agency or multiple debtors. The proposal for CESL encountered much criticism and was withdrawn in 2014; however, the commission announced a successor proposal adjusted to the Digital Internal Market, and it has not withdrawn its intention to present a further optional instrument on insurance contracts at a later stage.⁹⁶⁷ 464. Registration, a constitutive prerequisite for the optional institutions of intellectual property and company law outlined supra, cannot have the same significance in contract law. Contracts do not come into existence through registration; they are usually perfected through mere consent which sometimes, in cases of a greater economic significance, must be expressed in a specific form. But with the exception of a few special cases the very existence of a contract is not tied, through registration, to a specific legal regime. Rather, where a contract has been concluded the governing law will subsequently be found. A general registration requirement for contracts as a prerequisite for the application of CESL would be entirely impracticable. The application of an optional European contract law, therefore, can only occur when resulting from an agreed upon choice-of-law clause, this clause perhaps requiring a specific form but not being subject to registration. As a consequence, the legal regime of such contracts is not discernible to third parties. Thus, the use of the optional European contract regime is by necessity limited whenever third parties are involved, for example in questions relating to agency. The scholarly debate on these matters has begun only recently.⁹⁶⁸ 465. The choice of the optional European contract law raises a number of additional difficult issues. Some of the ones pertaining to the conflict of laws shall be mentioned here.⁹⁶⁹ The key question is whether the regulation providing for an optional contract law has to be classified as an instrument of substantive law whose application requires a prior reference, by the rules of private international law, to the law of a Member State. One answer holds that the optional contract law would stand as a “second model” alongside the autonomous contract law of that Member State. Thus that law would 967 On the withdrawal of CESL see COM (2014) 910 final of 16 December 2014, Annex 2, no. 60; for insurance contracts see Viviane Reding, “Warum Europa ein optionales europäisches Vertragsrecht benötigt”, ZEuP (2011), 1-6 at p. 5 968 See for issues of agency, Jens Kleinschmidt, “Stellvertretung, IPR und ein optionales Instrument für ein europäisches Vertragsrecht”, RabelsZ 75 (2011), 497-539. 969 For a thorough discussion see Matteo Fornasier, “28. versus 2. Regime – Kollisionsrechtliche Aspekte eines optionalen europäischen Vertragsrechts”, RabelsZ 76 (2012), 401-442; Max Planck Institute, RabelsZ 75 (2011), 400-412; Jürgen Basedow, “An EU Law for Cross-Border Sales Only – Its Meaning and Implications in Open Markets”, Liber amicorum Ole Lando, Copenhagen, 2012, pp. 21-38; for a more general approach taken prior to the proposal for CESL, see id., “Das fakultative Unionsprivatrecht und das internationale Privatrecht”, Grenzen überwinden – Prinzipien bewahren: Festschrift von Hoff mann, Bielefeld, 2011, pp. 50-62.

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contain two bodies of contract law. An alternative approach would place the regulation comprising the optional contract law at the same level as conflict rules; the specific scope rules of the optional instrument would, as a kind of lex specialis, take priority over the general rules of private international law of contracts as laid down in the Rome I Regulation. The situation would be similar to the fields covered by uniform private law conventions such as the Montreal Convention on air transport liability:⁹⁷⁰ the courts sitting in the contracting States of the Montreal Convention check the applicability of the Convention under its Article 1 irrespective of the conflict rules of the forum and of the national law that would be applicable to the contract otherwise; it is only where a case is not covered by the Convention that the ordinary choice-of-law rules come into play at a subsequent stage of the analysis. In light of this approach scholars usually refer to an optional contract law as a 28th or now, after the accession of Croatia to the European Union: a 29th model.⁹⁷¹ b) The Common European Sales Law and the conflict of laws 466. In respect of the Common European Sales Law, the European Commission has, however, suggested that the first solution (the “second model”) be chosen. It considers the agreement to use the Common European Sales Law as a “choice exercised within the scope of the respective national law which is applicable pursuant to the Rome I Regulation or other conflict rules. … [The choice] should therefore not amount to, and not be confused with, a choice of the applicable law within the meaning of the conflict-of-law rules and should be without prejudice to them. This regulation will therefore not affect any of the existing conflict-of-law rules”⁹⁷²

As a consequence, the second model is only available as such where the private international law of the forum, irrespective of the latter’s location inside or outside the European Union, designates the law of a Member State as applicable. Where the law of a non-Member State governs, it is up to that law to decide whether and to what extent a choice of the CESL will be respected; in general, courts will consider the choice as an incorporation of the CESL rules, subject however to the mandatory provisions of the applicable law of the non-Member State. It follows that the CESL may create a common legal framework for intra-EU sales contracts, but not for transactions involving third States. This is relevant in particular for B2C (business to consumer) transactions, for example online contracts which are subject to a large num970 Convention for the Unification of Certain Rules for International Carriage by Air, done at Montreal on 28 May 1999, 2242 UNTS 350. 971 See Norbert Reich and Hans-W. Micklitz, “Wie ‘optional’ ist ein ‘optionales’ EUVertragsrecht”, Europäisches Wirtschafts- und Steuerrecht, 2011, 113-119 at p. 115. 972 See Recital 10 of the Proposal, COM (2011) 635 final of 11 October 2011.

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ber of divergent and mandatory consumer protection regulations in many countries across the globe.⁹⁷³ 467. According to its Article 4, the proposed Regulation is intended to cover cross-border sales contracts only; the Member States may, however, make the choice of the CESL available for domestic contracts in their national legislation, Article 13. Article 4 paras. 2 and 3 contain separate and different definitions of what a cross-border contract means for transactions between traders or businesses (B2B contracts) and for those concluded between a business and a consumer (B2C). In the former case, it is only the habitual residences, viz. the central administrations or principal places of business, of the traders that counts; they must be situated in different countries for the transaction to be a “cross-border” one. In B2C contracts, a cross-border contract would also be acknowledged if both parties are habitually resident in the same State, but the place of delivery or the billing address is located in another country. It is not an issue to be discussed here, but it is difficult to see why the restrictions imposed on traders for B2B transactions are stricter than those for B2C contracts. Other eligibility limitations which appear rather obscure relate to the size of the traders involved: in B2B transactions one of the parties must be a small or medium-sized company (SME);⁹⁷⁴ according to the proposal, the CESL will not be available to two “big” traders unless a Member State decides to extend that option in its national legislation, Article 13. Finally, the CESL will be unavailable for two parties established in different non-Member States; at least one of the parties must be habitually resident in a Member State of the Union. 468. A further aspect somehow related to the conflict of laws concerns interpretation and the filling of gaps. According to Article 11 of the proposed Regulation, “only the Common European Sales Law shall govern the matters addressed in its rules,” once the parties have made a valid agreement on the use of the optional instrument. No selective choice of CESL provisions is permitted. The CESL rules “should be interpreted autonomously, [and] questions concerning matters falling within the scope of the Common European Sales Law which are not expressly settled by it should be resolved only by interpretation of its rules

973 See the broad comparative survey in Diego Fernández Arroyo, ed., Consumer Protection in International Private Relationships, Asunción/Paraguay, 2010, with 31 national and international reports and a general report drafted by the editor; see also Gralf-Peter Calliess, Grenzüberschreitende Verbraucherverträge, Tübingen, 2006. 974 Article 7, para. 2, defining the criteria for the defi nition of an SME draws from Commission Recommendation (2003/361/EC) of 6 May 2003 concerning the definition of micro, small, and medium-sized enterprises, OJ 2003 L 124/36. A business qualifies as an SME if it has less than 250 employees, an annual turnover not exceeding 50 million Euros and an annual balance sheet not exceeding 43 million Euros.

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The wording draws from Article 7 paragraph 2 CISG. Thus, national law and private international law have no significance for filling gaps in the CESL, whereas the conflict rules maintain their role for the determination of the law applicable to questions outside the scope of CESL.⁹⁷⁶ Section 3: Optional Instruments in International Conventions 1.

The 1964 Hague Sales Law (ULIS) and other Multilateral Conventions

469. The creation of opt-in private law regimes is not necessarily confined to supra-national organizations such as the European Union. It may also be achieved in the form of traditional inter-governmental cooperations, i.e. by international agreement. However, States have traditionally negotiated uniform law conventions having a different nature. Such conventions either provide for a mandatory regime, as in the case of most conventions dealing with the contract of carriage,⁹⁷⁷ or they create, as in the case of the CISG, dispositive or default law, i.e. a legal framework that applies ipso iure but allows the parties to opt out.⁹⁷⁸ Examples for opt-in instruments in traditional uniform private law are rare. The predecessor of CISG, i.e. the Hague Sales Convention of 1964 which introduced the Uniform Law on the International Sale of Goods (ULIS), permitted contracting States to confine, by an appropriate declaration, the application of ULIS to contracts that were subjected, by the parties’ choice of law, to this Convention.⁹⁷⁹ In the United Kingdom, which made a pertinent declaration, ULIS has apparently never been applied.⁹⁸⁰ This experience raises doubts as to the practical need for opt-in 975 See Recital 29 of the proposed Regulation, COM (2011) 635 of 11 October 2011. 976 See Recital 28; on the interpretation of the corresponding provision of Article 7, para. 2, CISG see Franco Ferrari in Franco Ferrari, Harry Flechtner and Ronald Brand, eds., The Draft UNCITRAL Digest and Beyond, Munich, 2004, pp. 157 et seq. 977 See the example of the Convention of the Unification of Certain Rules for International Carriage by Air, done at Montreal on 28 May 1999, 2245 UNTS 309 at 350; under Articles 26 and 49 the rules of the Convention on the carrier’s liability establish minimum standards; other provisions must not be derogated from at all, not even to the benefit of the shipper/passenger. 978 See supra, para. 124 at footnote 240. 979 See Article V of the Convention relating to a Uniform Law on the International Sale of Goods (ULIS) of 1 July 1964, English and French text in 834 UNTS 107. 980 See Ole Lando, “On a European Contract Law for Consumers and Businesses – Future Perspectives”, in Reiner Schulze and Jules Stuyck, Towards a European Contract Law, Munich, 2011, pp. 203-214 at p. 210; the underlying provision of Article V of the 1964 Convention had already been criticized at the time of its approval, see

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instruments in general, at least in areas which are essentially governed by dispositive law. 2.

The Franco-German Optional Matrimonial Property Regime

470. A further effort to create an opt-in instrument by international convention was recently made by the French and the German Government. In a bilateral convention they agreed on the creation of an optional marital property regime.⁹⁸¹ In substance, the regime is closer to the German Zugewinngemeinschaft than to the French participation aux acquêts since the spouses’ assets, both those owned at the time of marriage and those acquired afterwards, remain separate property; consequently, the dissolution of the regime does not entail the dissolution of co-ownership of the spouses in certain assets, but leads to compensatory claims sounding in money. The spouses can by a marital agreement choose this regime instead of any other eligible regime and instead of the regime governing their economic relations in the absence of a choice. While the regime is optional in this sense, the choice includes the mandatory application of all provisions of the Convention except for those which determine the composition of the assets subject to the regime; these rules may be derogated from.⁹⁸² 471. In the unification of private law, bilateral conventions have always been exceptional. Uniform law treaties are not primarily made in view of a mutual surrender of sovereign rights of the contracting States – this would indeed favour bilateralism. Their purpose is rather the protection of private rights. Rolf Herber, in Hans Dölle, ed., Kommentar zum einheitlichen Kaufrecht – Die Haager Kaufrechtsübereinkommen vom 1. Juli 1964, Munich, 1976, Vor-Artt. 1-8, Nos. 14-15; according to Jan Kropholler, Internationales Einheitsrecht, Tübingen, 1975, p. 96, a declaration made under Article V downgrades ULIS to something close to a set of standard terms of contract; on a similar note Kurt Nadelmann, “Uniform Legislation versus International Conventions Revisited”, Am. J. Comp. L. 16 (1968), 28-50 at pp. 43-44. 981 Gesetz vom 15. März 2012 zu dem Abkommen vom 4. Februar 2010 zwischen der Bundesrepublik Deutschland und der Französischen Republik über den Güterstand der Wahl-Zugewinngemeinschaft, BGBl. 2012, II-178, at p. 180, for the text of the agreement in both French and German; in Germany, a new § 1519 of the Civil Code refers to an agreement where the spouses have chosen the optional regime. In France, ratification of the bilateral treaty has been authorized by a Law No. 2013-98 of 28 January 2013, Journal officiel de la République française of 29 January 2013. For a more detailed treatment, cf. Michael Stürner, “Der deutsch-französische Wahlgüterstand als Modell für die europäische Rechtsvereinheitlichung”, JZ (2011), 545-555; Dieter Martiny, “Der deutsch-französische Wahlgüterstand – Ein Beispiel optionaler bilateraler Familienrechtsvereinheitlichung”, ZEuP (2011), 577600; Philippe Simler, “Le nouveau régime matrimonial optionnel franco-allemand de participation aux acquêts”, La semaine juridique (JCP) – édition notariale et immobilière, 2010, No. 1203, pp. 52-57. 982 See Article 3, para. 3, of the Convention.

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Private parties need stability and continuity in the assessment of their rights and obligations – not only in the courts of one or two States, but in the courts of several countries and, if possible, of all countries. This is particularly true within the European Union, where mixed couples are not confined in the choice of their habitual residence to the two home countries. A Franco-German couple might equally decide to settle in Belgium, in the United Kingdom or in any other Member State. It is true that, currently, FrancoGerman couples are confronted with some problems arising from their matrimonial property regime.⁹⁸³ But such difficulties are, of course, not limited to Franco-German relations and would rather justify a corresponding initiative of the European Union.⁹⁸⁴ The true motivation of both Governments for the conclusion of the bilateral agreement appears to be different: it emerges from Article 21 of the bilateral Convention that they envisage the adhesion of further Member States of the European Union. When such adhesion occurs, the optional marital property regime of the Convention might gradually turn into a truly European regime. It is, however, difficult to understand why non-Member States such as Switzerland or Norway are not allowed to adhere. A reason might be the expectation of the two Governments that the model of their bilateral Convention will not only spread across Europe, but will sooner or later be converted into an EU instrument that could not be effective in non-Member States. 472. The Convention provides for substantive law, not for private international law. According to its Article 1, the optional marital property regime is available to spouses whose matrimonial property relations are governed by the internal law of either contracting State. Thus, the regime is eligible irrespective of the spouses’ nationality and also for “domestic” couples lacking any connection with a foreign country. The need for a prior application of private international law highlights a certain weakness of the optional matrimonial property regime. While both countries permit the spouses to choose the applicable law from a range of laws, that election must be authenticated under German law, whereas a tacit choice of law is valid in accordance with French private international law.⁹⁸⁵ Will the choice of the Franco-German optional marital property regime be acknowledged as a tacit choice of French or German law ? And if so, will it be a choice of French or of German law ? The 983 The explanatory report to the Convention accurately points out that couples living under the French marital property regime of a communauté aux acquêts encounter difficulties in purchasing or encumbering real property located in Germany, see Bundesrat, Drucksache 67/11 of 4 February 2011, p. 23. 984 The European Union has made a proposal for a Regulation determining the applicable law, see supra, para. 391, which does not, however, touch upon the substantive law. 985 See for Germany Article 15, para. 3, in conjunction with Article 14, para. 4, of the Introductory Law of the Civil Code; for France Article 11 of the Hague Convention on the Law Applicable to Matrimonial Property Regimes of 14 March 1978, which has been ratified by France, see supra para. 390.

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courts will hopefully find constructive solutions.⁹⁸⁶ Greater difficulties may arise where the spouses are domiciled and initiate proceedings in a country other than France and Germany, in particular if that State does not grant party autonomy in respect of matrimonial property. The unification of private international law in this field within the European Union will overcome such problems at least in part; given the Franco-German initiative that unification becomes even more urgent.⁹⁸⁷ Section 4: Conclusion 473. The creation of optional instruments is the most recent offspring of a general movement favouring the role of private ordering in transnational private legal relations. It differs from traditional party autonomy in private international law in an essential point: whereas the debate over party autonomy exclusively relates to the choice between laws that have been created for internal or domestic fact situations, the optional instruments presented in this chapter have been conceived of with a particular – although not exclusive – view to cross-border operations and the resulting legal complexities. They resemble traditional uniform law conventions of an opt-out nature, but require an affirmative opt-in commitment of the private parties involved. Where national law contains a large amount of mandatory provisions and the optional instrument, according to its own scope-determining provisions, is available as an alternative, a new form of regulatory competition emerges, so-called vertical regulatory competition.⁹⁸⁸ It emerges from the permission given to private actors to replace the otherwise mandatory regime of their domestic law with an alternative set of rules. Many theoretical questions relating to this type of legislation are still open for debate. In particular, this applies to the relation between private international law and the optional institutions. The evolution in this area is unclear and, in part, contradictory. Future developments will have to show whether optional instruments are a part of national law whose application is subject to choice-of-law rules or whether they are on an equal footing with uniform law conventions whose scope rules are usually considered in a first step – in the analysis of the applicable law – prior to the application of choice-of-law rules.

986 See Martiny, ZEuP (2011), 584 and 587-588. 987 See supra, para. 391. 988 See Fleischer, Com. Mkt. L. Rev. 47 (2010), 1700-1703, with further references in respect of company law; for regulatory competition in general, see supra, paras. 101 et seq.

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Deliberate Connections (Indirect Choice of Law)

474. A further instrument available for the private ordering of transnational activities and the resulting legal relations consists in the deliberate creation of links relevant under private international law that connect transnational fact situations with specific legal systems which the persons in question prefer to other legal systems for substantive reasons. The links brought about by such deliberate activities have traditionally been considered as artificial, alleged or pretended connections with a given jurisdiction. Conflict lawyers have dealt with them under the heading of “ fraus legis”, “ fraude à la loi”, “evasion of laws”, “wetsontduiking” or “Gesetzesumgehung”. The negative connotation of these terms results from the assumption of a quasi-natural, deeply rooted and stable connection of individuals, companies, corporeal things and acts with a given jurisdiction, the notion of a pre-established “seat” of the legal relation. Where such assumption prevails, the calculated creation of a relevant link with a different jurisdiction may appear as illegitimate. The question that has to be asked in our times is whether such quasi-natural and deeply rooted connections to specific jurisdictions can still be claimed to exist in all areas of the law. While they still endure in some legal disciplines such as the law of immovable property, others are undergoing a transformation. To employ the term coined by Savigny, the “seat” of some legal relationships seems to be increasingly indicated by connecting factors permitting flexibility and mobility at lower costs for the persons involved. Put in other words: private actors are progressively capable of changing the connections of those legal relations and of establishing, by appropriate moves, connections with legal systems that may suit their interests and intentions better than the connecting factors accepted in former times. The process may indeed be characterized as a turn towards an “indirect choice”.⁹⁸⁹ 475. This transformation of the discipline will be further investigated with regard to some traditional connecting factors employed in the conflict of laws, see infra section 1. The tendency towards objective connecting factors allowing for greater mobility goes hand in hand with the progressive advancement 989 See the illuminating article of Peter North, “Choice in Choice of Law”, in id., Essays in Private International Law, Oxford, 1993, pp. 171-200 at pp. 172-179.

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and liberalization of the recognition of foreign decisions and other crystallizations of foreign law. This development is targeted at the implementation of the so-called principle of recognition which has received particular attention as the principle of mutual recognition within the European Union, see below section 2. The nexus between recognition and private ordering of the type outlined supra can be explained by the following consideration: as the preconditions of recognition are becoming more lenient and recognition is handled more generously, the individual liberty to choose among several jurisdictions by deliberately establishing appropriate connections is enlarged as a matter of fact since the persons involved need not effectively give up the connections with the legal system whose law had previously governed their relationship. The possibility of maintaining the substantive factual connections with country A while at the same time deliberately creating connections with country B in order to benefit from its legal order raises the question of fraus legis. In a system of mutual recognition, it appears in a new light as will be further explained in section 3. Section 1: Connecting Factors Favouring Private Choice 1.

Formal Requirements and the Lex Loci Celebrationis

a) The recognition of the lex loci celebrationis 476. In modern society and culture, a profound distinction between form and substance can be observed. Form is not valued in the same way as substance. This is reflected by the treatment of formal requirements in many areas of the law. They are considered as ancillary to substance and are afforded secondary significance in most contexts. Accordingly, a rather lenient approach has evolved in private international law, relating to all kinds of juridical acts, in particular contracts, marriages and wills. Courts and legislators do not insist on the observance of the formal requirements established by the law governing the contract or unilateral declaration in question; instead, they accept the formalities laid down in the law of the place where the contract or declaration is made.⁹⁹⁰ According to Savigny, this rule has been accepted ever since the sixteenth century.⁹⁹¹ The designation of this rule by the Latin 990 See for contracts in Europe, Article 11, Rome I; in the United States § 199 Rest. Second, Conflict of Laws, and, even more lenient, Article 3538 of the Louisiana Civil Code; for Switzerland Article 124 of the law of 1987; for Tunisia Article 68 of the law of 1998; for Venezuela Article 37 of the law of 1998; in legal literature see Frank Vischer, “Connecting Factors”, IECL, Vol. 3, Chap. 4, Sects. 36-38, referring to contracts, marriage and wills; for the latter it is sufficient to refer to the validating alternative connections laid down in the Hague Convention on the Conflict of Laws Relating to the Form of Testamentary Dispositions of 5 October 1961, in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, pp. 52 et seq. 991 Savigny, p. 350 (§ 381).

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adage locus regit actum is a bit misleading since a law that is merely one out of two alternatives cannot be said to be “governing”. Rather, the alternative connection of the formal requirements to either the law governing the substance or to the law of the place of declaration or conclusion grants the private parties a right to avail themselves of the law requiring a form that they can comply with at lowest cost and that best suits their needs. The permissive alternative conflict rules relating to formal requirements are, however, subject to certain exceptions, for example for certain contracts relating to real property.⁹⁹² b) How the rule evolved 477. The little weight accorded by modern law to formalities is the result of a long historical evolution. At its beginning, in antiquity, the weight of forms was much greater. As pointed out by Pringsheim, “the early history of legal transactions is always dominated by formalism”, and he explains this finding by the fact that “archaic formalism originates from religious rights”.⁹⁹³ In the classical Roman law, nuda pacta, i.e. commitments incurred by pure promise without observance of any form, could only give rise to ancillary regulations, for example on prescription, but not to actionable rights outside a limited number of contract types.⁹⁹⁴ Given the religious underpinnings of many legal forms, it has been said for ancient law that “not only are the formalities of equal importance with the promise itself, but they are, if anything, of greater importance.”⁹⁹⁵ While these observations concern substantive law, there can hardly be any doubt that private international law would never have accepted the rather lenient approach to formal validity outlined supra had the valuation of form remained unchanged over the centuries. The case of Ratchis, a Lombard king of the 8th century, provides a telling example: he married a Roman wife in 744 and, probably for political reasons, conveyed the morning gift in the Roman form (sponsalitium) and not in the Lombard form (morgencap). In terms of modern conflicts law this decision could be interpreted as one in favour of the lex loci celebrationis and against the law governing the marriage, which would have been Lombard law under the personality principle. While this choice in favour of the lex loci celebrationis would have been legitimate and in line with present conflict rules governing marriage across the globe, it was considered as a betrayal by contemporary observers.⁹⁹⁶ Apparently, these critics valued the ceremonial form of a marriage as being of greatest importance. It was only much later when formalities gradually lost their significance that practical 992 See for example Article 11, para. 5, Rome I. 993 Fritz Pringsheim, The Greek Law of Sale, Weimar, 1950, pp. 15 and 18. 994 See Reinhard Zimmermann, The Law of Obligations – Roman Foundations of the Civilian Tradition, Cape Town, 1990, pp. 508 et seq. 995 Henry Sumner Maine, Ancient Law, 15th ed., London, 1894, p. 313. 996 Meijers, Recueil des cours 49 (1934), 553.

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considerations such as the non-availability – in the State where either a contract is executed or a declaration is made – of a given form prescribed in the State of origin gained weight and finally prevailed.⁹⁹⁷ 478. The turn to the lex loci celebrationis and conflict rules providing for an alternative connection in respect of formal requirements has been achieved from an ex-post perspective in cases where parties complied with the form required by the local law of the place of the making of a declaration, but not with the form required by the law governing the substance. Where the latter form could no longer be satisfied, courts had to face the invalidity resulting from the law governing the substance of an otherwise valid contract or declaration. That sanction was considered too harsh; justice compelled a different solution. Since formal requirements in Savigny’s words were not meant to impede or obstruct dealings,⁹⁹⁸ the law took account of the legal rules effective in the place where the dealings were executed. In more recent times, this effort to avoid an injustice that flows from the requirements of rigid formalities is well captured by the Dutch history with regard to the form of wills. The former Article 992 of the Civil Code (abrogated in 1982) prevented Dutch citizens from making a will other than by authentic act. Over time, this rule became a serious obstacle for Dutch testators living abroad, who were either unaware of the rule or did not find the assistance of a notary in their country of residence. In a long list of cases, Dutch courts, confronted with holographic wills made by Dutch citizens in foreign countries, gradually toned down the harshness of the rule; it was finally abandoned in 1982 when the Netherlands ratified the Hague Wills Convention, the rule being perceived as an impediment to the increasing internationalization of legal relations.⁹⁹⁹ c) Examples of private dispositions 479. Despite the retrospective character of this legal development, it of course opens a gateway for proactive dispositions by private parties. This can be exemplified in the three areas of contracts, marriage and wills. Under the German law of private limited liability companies, the assignment of shares and any contractual commitment to such assignment is invalid unless laid down

997 Savigny, p. 350 (§ 381) refers to a citizen of Prussia who wants to make a will while falling ill in France; under the law of Prussia, governing the substance of the will, this would require the co-operation of a court, yet no French court would be empowered to provide such assistance. 998 Savigny refers to “die Gefahr der Ungültigkeit … und zwar … nur in Folge von gesetzlichen Formen, die gewiss nicht zur Hemmung und Erschwerung des Verkehrs eingeführt sind”, see p. 350 (§ 381). 999 J. G. Sauveplanne, Elementair Internationaal Privaatrecht, 8th ed., Deventer, 1986, p. 76; for the case law on that provision see id., Elementair Internationaal Privaatrecht, 5th ed., Deventer, 1976, pp. 59-61.

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in a notarial act.¹⁰⁰⁰ In order to avoid the notarial fees which in Germany are fi xed by statute, parties will not infrequently travel into neighbouring countries, such as Switzerland, where the transfer of shares and related contracts may be put into effect without notarial assistance in a simple writing. They avail themselves of Article 11 of the Rome I Regulation or of Article 11 of the Introductory Law of the Civil Code; both provisions explicitly validate contracts or juridical acts which satisfy the formalities required by either the law governing the act or by the law of the place where it was executed. While Article 1 Rome I explicitly excludes certain issues of company law from the scope of the Regulation, it is not quite clear whether and in which circumstances the transfer of shares of a limited liability company is covered by the Regulation;¹⁰⁰¹ where the transfer simply changes ownership of the shares and does not affect the internal structure of the company, the rationale for the exclusion of company law issues does not seem to apply. To the extent that Rome I is excluded, German case law gives evidence of a strong inclination of the courts to apply Article 11 of the Introductory Law also to juridical acts in the field of company law.¹⁰⁰² While the courts are not unanimous and legal certainty has not yet been established, an important migration of shareholders to Switzerland and other places whose laws permit the transfer of shares in limited liability companies without notarial authentication (meaning, at low costs) has evolved over the years. 480. In the law of marriage, compliance with the formalities required by the country of celebration is not only a possibility, but usually an imperative; 1000 See § 15, paras. 3 and 4, of the law concerning companies with limited liability (Gesetz betreffend die Gesellschaften mit beschränkter Haftung – GmbHG), English translation in Burkhardt Meister, Martin Heidenhaim and Joachim Rosengarten, The German Limited Liability Company, 7th ed., Munich, 2010, pp. 107 et seq. 1001 While Article 1, para. 2 (f), Rome I, excludes “questions governed by the law of companies … such as the creation …” of a company from the scope of the Rome I Regulation, a contractual commitment to transfer shares is arguably covered by Rome I, see Spellenberg in Münchner Kommentar zum Bürgerlichen Gesetzbuch, Vol. 10, 5th ed., Munich, 2010, EGBGB, Art. 11, para. 173; there does not appear any clear opinion on the transfer itself so far. 1002 BGH, 4 November 2004, RIW (2005), 144 = IPRspr (2004), No. 22; see the comments by Anatol Dutta, “Form Follows Function ? – Formfragen bei Schuldverträgen über ausländische Gesellschaftsanteile”, RIW (2005), 98-103 at pp. 100-102; for lower court opinions expressing different views see Spellenberg in Münchner Kommentar zum Bürgerlichen Gesetzbuch, Vol. 10, 5th ed., Munich, 2010, EGBGB, Art. 11, para. 173, and Kindler in Münchner Kommentar zum Bürgerlichen Gesetzbuch, Vol. 11, 5th ed., Munich, 2010, IntGesR, paras. 558 et seq. More recently the Federal Court decided that the submission of the list of shareholders to the registry which also requires notarial intervention in accordance with § 40 para. 2 GmbHG, may also be effected by a Swiss notary whose activity is substituted to that of a German notary, see BGH 17 December 2013, RIW 2014, 156 and Tim Odendahl, “Die Abtretung von GmbH-Geschäftsanteilen vor ausländischen Notaren”, RIW 2014, 189; MarcPhilippe Weller, “GmBH-Anteilsabtretungen in Basel”, ZGR 2014, 865 et seq.

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the marriage will only be considered as valid in that country if concluded in the form prescribed by its laws.¹⁰⁰³ A marriage concluded in accordance with the formalities of the local law will almost invariably be recognized as valid in other States; in this respect, the lex loci celebrationis is almost universally accepted.¹⁰⁰⁴ Spouses are thereby afforded a choice of ceremonial forms enacted or observed in the several countries, and there appears to be a certain demand for outlandish or even exotic forms of marriage. According to newspaper reports, there are spouses who prefer the customary rites of certain peoples in Africa or the Pacific Islands to the bureaucratic marriage procedures found in their home country, and there appear to be travel agents who organize trips for fiancés that culminate in such marriage procedures under the Southern Cross.¹⁰⁰⁵ To the extent that marriages thus celebrated are officially recognized in the respective States in Africa or Oceania, they will also be registered as valid marriages in the European or American home countries of the spouses, a consequence of the recognition of the lex loci celebrationis. Where, however, the marriage forms of the indigenous peoples are, under the laws of the respective States, available only to members of those peoples, the said rites will not be respected, under conflict rules permitting the celebration in the forms of the local law as lex loci celebrationis. 481. A third example for human mobility generated by the desire to take advantage of the lex loci celebrationis and effectively facilitated by it has come to the fore in the field of succession. As pointed out supra, the Netherlands no longer insists that their citizens make a will in an authentic document. They have however not fully liberalized the testamentary forms. A holographic will is permitted, but it will be valid only if deposited with a notary who issues a certificate of deposit and stores the will in a central register – and charges a fee for his services.¹⁰⁰⁶ Here again, the incentive to avoid formalities and costs has triggered new ideas and mobility. One entrepreneurial firm has published an online questionnaire which interested persons can fill out and send back; the company will then prepare a draft will taking account of the particular wishes and situation of the testator and convey this draft to him or her, combined with advice for drawing up the individual will. The testator is then advised to travel to a neighbouring country, such as Germany, where holographic wills do not require further formalities. There, he should draft an individualized will using the sample will as a template; once 1003 Lennart Pålsson, “Marriage and Divorce”, IECL, Vol. 3, Chap. 16, Sect. 24. 1004 Pålsson, IECL, Vol. 3, Chap. 16, Sect. 25. 1005 “Ein Häuptling ist keine Behörde” [“A Chief Is Not an Agency”], Süddeutsche Zeitung, No. 126 of 5 June 1997, p. 12. More recently, the celebration of marriage by the master of a vessel on the High Seas has become an attractive offer made by cruise liners; where the flag state enables the master to celebrate such a marriage it will be valid under the locus regit actum rule, provided that the ceremony takes place on the High Seas. See Anatol Dutta, “Eheschließung auf See“, StAZ 2014, 44. 1006 See Article 95 of Book 4 of the Civil Code.

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signed, the concluded instrument is taken back to his or her home in the Netherlands, possibly with a postcard from the place of execution attached to the will to facilitate proof that it was actually drawn up abroad. Since the will would thus comply with the formalities required by the foreign lex loci celebrationis, it would not have to be stored and would nonetheless have to be recognized as formally valid under the Hague Wills Convention in the Netherlands. This offer has been criticized as “legal quackery” by Dutch scholars because it cannot ensure the same degree of legal certainty as the testamentary forms regulated by domestic Dutch law.¹⁰⁰⁷ Still, the example demonstrates once more that the lex loci celebrationis, in particular as part of a system of alternative connecting factors, encourages the private ordering of international relations. 2.

From Nationality to Habitual Residence in the Law of Personal Status

a) Rise and decline of nationality 482. As has been pointed out before, citizenship became the primary connecting factor for all issues related to personal status, family law and succession in the course of the nineteenth and early twentieth centuries.¹⁰⁰⁸ This concerns most continental European countries, but also a great number of States in the Middle East and Asia.¹⁰⁰⁹ The reasons for the recognition of the nationality principle in continental Europe in the course of the nineteenth century have been outlined supra: the million-fold emigration to other continents, the development of the nation-State ideology, the desire to maintain links with émigrés, and the practical convenience of the application of the lex fori in the courts of the country of origin. What matters in this context is the merger of the national idea with the organization of States. Viewed from a nineteenth-century perspective, the cultural affiliation of humans was an extremely stable link – much more stable than their residence or the territorial extension of State power, each of which could easily change over the years. The merger of national culture and State organization was intended to bestow the stability of the cultural link on the existence and structure of the nation-State. On the other hand, it had the effect of turning the cultural link, i.e. a pre-State connection, into the legal connection of citizenship as 1007 See J. H. M. ter Haar, W. D. Kolkman and L. C. A. Verstappen, “De onwenselijke aspecten van een internet-testament”, WPNR (2007), 745-751 at p. 751, for the criticism; but the authors do not question the formal validity, under the Hague Convention, of such a will, one which cannot be set aside for reasons of evasion of the law (fraus legis, wetsontduiking), p. 748; see also the comments by E. W. J. Ebben, “Zin en onzin van internet-testamenten”, WPNR (2008), 52-55 with a reaction by ter Haar, Kolkman and Verstappen, WPNR (2008), 56-58. 1008 See supra, paras. 93 and 382. 1009 See supra, footnote 743.

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defined by specific statutes that gradually came into being in the various countries during the nineteenth century; in the process, subjects became citizens. While the allegiance of subjects had been defined by the changing relations of State power over the years, these persons now became citizens in accordance with precise legal definitions. The stability of the cultural link was thus transformed into the legal relation of citizenship. Acquisition and loss of citizenship were clearly regulated, and the acquisition of citizenship by naturalization became a lengthy and complicated procedure, often leaving much discretion to the Government and authorities of the respective State. 483. For private international law, citizenship has two main practical advantages as a connecting factor: it is easy to ascertain and, because of its stability, it ensures the continuity of private legal relations in the international arena. On the other hand, it leaves little room for private disposition. Millions of Europeans who left their home countries in the nineteenth century for the New World kept the citizenship of their State of origin irrespective of whether they considered their emigration as definitive or not. Even their children and grandchildren born in the Americas may still be considered as national citizens in their ancestors’ European home countries. When they are involved in litigation over issues of personal status in the European countries of origin, the courts will apply the law of the European forum irrespective of their much stronger links with their American home. Usually, a deliberate act on their side is required for the loss of their citizenship. On the other hand, its acquisition is not easy either, and given the bundle of obligations it entails in all areas of the law, very few people change nationality for the sole purpose of rendering a different private law applicable.¹⁰¹⁰ 484. In more recent times, citizenship as a connecting factor has increasingly been abandoned in European countries. This is due to several reasons. First, a number of European jurisdictions, such as those of the United Kingdom, the Scandinavian States and Switzerland, have always adhered to domicile as the main connecting factor or have applied the lex fori; therefore, the adjudication of personal status under the national law was not suited, from a comparative perspective, to bringing about the uniformity of outcome pursued – as its major objective – by private international law. Second, and on a more practical note, the nationality principle compelled more and more European courts to apply foreign law since Europe, which had been the country of origin for a large scale emigration in the nineteenth century, turned into the destination for a mass immigration after World War II; the increasing application of foreign law in fact started to impede the operation

1010 However, such cases have occurred from time to time, in particular for evading restrictive divorce laws found in the former national law, see e.g. in the Netherlands, HR, 21 March 1947, Ned. Jur. 1947 No. 382.

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of the court system in some countries.¹⁰¹¹ Third, for several reasons nationality became less indicative of an unambiguous affiliation with a single State and its law: because of citizenship options after World War I and because of the strong trend towards the equal treatment of women, who no longer lost their initial citizenship when marrying a foreigner, couples of mixed nationality became more common and their children acquired dual citizenship from both parents; consequently, citizenship as a connecting factor had to be supplemented by further conflict rules to designate the applicable law unambiguously. Fourth, after World War II several European countries began to liberalize the naturalization of foreigners for policy objectives such as the augmentation of the national population or the smooth integration of foreigners. Thus, the cultural link between a citizen and his or her home State which had been the historical root of the laws on citizenship gradually lost its significance, more and more people being affiliated to both the country of their ancestors and to that of their residence. This process deprived the nationality principle of the legitimacy enunciated by Mancini.¹⁰¹² Last but not least, the European Union, established in 1957, features the prohibition of discrimination on grounds of nationality as one of its foundational principles;¹⁰¹³ accordingly, both the Union and the Member States became increasingly reluctant to make use of citizenship as a connecting factor. Some of these considerations have a purely European significance, others affect the role of the nationality principle at a universal level. In both contexts, we can observe its gradual decline and the progressive replacement of citizenship with habitual residence as a localizing factor. 485. For the reasons outlined supra, many States of the western hemisphere have adhered to domicile as the key connecting factor in matters relating to personal status.¹⁰¹⁴ The judiciaries of these countries had to cope with the problem of a mass immigration of foreigners. Application of their national laws 1011 For this change of the migration movements, see Jürgen Basedow and Barbara Diehl-Leistner, “Das Staatsangehörigkeitsprinzip im Einwanderungsland – Zu den soziologischen und ausländerpolitischen Grundlagen der Nationalitätsanknüpfung im Internationalen Privatrecht”, in Erik Jayme and Heinz-Peter Mansel, ed., Nation und Staat im Internationalen Privatrecht, Heidelberg, 1990, pp. 12-43. 1012 See supra, para. 93. 1013 See Article 18, TFEU; the provision, renumbered several times, was already part of the Treaty of Rome of 1957, see its Article 7. 1014 The conflicts principles in Latin American countries in matters of personal status are far from uniform and have changed in some States over time, see the comprehensive survey by Jürgen Samtleben, Internationales Privatrecht in Lateinamerika, Tübingen, 1979, pp. 245-253, identifying three groups of countries which apply the laws of personal status either on the basis of strict territoriality (e.g. Chile) or of citizenship (e.g. Cuba) or of domicile (e.g. Argentina), the latter group winning more and more members. As a consequence, the Código Bustamante of 1928 abstained from prescribing a uniform conflict rule on personal status; Article 7 left the matter to national legislation, Samtleben, p. 258.

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would have profoundly disturbed the operation of the court system. In practice it would also have prevented any uniform regulation of personal status by the new States from taking effect in real life; the courts would, perhaps over generations, have had to continue to apply the divergent laws of the immigrants’ European countries of origin. However, domicile soon revealed itself to be subject to diverse interpretations in the various States. The difficulties arising therefrom led to negotiations over a harmonized understanding that culminated in the conclusion of an Inter-American Convention on the Domicile of Natural Persons in 1979.¹⁰¹⁵ In accordance with its Article 2, domicile is primarily indicated by the habitual residence of a natural person; a secondary indicator is the principal place of business. b) Old and new Hague conventions 486. At the universal level a comparison of old and new Hague conventions reveals the gradual replacement of nationality with habitual residence. The first series of Hague conventions adopted before World War I were founded on nationality as the predominant or sole connecting factor. This applies to the 1902 conventions on marriage and on divorce. The former required a cumulative application of the national laws of both spouses to assess their capacity to marry and any potential impediments to marriage.¹⁰¹⁶ Under the latter, the law of the common nationality of the spouses governed legal separation and divorce; in the absence of a common nationality, the “last common legislation” – a rather vague and ambiguous notion – determined the preconditions and effects of divorce.¹⁰¹⁷ A similar solution referring in the first instance to the law of the country of common nationality and to the law of the “last common legislation” was adopted in the 1905 Convention on the Effects of Marriage, which had a rather wide substantive scope encompassing the marital property regime, maintenance obligations and also some personal effects of marriage.¹⁰¹⁸ Particularly noteworthy is the adhesion to the nationality principle in the Guardianship Convention of 1902: while the 1015 Inter-American Convention on the Domicile of Natural Persons in Private International Law, done at Montevideo on 8 May 1979, available at the website of the Organization of American States. The Convention has taken effect for six countries: Ecuador, Guatemala, Mexico, Paraguay, Peru and Uruguay. 1016 See Article 1 of the 1902 Marriage Convention, which was exclusively drawn up in French: Convention du 12 juin 1902 pour régler les conflits de lois en matiére de mariage; the text is available at the website of the Hague Conference. 1017 See Articles 1 and 8 of the 1902 Divorce Convention, which equally was only drawn up in French: Convention du 12 juin 1902 pour régler les conflits de lois et de juridictions en matière de divorce et de séparations de corps, available at the website the Hague Conference. 1018 See Articles 1 and 9 of the Effects of Marriage Convention which was only drafted in French: Convention du 17 juillet 1905 concernant les conflits de lois relatifs aux effets du mariage sur les droits et les devoirs des époux dans leurs rapports personnels et sur les biens des époux, available at the website of the Hague Conference. On

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

guardian will for practical reasons often be required to act without undue delay in accordance with the local law of the country of the ward’s habitual residence, the Guardianship Convention nevertheless referred first to the law of the ward’s citizenship.¹⁰¹⁹ It is a clear example of ideology trumping pragmatism. At present, these conventions are obsolete: they have either been denounced by the contracting States or are, for all practical purposes, no longer being applied.¹⁰²⁰ 487. Subsequent to World War II a series of modern Hague conventions have addressed either the same or new subjects relating to personal status. They almost invariably employ habitual residence as the main connecting factor, granting only a residual significance if any to nationality. Considering only the instruments succeeding the Hague conventions of the first generation, the following observations can be made: while in substantive law guardianship has been replaced by the notion of protection, the 1961 Hague Convention on the protection of infants clearly refers to the judicial or administrative authorities and to the law of the State of the habitual residence of an infant as governing protective measures.¹⁰²¹ The same assignment is laid down in the next successor convention of 1996 on the protection of children.¹⁰²² The authorities and the law of the State of which the child is a national are declared competent only in exceptional cases. With regard to marriage, the 1978 Hague Marriage Convention has equally downgraded the significance of nationality. It distinguishes the celebration and the recognition of marriage and requires, for the celebration, compliance by the spouses with the substantive requirements of the internal law of the State of celebration, provided that one of them has the nationality of that State or is habitually resident there.¹⁰²³ It follows that a contracting State can apply its its broad scope of application, see Kegel, in Soergel and Siebert, BGB [Kommentar], Vol. V, 9th ed., Stuttgart, 1961, Art. 16, Anh. para. 3. 1019 See Article 1 of the Guardianship Convention, which equally was authoritative only in French: Convention du 20 juillet 1905 pour régler la tutelle des mineurs, available at the website of the Hague Conference. 1020 See the status reports following the texts of the four conventions as reproduced on the website of the Hague Conference. 1021 See Articles 1 and 2 of the Convention concerning the Powers of Authorities and the Law Applicable in Respect of the Protection of Infants of 5 October 1961, English translation in 1969 UNTS 145, also available at the website of the Hague Conference. 1022 See Articles 5 and 15 of the Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children of 19 October 1996, in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, p. 396. 1023 See Article 3 of the Convention on Celebration and Recognition of the Validity of Marriages of 14 March 1978, in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, p. 256; according to the status table at the website of the Hague Conference, the Convention has entered into force for Australia, Luxembourg and the Netherlands.

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lex fori to all marriages of its inhabitants and that the migration of persons to a contracting State renders the law of that country applicable to the prospective celebration of their marriage. 488. The 1905 Effects of Marriage Convention has been replaced by two instruments: the Matrimonial Property Convention of 1978¹⁰²⁴ and the Maintenance Convention of 1973,¹⁰²⁵ which in turn has been replaced by the Maintenance Protocol of 2007.¹⁰²⁶ With regard to matrimonial property, Article 4 of the 1978 Convention designates the law of the spouses’ first habitual residence after marriage and reduces the situations where the law of common nationality will apply to rather exceptional circumstances. As to maintenance obligations between spouses, Article 4 of the 1973 Convention refers to the law of the creditor’s habitual residence as long as the marriage subsists. From its dissolution onwards the law applied to divorce, which may be the law of common nationality depending on the conflict rules of the forum, will also govern maintenance obligations. Article 5 of the 2007 Protocol has eliminated this indirect reference to the law of common nationality. It has been replaced by the designation of the law of the spouses’ last common habitual residence, provided that this law has a closer connection with the marriage than the law of the creditor’s habitual residence; this rule governs maintenance relations between spouses irrespective of whether they are still married or already divorced. c) Domicile and habitual residence 489. The modern conventions do not employ the concept of domicile, but of habitual residence.¹⁰²⁷ This important change draws from the work undertaken in the Hague Conference between World Wars I and II. That work was intended to overcome the difficulties arising for the application of the old Hague conventions in respect of persons who were stateless or who had dual or multiple citizenship; the number of such persons had increased considerably as a consequence of World War I. In 1928, in attempting to tackle this problem, the Sixth Hague Conference was confronted with the choice between domicile and habitual residence as the main connecting factor for the law governing the personal status of the members of these groups. Domicile would have had the advantage of greater certainty flowing from precise legal 1024 Convention on the Law Applicable to Matrimonial Property Regimes of 14 March 1978, in Hague Conference on Private International Law, ed, Collection of Conventions 1951-2009, The Hague, 2009, p. 242; the Convention has taken effect for France, Luxembourg and the Netherlands, see also supra at footnote 770. 1025 Convention on the Law Applicable to Maintenance Obligations of 2 October 1973, in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, p. 230; the Convention has taken effect for 15 countries. 1026 See already supra paras. 411 et seq. and footnote 819. 1027 As early as 1969 de Winter, Recueil des cours 128 (1969), 423, stated that “habitual residence has practically ousted the concept of ‘domicile’ in modern Private International Law”.

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

provisions of the various countries. But that advantage was more than outweighed by the variations in the regulation of domicile within those laws.¹⁰²⁸ For example, under some laws domicile depends on one’s enlistment in a public register of inhabitants, while other laws exclusively consider the factual residence of a person and the animus manendi, i.e. his or her intention to stay at that place. Some jurisdictions recognize the existence of a dual domicile, others do not. Under some regimes a public official may be regarded as being domiciled at the place of service in his home State while other jurisdictions do not provide for specific rules on the matter. Under English common law an individual always has a domicile, if only the domicile of origin, whereas he may spend his life without ever establishing a domicile anywhere in accordance with German notions. 490. In view of these legal divergences, the use of domicile would not have remedied, but simply shifted the problems that gave rise to the 1928 Hague Conference. Thus, the conference finally opted in favour of the factual concept of habitual residence; as a connecting factor it was intended to supplement or replace citizenship in respect of stateless people and persons with multiple nationality.¹⁰²⁹ The breakthrough of that concept occurred, however, only after World War II. In 1955 the Seventh Hague Conference addressed the divergent connections of personal status to domicile in some countries and nationality in others; to overcome the resulting difficulties, it approved what is generally called the Renvoi Convention.¹⁰³⁰ Under Article 5 of that Convention, domicile is the place of habitual residence unless the domicile of a person depends on the domicile of another person or on the seat of an authority. While the Convention never took effect, it thereby made clear that habitual residence is a factual concept excluding the legal connotations of domicile. Ever since, habitual residence has been employed with this understanding in a large number of Hague Conventions, some of which were mentioned in preceding paragraphs. d) Private international law in the European Union 491. Although the Hague conventions were concluded as instruments of a universal purview, the effect of the conventions dealing with choice of law as 1028 For a comparative survey see Vischer, IECL, Vol. 3, Chap. 4, Sects. 26-27; Ernst Rabel and Ulrich Drobnig, The Conflict of Laws, Vol. 1, 2nd ed., Ann Arbor, 1958, pp. 150153; de Winter, Recueil des cours 128 (1969), 419-423. 1029 See Dietmar Baetge, Der gewöhnliche Aufenthalt im internationalen Privatrecht, Tübingen, 1994, pp. 8-10, with further reference to the minutes of the Sixth Hague Conference on Private International Law. 1030 Convention relating to the settlement of the conflicts between the law of nationality and the law of domicile of 15 June 1955, drawn up in French only, see the text in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, p. 31; see F. A. Mann, “Der gewöhnliche Aufenthalt im internationalen Privatrecht. Ein Beitrag zur Rechtsvereinheitlichung”, JZ (1956), 466-470.

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opposed to jurisdiction and judicial cooperation has always been limited to Europe, either in practice or because of a deliberate confinement of their territorial scope of application.¹⁰³¹ Moreover, hardly any extra-European country participated in the Hague Conferences on private international law in their early years. Thus, the decline of citizenship and the trend emerging from the Hague conventions towards the recognition of habitual residence as the primary connecting factor of personal status can be denoted as a European trend, although numerous countries in other parts of the world adhere to habitual residence as well. In more recent years, the trend has affected the legislative activities of the European Union in private international law and materialized in some texts elaborated or proposed by the European Commission. 492. With regard to jurisdiction in matrimonial matters, the Brussels IIbis Regulation sticks to nationality and the English-style domicile (which is considered as an equivalent to nationality) as a connecting factor, but only where both spouses have the same nationality or the same English-style domicile.¹⁰³² Habitual residence does not only precede nationality as a connecting factor for jurisdiction, it is also employed in a more generous manner since the habitual residence of a single spouse, be it the respondent or the applicant, may suffice under certain conditions as a head of jurisdiction.¹⁰³³ In a similar vein, a child’s habitual residence is the main connecting factor for the determination of jurisdiction in matters of parental responsibility, and the Court of Justice, instead of advocating the dependence of the child’s habitual residence on that of the parents, has stressed the factual nature of the concept; it is noteworthy and curious that the Court included nationality among the factors determining habitual residence.¹⁰³⁴ The law applicable to 1031 The old conventions concluded before World War I explicitly confined their application to the European territory of the contracting States, see for example Article 9 of the 1902 Marriage Convention and Article 10 of the 1902 Divorce Convention; in more recent times, the limitation is rather a practical result of the location of States that have ratified the respective instruments, see Jürgen Basedow, “Was wird aus der Haager Konferenz für Internationales Privatrecht ?”, in Thomas Rauscher and Heinz-Peter Mansel, eds., Festschrift für Werner Lorenz zum 80. Geburtstag, Munich, 2001, pp. 463-482 at pp. 475 and 476. 1032 See Article 3, para. 1 (b), Brussels IIbis Regulation. 1033 See Article 3, para. 1 (a), 3rd to 6th indents. 1034 See Article 8 of the Brussels IIbis Regulation. As pointed out by the European Court of Justice, the habitual residence of a child “must be established on the basis of all the circumstances specific to each individual case. In addition to the physical presence of a child in a Member State other factors must be chosen which are capable of showing that that presence is not in any way temporary or intermittent and that the residence of the child reflects some degree of integration in a social and family environment. In particular, the duration, regularity, conditions and reasons for the stay on the territory of a Member State and the family’s move to that State, the child’s nationality [sic], the place and conditions of attendance at school, linguistic knowledge and the family and social relationships

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

divorce proceedings is designated analogously by the Rome III Regulation: in the absence of a choice of the spouses, a cascade of connecting factors applies with the habitual residence of the spouses in a single country being in the lead, followed by their last habitual residence if one of the spouses still resides in the respective State; it is only at the third level of the cascade that the law of the common nationality of both spouses will be applied.¹⁰³⁵ 493. Further instruments in matters relating to personal status follow a similar path: in matters of succession, both the general jurisdiction of the courts and the law applicable in the absence of a private choice depend on the last habitual residence of the deceased.¹⁰³⁶ With regard to jurisdiction on matters of matrimonial property, the Commission Proposal of 2011 essentially provides for an extension of jurisdiction in matters of succession or in matrimonial matters under the pertinent instruments, which will equally render habitual residence the predominant connecting factor; in other cases it is again the present or past habitual residence of both spouses or that of the defendant which trumps the common nationality of the spouses as a head of jurisdiction.¹⁰³⁷ As to the law applicable in the absence of a choice, the Commission Proposal refers to the spouses’ first common habitual residence after marriage and only residually to the law of the State of the spouses’ common nationality.¹⁰³⁸ e) Habitual residence and the open society 494. From all these instruments a clear trend emerges towards the habitual residence as the primary connecting factor in matters of personal status. This appears to be in line with the requirements posed by an open society allowing people to move across frontiers without great difficulty. Such peo-

1035

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of the child in that State must be taken into consideration.” ECJ, 2 April 2009, Case C-523/07 (A), [2009] ECR I-2805, cons. 37-39. See Article 8 of the Rome III Regulation and Jürgen Basedow, “European Divorce Law – Comments on the Rome III Regulation”, in Confronting the Frontiers of Family and Succession Law – Liber amicorum Walter Pintens, Antwerp, 2012, pp. 135-150 at pp. 145 et seq. See Articles 4 and 21 Reg. 650/2012 and the previous Proposal for a regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of decisions and authentic instruments in matters of succession and the creation of a European Certificate of Succession, COM (2009) 154 final of 14 October 2009, also printed and commented on in Max Planck Institute for Comparative and International Private Law, “Comments on the European Commission’s Proposal for a Regulation of the European Parliament and of the Council on Jurisdiction, Applicable Law, Recognition and Enforcement of Decisions and Authentic Instruments in Matters of Succession and the Creation of a European Certificate of Succession”, RabelsZ 74 (2010), 522-720 at pp. 568 et seq., 600 et seq. See Articles 3-5 of the Proposal for a Council Regulation on jurisdiction, applicable law and the recognition and enforcement of decisions in matters of matrimonial property regimes, COM (2011) 126 final of 16 March 2011. Article 17 of the Proposal, previous footnote.

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ple need courts located in their proximity which can clarify their personal status under an easily accessible law. Litigating in the distant country of citizenship or in the country of residence under a foreign law designated by nationality will usually be costly and cause undue delay. In most cases, these considerations lead to the jurisdiction of the courts of habitual residence and to the law indicated by the same connecting factor. It is the reverse side of this approach that private parties may also elect their habitual residence in view of the regulations having effect in that country. From this perspective, the trend replacing nationality with habitual residence as the main connecting factor in matters of personal status may in fact be considered as a further step enlarging the leeway given to the private ordering of private international legal relations. 3.

Conclusion

495. The reference by conflict rules to the law of the place of celebration and to the law of the habitual residence are the most prominent examples of a gradual transformation of private international law through the adoption of conflict rules which take into account the growing mobility in open societies.¹⁰³⁹ By the establishment of fact situations covered by those conflict rules, private parties may indirectly influence the applicable law with personal decisions constituting another kind of private ordering alongside the methods discussed in previous chapters of this part, viz. the direct choice of the applicable law, private arrangements such as the lex mercatoria or the choice of optional instruments. The indirect choice put into effect by such private decisions may not always have been the primary objective of rulemakers who created the new conflict rules; in many instances they simply wanted to avoid the harsh consequences flowing from the previous law. But the permission of indirect choice is a consequence of the adoption of the new conflict rules, and legislators are increasingly becoming aware of the need arising in open societies for conflict rules that take account of factual mobility. Thus, they may be motivated by a greater tolerance vis-à-vis foreign law in the respective areas.

1039 See Peter North, “Choice in Choice of Law”, in id., Essays in Private International Law, Oxford, 1993, at p. 200, addressing the development of both direct and indirect choice of law as “significant and welcome”: “Ease of travel and communication mean that the lives of far more people are touched by transnational problems than ever was the case a few decades ago. Wisely, the majority wish to avoid the difficulties which may arise … Choice of law rules should be designed to fulfi l this prophylactic role.”

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

Section 2: The Principle of (Mutual) Recognition 496. The more readily a State A recognises the crystallizations of law effectuated in another State B, and the more State A lowers barriers to recognition, the greater the freedom afforded its inhabitants to avail themselves of the legal system of State B for their private purposes even if they do not wish to discontinue their links with State A. This effect can be ascertained irrespective of whether the legislature of State A, when liberalizing recognition, actually pursued this objective or whether that legislature was otherwise motivated, in particular by the intention to avoid what are termed “limping” legal relations, for example a marriage or divorce effective in one country but not in others. There is plenty of evidence for this interaction between the liberalization of recognition and the extension of the leeway granted to private ordering. However, before embarking on a more detailed account of examples of that interaction, we have to spend a moment on the multi-layered and complex concept of recognition. 1.

The Concept of Recognition

a) Multiple meanings and their common core 497. The term recognition is used in manifold contexts in substantive law, in public international law and in the conflict of laws. In substantive law it relates, for example, to the recognition of certain facts such as a claim or the descent of a child from a father; in public international law certain entities are recognized as States; and private international law employs the term to express the extension of effects resulting from the crystallization of law in a foreign country to the domestic legal sphere. These meanings have certain common elements: first, recognition is more than simple cognisance; it includes an element of will on the part of the recognizing person; second, it indicates a certain sequence in time, referring to a previous occurrence which is taken account of at a later stage; third, it is a statement of the recognizing person to the effect that the previous occurrence or its legal effects will no longer be contested. Apart from these common features, there are, however, numerous differences between the meanings as employed in the various areas of the law, and even in a single discipline such as private international law, the understanding differs from country to country. b) Recognition of foreign judicial and administrative measures 498. In private international law, recognition designates an extension of the legal effects of a crystallization of the law effectuated abroad to the domestic jurisdiction. With regard to judgments and other decisions in judicial and extrajudicial matters, the “principle of mutual recognition” is highlighted as the basis for legislation of the European Union in the field of judicial cooperation in civil matters in Article 81 TFEU. Here, recognition relates to an importation of the effects a decision produces in its foreign country of

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origin to the country of recognition.¹⁰⁴⁰ This includes, in particular, any res judicata effect which precludes the parties to the foreign litigation from contesting both the facts established in and the legal consequences drawn from a foreign decision – to the extent that such aspects are covered by res judicata under the foreign law. Where the effect of the foreign judgment, for example a divorce decree, changes the substance of a legal relationship such that it carries effects against everyone (erga omnes), the res judicata effect will also operate erga omnes in the country of recognition, affecting the substantive legal relation under dispute. Recognition in this sense does not extend, however, to the enforcement of the foreign decision by executive authorities which compels the judgment debtor to comply with the decision; this step often requires additional proceedings. Where the effect a foreign decision produced in the country of origin is unknown to the legal order of the recognizing State, difficulties arise as to what exactly is meant by recognition: implementation of foreign effects which are alien to the legal order of the recognizing State, or perhaps the assimilation of such effects to the legal order of that jurisdiction ? 499. While the meaning of recognition is essentially clear with regard to foreign judicial decisions, there is much uncertainty in respect of other crystallizations of the law effectuated abroad. Court settlements and authentic instruments are susceptible of being enforced under certain conditions, but can they be recognized ? It is doubtful whether they produce a res judicata effect because no judgment has been rendered and the judge’s intervention, if any, has been confined to the authentication of the parties’ agreement, which is a matter of substantive law. Yet, some instruments explicitly refer to the recognition of court settlements and authentic instruments. In the European Union this applies to the Brussels IIbis Regulation¹⁰⁴¹ and also to the Maintenance Regulation.¹⁰⁴² Here, recognition may relate to the authenticity of the instrument, to the facts emerging from the document and to the quality of the issuing court or authority as a body enabled to draw up authentic instruments. But does recognition also concern the substantive legal relation Stated in the court settlement or in the authentic instrument ? Does, for example, the recognition of a certificate of marriage mean that the validity of the marriage is no longer subject to review in the country of recognition ? The question is far from clear, and the views on the matter differ in the vari1040 Dieter Martiny, “Anerkennung ausländischer Entscheidungen nach autonomem Recht”, in Handbuch des internationalen Zivilverfahrensrechts, Vol. III/1, Tübingen, 1984, paras. 68 et seq. and 362 et seq.; Hélène Gaudemet-Tallon, Compétence et exécution des jugements en Europe, 4th ed., Paris, 2010, para. 373 at pp. 391-392; Virgós Soriano and Garcimartín Alferez, paras. 20.3 et seq. at p. 561 et seq.; Schack, Internationales Zivilprozessrecht, paras. 881 et seq., p. 300 et seq. 1041 See Article 46 of the Brussels IIbis Regulation. 1042 See Article 48 of the Maintenance Regulation 4/2009: “Court settlements and authentic instruments which are enforceable in the Member State of origin shall be recognised in another Member State …” (emphasis added).

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

ous jurisdictions. The European Commission is currently investigating the matter,¹⁰⁴³ which in some jurisdictions is rather considered as an issue of substantive law to be determined under the law applicable in accordance with the conflict rules of the forum, see below paragraph 501. 500. In respect of decisions of the executive branch of government, a wide-spread opinion still holds sway that, due to the territorial limitations of jurisdiction under international law, they only produce effect within their country of origin. But the list of exceptions is growing longer and longer, particularly within the European Union. Within the Internal Market, compliance with the administrative regulations governing the production and quality of goods and services in the country of origin will usually suffice for the admission of such products to the markets of other Member States.¹⁰⁴⁴ While such respect for the laws of the Member State of origin does not depend on the issuance of administrative decisions in the individual case, recognition of such decisions where issued is ensured in various contexts, both between Member States and at the universal level: driving licences;¹⁰⁴⁵ certificates

1043 European Commission, Green Paper – Less Bureaucracy for Citizens: Promoting Free Movement of Public Documents and Recognition of the Effects of Civil Status Records, COM (2010) 747 final of 14 December 2010; see also the comments made by the Academic Advisory Board of the Association of German Registrars, “Der freie Verkehr öffentlicher Urkunden und die gegenseitige Anerkennung der Rechtswirkungen von Personenstandsurkunden in der Europäischen Union – Stellungnahme des Wissenschaftlichen Beirats des BDS zum Grünbuch ‘Weniger Verwaltungsaufwand für EU-Bürger’ ”, Das Standesamt (StAZ), 2011, 165-175. 1044 This principle has been implemented by the European Court of Justice in a long series of judgments starting with ECJ, 20 February 1979, Case 120/78 (Rewe v. Bundesmonopolverwaltung für Branntwein – “Cassis de Dijon”), [1979] ECR 649, cons. 14; for the services sector, the case law has been codified and developed in, inter alia, Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, OJ 2006 L 376/36; see also Mansel, RabelsZ 70 (2006), 664-669, and, on the conceptual background and the operation of the principle of mutual recognition with regard to the various basic freedoms ensured by the European Treaties, see Alfonso Mattera, “La reconnaissance mutuelle: une valeur historique ancienne, un principe juridique intégrationniste, l’assise politique d’un modèle de société humaniste”, Revue du droit de l’Union européenne, 2009, 385-418 at pp. 391 et seq. 1045 See for the European Union the First Council Directive 80/1263/EEC of 4 December 1980 on the introduction of a Community driving licence, OJ 1980 L 375/1; Article 5, para. 2, and several recitals make clear that the Directive regulates recognition. Beyond the European Union, the Convention internationale relative à la circulation automobile, done at Paris on 24 April 1926, had already provided for the recognition of driver permits in its Article 7, see the text in the Swiss collection Recueil systématique (RS), 0.741.11; it is still in force for many countries across the globe, see also Dieter von Würzen, Internationales Kraftfahrzeugrecht, Göttingen, 1960, pp. 12-13 and 20 et seq. More recently, Articles 41 et seq. of the Convention on Road Traffic, done at Vienna on 8 November 1968 under the auspices of the Economic and Social

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of a vessel’s technical equipment required by international conventions;¹⁰⁴⁶ certificates of professional qualifications¹⁰⁴⁷ or of a grant of citizenship by a foreign country;¹⁰⁴⁸ even financial penalties¹⁰⁴⁹ or findings of a competition authority¹⁰⁵⁰ – these and many other administrative decisions sometimes produce effects in foreign countries and give evidence of the need to reconsider the traditional views in international administrative law.¹⁰⁵¹ Arguably, with regard to some types of administrative acts, the number of exceptions has increased to such a degree that the traditional approaches cannot be maintained any more and new principles emerging from the recent development of international law have to be elaborated. But that requires a separate enquiry which is not the object of this treatise. c) Recognition of legal situations 501. Within the area of private international law proper, the term recognition is employed as well, but its meaning has been oscillating and is thus uncertain. It can be taken for definite that a contract concluded abroad will not be “recognized” in another country; rather, it will be valid or invalid Council of the United Nations, 1042 UNTS 17, puts the contracting States under an obligation to recognize driving permits issued in other contracting States. 1046 See e.g. Article 17 of the Annex to the International Convention for the Safety of Life at Sea (SOLAS), concluded in London on 1 November 1974, 1184 UNTS 277. 1047 See for the European Union Council Directive 89/48/EEC of 21 December 1988 on a general system for the recognition of higher-education diplomas awarded on completion of professional education and training of at least three years’ duration, OJ 1989 L 19/16. 1048 It is generally accepted that the citizenship of a country is to be determined by the law of that State, see for example ECJ, 2 March 2010, Case C-135/08 (Rottman v. Freistaat Bayern), [2010] ECR I-1449, cons. 39; see also Alfred M. Boll, Multiple Nationality in International Law, Leiden, 2007, pp. 97 et seq., with many further references; according to Matthias Ruffert, “Recognition of Foreign Legislative and Administrative Acts”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law, 2011, http://www.mpepil.com no. 8, non-recognition of the nationality bestowed upon a person by a foreign State would amount to the infringement of a customary rule of public international law. 1049 Council Framework Decision 2005/214/JHA of 24 February 2005 on the principle of application of mutual recognition to financial penalties, OJ 2005 L 76/16. 1050 See the solution contemplated by the European Commission in Jürgen Basedow, “Recognition of Foreign Decisions within the European Competition Network”, in Jürgen Basedow, Stéphanie Francq and Laurence Idot, eds., International Antitrust Litigation, Oxford, 2012, pp. 571-585 at p. 573; see now Article 9 Directive 2014/104/ EU, OJ 2014 L 349/1.. 1051 A growing interest of public law scholars in the theory of recognition in administrative law becomes visible, see Henrik Wenander, “Recognition of Foreign Administrative Decisions”, ZaöRV 71 (2011), 755-785; Markus Glaser, “Internationales Sozialverwaltungsrecht”, in Christoph Möllers, Andreas Vosskuhle and Christian Walter, eds., Internationales Verwaltungsrecht, Tübingen, 2007, 73-120 at pp. 117-119, with further references to German legal theory.

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

under the applicable law as designated by the conflict rules of the forum. The same applies to a will drawn up abroad; its legal validity and meaning will be checked under the applicable law, but it will not be “recognized”. Similarly, the acquisition of title or security interests in property in a foreign country is not a case for “recognition”, but rather to be determined by the law governing the respective transaction. There are, however, other legal relations where at least in some countries the term recognition has applicability. 502. The validity of marriages celebrated in a foreign State provides an example: while in some countries it results from the application of the law designated by the conflict-of-laws rules of that jurisdiction, others consider the matter as an issue of recognition. This is due to the different characterization of marriage in the various legal systems: in many legal orders it is still essentially regarded as an agreement between husband and wife which is only supported, for evidential purposes, by public assistance and registration; in other countries, the certificate of marriage, i.e. an administrative act, is increasingly considered as the essential part of the ceremony which produces effects in other countries subject to recognition. This is the basic approach taken by the 1978 Hague Convention on celebration and recognition of the validity of marriages; it contains a set of rules governing the celebration of a marriage and a distinct set of rules on its subsequent recognition in other contracting States.¹⁰⁵² 503. A further example relates to the recognition of companies incorporated abroad. The traditional approach taken by French law, for example, distinguishes the recognition of a company from the determination of the law applicable to its internal and external legal relations.¹⁰⁵³ As opposed to France, in some other countries, for example Germany, the conferral of legal capacity to an entity by a foreign State has usually been characterized as an issue governed by the law applicable to the foreign company under the conflict rules of the forum.¹⁰⁵⁴ Here again the explanation may be found in different 1052 Convention on Celebration and Recognition of the Validity of Marriages concluded on 14 March 1978, in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, pp. 256 et seq., see Chap. II, Articles 7-15, which explicitly deal with the recognition of marriages entered into in other States. 1053 Audit/D’Avout, Nos. 1121 et seq., pp. 953 et seq.; Yvon Loussouarn and Jean-Denis Bredin, Droit du commerce international, Paris, 1969, Nos. 285 et seq., pp. 313-318; Michel Menjucq, La mobilité des sociétés dans l’espace européen, Paris, 1997, Nos. 65-67, pp. 47-48; but see also Mayer and Heuzé, Nos. 1028, 1053 and 1054 at pp. 750 and 771, who speak of “recognition” (quotation marks in original), thereby indicating that the operation “does not concern the existence of legal capacity” which rather follows from the applicable law designated by the conflict rules of the forum. 1054 For an early treatment see Günther Beitzke, Juristische Personen im Internationalprivatrecht und im Fremdenrecht, Munich, 1938, pp. 45-46; in a comparative perspective Drobnig, Festschrift von Caemmerer, pp. 687-688, with further references to the laws of England and the Nordic countries; for a more recent survey see Kindler in Münchener Kommentar zum BGB, Vol. 11, 5th ed., Munich, 2010, IntGesR, paras.

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views on the nature of both a corporate entity and the acquisition of legal capacity by it. Where that foreign entity is considered as a mere fiction put into effect by an executive act of a foreign State, its existence as a legal person outside its country of origin may appear to depend on some kind of recognition; accordingly the issue is classified by French authors as a matter relating to the law of aliens (statut des étrangers). Where, however – similar to what has been said supra about contracts and wills – the entity is perceived as a reality of social and economic life, the conferral of legal capacity rather follows from the application of abstract legal rules of the legal order designated by the conflict rules of the forum. 504. A related problem concerns the recognition of trusts which has been regulated in the Hague Trusts Convention of 1985.¹⁰⁵⁵ In its second chapter the Convention specifies the law governing a trust. If the judge in a contracting State, in applying that law, comes to the conclusion that a valid trust has been created, what could be the significance of recognition that is not already covered by this finding ? Yet, the Convention contains a third chapter which explicitly states in its Article 11 that “a trust created in accordance with the law specified by the preceding Chapter shall be recognized as a trust.” This chapter was allegedly included with a view to the judges sitting in civil law countries who were said to need an explicit order of recognition for pedagogical reasons.¹⁰⁵⁶ Put in other words: the Hague Conference agreed that the chapter on recognition was redundant from a legal point of view. These conceptual uncertainties and divergences of national approaches have to be kept in mind when lawyers from different countries employ the concept of recognition. 2.

The Liberalization of the Recognition of Judgments

505. From the perspective of a vertical and long-term comparison, a distinct tendency emerges towards the liberalization of the recognition of foreign judicial decisions. It can be ascertained in international conventions and the law of the European Union, but also at the national level. The starting point of the modern development was a wide-spread hostility to the recognition and enforcement of foreign judgments prevailing in many countries in the nineteenth and early twentieth centuries. Supported by ideas of an absolute 317 et seq., who speaks of the “alleged problem of recognition in international company law” and refers to a large assortment of legal writings. 1055 Convention on the Law Applicable to Trusts and on Their Recognition, concluded on 1 July 1985, in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, pp. 330 et seq. The Convention is now in force for 11 States: Australia, Canada, Italy, Liechtenstein, Luxembourg, Malta, Monaco, Netherlands, San Marino, Switzerland and the United Kingdom. 1056 See Hein Kötz, “Die 15. Haager Konferenz und das Kollisionsrecht des trust”, RabelsZ 50 (1986), 562-585 at pp. 576 et seq.

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

sovereignty of the nation-State, many legislatures explicitly declined giving any effect to foreign judgments altogether in their national statutes.¹⁰⁵⁷ The same basic approach led to rules enacted in countries such as the former Soviet Union and the present Russian Federation, where recognition and enforcement has always been confined to judicial decisions originating in countries which entered into international treaties on the matter with the Soviet Union or, respectively, the Russian Federation; it is only in more recent years that the State arbitration courts have gradually opened the door for foreign judgments in cases where reciprocity could be established.¹⁰⁵⁸ The full review of the merits of a foreign decision (révision au fond) permitted by French law until 1964 and also in some other jurisdictions of Romanic tradition was inspired by similar considerations of national sovereignty.¹⁰⁵⁹ On the other hand, countries which had to accommodate several legal systems within their own borders were apparently more inclined to grant effect to foreign judgments. However, they made recognition depend on the foreign proceedings and the resulting judgments complying with some basic procedural requirements relating to the jurisdiction of the foreign court and assurances of a fair trial. Examples here are the United Kingdom¹⁰⁶⁰ and Germany, the latter having a legal landscape that was far from homogeneous before 1900.¹⁰⁶¹ The liberal model of these jurisdictions has paved the way for the modern development of the law of recognition, which is nowadays to a considerable degree regulated in international treaties and other instruments worldwide. a) Abandoning the review of the applicable law 506. A first example for the liberalization of recognition is provided by the Hague Conventions dealing with the effects of foreign divorce decrees; the first being concluded in 1902, the second in 1970. According to Article 7 of the 1902 Convention, a divorce decree “issued by a court having jurisdiction under Article 5, will be recognized everywhere, provided that the clauses of the 1057 See for example Martiny, in Handbuch des internationalen Zivilverfahrensrechts, Vol. III/1, para. 249, referring to the Netherlands, Norway and Sweden. 1058 Eleonora Gerasimchuk, Die Urteilsanerkennung im deutsch-russischen Rechtsverkehr, Tübingen, 2007, pp. 18 and 21; for an account of the more recent liberalization in case-law see Eugenie Kurzynsky-Singer, “Anerkennung ausländischer Urteile durch russische Gerichte”, RabelsZ 74 (2010), 493-521 at pp. 509-517. 1059 See Martiny, Handbuch des internationalen Zivilverfahrensrechts, Vol. III/1, para. 250, referring to the limited scope of the révision au fond in Luxembourg, Belgium and Italy; according to Adolf Schnitzer, Handbuch des internationalen Privatrechts, Vol. II, 4th ed., Basel, 1958, p. 901, the révision au fond was explicitly prescribed in the code Michaud of 1629; it was abandoned as late as 1964 in the case Munzer, Cass civ., 7 January 1964, Clunet 91 (1964), 302, with annotation Goldman = Rev. crit. dr. int. pr. 53 (1964), 344, with annotation Batiffol. 1060 Cheshire, North and Fawcett, pp. 516 et seq. 1061 See § 328 of the German Code of Civil Procedure (Zivilprozessordnung, ZPO).

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present convention have been observed…”.¹⁰⁶² Under Article 5, the competent court was essentially determined by the national law of the spouses and by their domicile. By the reference to the “clauses of the present convention”, Article 7 makes recognition dependent on the observance, by the foreign court, of the choice-of-law rules of the Convention.¹⁰⁶³ Since Article 1 of the Convention provided for the cumulative application of the spouses’ national law and the lex fori, a divorce granted by a foreign court under a different law, for example the law of the spouses’ habitual residence or domicile, could not be recognized under the Convention. The 1970 Convention has completely set aside this condition. It only deals with recognition and not with jurisdiction and the applicable law.¹⁰⁶⁴ Under Article 2 of the Convention, recognition depends on whether the jurisdiction of the foreign court could be based on a number of criteria listed in that provision; some additional barriers to recognition such as a lack of notification of the proceedings, the incompatibility of the foreign decree with a previous decision rendered in the country of recognition, or the infringement of the recognition State’s public policy are listed in further provisions of the Convention. But it is explicitly laid down in Article 6, paragraph 2 that the recognition of a divorce is not to be refused because a law was applied other than that applicable under the rules of the private international law of the recognizing State. Thus, apart from an infringement of the public policy of the State of recognition, issues of choice of law and substantive law have completely lost their significance for recognition. This detachment of recognition from the rules of choice of law has been affirmed, within the European Union, in the Brussels IIbis Regulation for all decisions falling under its scope, i.e. for divorce, legal separation and marriage annulment.¹⁰⁶⁵ The plea for the revitalization of this kind of review¹⁰⁶⁶ is unlikely to lead to a reversal of the general trend. 1062 Convention du 12 juin 1902 pour régler les conflits de lois et de juridictions en matière de divorce et de séparations de corps, drawn up only in French and available at the website of the Hague Conference; author’s translation. 1063 F. Meili and A. Mamelok, Das internationale Privat- und Zivilprozessrecht auf Grund der Haager Konventionen, Zurich, 1911, pp. 226-227. 1064 Convention on the Recognition of Divorces and Legal Separations, concluded on 1 June 1970, in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, p. 134; it has taken effect for 18 States: Australia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, Italy, Luxembourg, Moldova, Netherlands, Norway, Poland, Portugal, Slovakia, Sweden, Switzerland and the United Kingdom. 1065 See Article 25 of the Brussels IIbis Regulation: “The recognition of a judgment may not be refused because the law of the Member State in which such recognition is sought would not allow divorce, legal separation or marriage annulment on the same facts.” 1066 See Johan Meeusen, “Op weg naar een communautair internationaal familie(vermogens)recht ? Enkele europeesrechtelijke beschouwingen”, Mededelingen der Nederlandse Vereniging voor Internationaal Recht 133 (2006), 1-70 at p. 62.

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

507. The eschewal, at the stage of recognition, of the review of the choice of law made by the foreign court can also be ascertained in the recognition of money judgments which depend on preliminary questions relating to personal status. The original version of the 1968 Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters (replaced by the Brussels I Regulation in 2001) excludes recognition of judgments rendered in other Member States, “if the court of the state of origin, in order to arrive at its judgment, has decided a preliminary question concerning the status or legal capacity of natural persons, rights in property arising out of a matrimonial relationship, wills or succession in a way that conflicts with a rule of the private international law of the state in which the recognition is sought, unless the same result would have been reached by the application of the rules of private international law of that state”.¹⁰⁶⁷

This ground for refusal of recognition was deleted in the Brussels I Regulation 44/2001, see Article 34 of the original version of 2001. The European Commission motivated this amendment with reference to the fact that “these rules [of private international law] are gradually being approximated in the Member States.”¹⁰⁶⁸ This is a rather generous assessment; more than a decade later, no harmonization of conflict rules relating to personal status has been put into effect in the European Union except for a partial unification of choice of law in matters of divorce and succession.¹⁰⁶⁹ If the Commission had taken its own argument seriously, it would have been more reasonable to wait for that harmonization and to drop this particular ground for non-recognition only after it would have been carried out. To the extent the Member States nevertheless unanimously approved that amendment in 2001, this rather appears to point to a different reason underlying that change, a reason which was not made explicit: it reveals the loss of significance of that rule of non-recognition in modern conflict of laws. This is underlined by the absence of a corresponding review of foreign support judgments in the European Maintenance Regulation.¹⁰⁷⁰ Again, this observation 1067 See Article 27, No. 4, of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, done at Brussels on 27 September 1968, as amended by several subsequent accession treaties; the provision cited in the text has been slightly amended by the accession treaty of Spain and Portugal of 26 May 1989, see OJ 1990 C 189/1. 1068 Proposal for a Council Regulation (EC) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, COM (1999) 348 final of 14 July 1999, p. 23; see also Stéphanie Francq, in Ulrich Magnus and Peter Mankowski, eds., Brussels I-Regulation, Munich, 2007, Article 34, para. 12. 1069 See supra, paras. 407 et seq. 1070 See Article 24 of the Council Regulation (EC) No. 4/2009 of 18 December 2008 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations, OJ 2009 L 7/1.

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points to a new focus of the law of recognition: while the foreign judgment used to be considered as a specification of the substantive law governing a certain legal relationship, substance has lost much of its significance in the meantime. The judiciary generating the foreign judgment is rather seen as another compartment of a global judicial system, and the judgment emanating from it will be recognized provided that the foreign proceedings met certain procedural standards. b) Loosening the review of jurisdiction 508. One of those standards is the dispute having a sufficient degree of proximity to the foreign court rendering the judgment. That proximity justifies the jurisdictional claim of the foreign court in the eyes of the country of recognition. Virtually all recognition regimes therefore require that the foreign court had jurisdiction to decide the matter. In the United States, both the 1962 Uniform Foreign Money-Judgments Recognition Act¹⁰⁷¹ and the 2005 Uniform Foreign-Country Money Judgment Recognition Act¹⁰⁷² prohibit recognition of a foreign judgment – as opposed to the judgment of a sisterState court¹⁰⁷³ – where the foreign court did not have personal jurisdiction over the defendant or lacked jurisdiction over the subject matter. While the subject matter jurisdiction will be decided under the law of the foreign court, US courts apply their own standards in the review of in personam jurisdiction, and both uniform laws contain long lists of jurisdictional standards which, if met by the foreign judgment, provide a jurisdictional basis for its recognition.¹⁰⁷⁴ The potential connections between the case and the foreign country of origin of the judgment which are considered as legitimate by these lists are of a great variety. It follows that the individual States of the United States give effect to foreign judgments in a rather generous way and that they do not claim jurisdiction for their own courts to a greater extent 1071 Uniform Foreign Money-Judgments Recognition Act, 1962, drafted by the National Conference of Commissioners on Uniform State Laws, Uniform Laws Annotated 13, Part II (2002), p. 39, see Section 4; the Act has been implemented in 32 states and the US Virgin Islands; see the website of the National Conference of Commissioners on Uniform State Laws. 1072 Uniform Foreign-Country Money Judgment Recognition Act, 2005, Uniform Laws Annotated 13, Part II (2002), Cumulative Annual Pocket Part, 2009, p. 7, see Section 4 (b) (2) and (3). The Act has been implemented in 18 states and the District of Columbia, see the website of the National Conference of Commissioners on Uniform State Laws. 1073 Sister-state judgments are recognized and enforced under the Full Faith and Credit Clause of the US Constitution, Article IV, Section 1. A defence against recognition based on the lack of jurisdiction of the court rendering the judgment is permitted only in rare cases, see Hay, Borchers and Symeonides, pp. 1459 and 1464 et seq. 1074 See Section 5 of the 1962 Act and Section 5 of the 2005 Act; see also David P. Stewart, “Recognition and Enforcement of Foreign Judgments in the United States”, YBPIL 12 (2010), 179-199 at pp. 186-187.

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

than they accept it in foreign courts. In Latin America, the Inter-American Convention on extraterritorial validity of foreign judgments equally adheres to what is often called the “mirror theory” of jurisdiction: recognition is prescribed where the rendering court has jurisdiction “in accordance with the law of the state in which the judgment … or decision is to take effect”.¹⁰⁷⁵ In order to ensure greater uniformity, another Inter-American convention, completed in 1984, has established common standards of in personam jurisdiction; however, that convention has only entered into force for two countries.¹⁰⁷⁶ 509. Within the European Union, a judgment emanating from another Member State is generally recognized without a review of the foreign court’s jurisdiction. Such review has so far been permitted only in specific areas, namely with regard to insurance and consumer contracts and with regard to exclusive jurisdiction. In these areas it would have been abandoned as well if the overhaul of the Brussels I Regulation had adopted the proposal submitted by the European Commission.¹⁰⁷⁷ For the time being, it should be borne in mind that all courts in the European Union are bound to apply the same jurisdictional rules of the Brussels I Regulation when they are seized as first courts. As compared with traditional recognition and enforcement treaties such as the 1979 Inter-American Convention the Brussels Convention 1075 Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards, done at Montevideo on 8 May 1979; the text is available at the website of the Organization of American States. The Convention has taken effect for 10 States: Argentina, Bolivia, Brazil, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela. 1076 Inter-American Convention on Jurisdiction in the International Sphere for the Extraterritorial Validity of Foreign Judgments, done at La Paz on 24 May 1984; the text is available on the website of the Organization of American States. The Convention has only been ratified by Mexico and Venezuela. 1077 See Article 35, para. 1, of the current Brussels I Regulation and Article 45 of the recast Regulation (EU) No. 1215/2012 of 12 December 2012, OJ 2012 L 351/1. But compare the Commission Proposal for a Regulation of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), COM (2010) 748 final of 14 December 2010, in particular Articles 43 to 46 on the grounds for the refusal of recognition and enforcement; and compare the comments by Ulrich Magnus and Peter Mankowski, “The Proposal for the Reform of Brussels I”, ZvglRWiss 110 (2011), 252-301 at pp. 291 et seq. The limited review of jurisdiction by virtue of Article 35, para. 1, has been criticized as incomplete and contradictory because it does not pertain to employment contracts and choice-of-forum clauses, see Burkhard Hess, Thomas Pfeiffer and Peter Schlosser, The Brussels I Regulation (EC) No. 44/2001 – The Heidelberg Report on the Application of Regulation Brussels I in 25 Member States, Munich, 2008, para. 496, at p. 146; Hélène Gaudemet-Tallon, Compétence et exécution des jugements en Europe, 4th ed., Paris, 2010, No. 385 at p. 403; the recast version has now extended the review of jurisdiction in the Member State of recognition to judgments dealing with employment contracts, see Article 45, para. 1 (e) (i).

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of 1968 and its successor, the Brussels I Regulation represent a new type of instrument that is usually referred to as “double convention”: they regulate both the jurisdiction of the Member State court first seized and the recognition of its judgment in other Member States. The “mirror theory” outlined supra is consequently implemented in substance if not explicitly: the foreign court has to apply the same jurisdictional standards which the court of the country of recognition would apply had the case been brought to that court. The review of the foreign court’s jurisdiction therefore becomes redundant provided that all courts in the Union actually comply with the Brussels I rules on jurisdiction. 510. It is not necessary for our purposes to investigate the accepted heads of jurisdiction in detail. In a global comparison, there are still remarkable divergences which explain the failure of the negotiations on a worldwide recognition convention under the auspices of the Hague Conference.¹⁰⁷⁸ What matters in our context is that all countries recognize the jurisdiction of foreign States in a rather generous way. The view that there is only one court under the sun which is competent to hear a given dispute – a notion that had some attraction in the nineteenth century – has survived for only few areas of the law.¹⁰⁷⁹ The existence of concurrent jurisdiction is the general rule and is usually accepted at the subsequent stage of recognition. In the United States, the lists contained in the 1962 Foreign Money-Judgments Recognition Act and in the 2005 Uniform Foreign-Country Money Judgment Recognition Act provide for a broad range of courts whose judgments will not be rejected because of a lack of jurisdiction. They explain the view that the United States approach gives favourable treatment to most foreign judgments.¹⁰⁸⁰ A similar assessment can be made with regard to the heads of jurisdiction available under Articles 2 et seq. (now: Articles 4 et seq.) of the Brussels I Regulation in the European Union. While an extension of the jurisdictional rules to third-State relations was debated although finally rejected in the legislative process preceding the recast of the Brussels I 1078 There is a Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, done on 1 February 1971, see Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, p. 112, which has however only taken effect for 5 countries: Albania, Cyprus, Kuwait, Netherlands and Portugal. The more recent efforts to negotiate a more successful follow-up convention have failed because of disagreement, in particular over certain issues of jurisdiction, see Arthur T. von Mehren, “The Hague Jurisdiction and Enforcement Convention Project Faces an Impasse – A Diagnosis and Guidelines for a Cure”, IPRax (2000), 465-468 at p. 466 speaking of “salient differences”. For a more systematic treatment of the draft rules on jurisdiction see Rolf Wagner, “Die Bemühungen der Haager Konferenz für Internationales Privatrecht um ein Übereinkommen über die gerichtliche Zuständigkeit und ausländische Entscheidungen in Zivil- und Handelssachen”, IPRax (2001), 533-547 at pp. 537-544. 1079 See supra, paras. 12 et seq. 1080 Stewart, YBPIL 12 (2010), 180.

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

Regulation,¹⁰⁸¹ the recognition of third-State judgments will definitely remain a matter for the national law of the Member States for the foreseeable future.¹⁰⁸² 511. From all these endeavours emerges a rather open attitude vis-à-vis the recognition of foreign judgments. Its reverse side is the possibility for plaintiffs to seize the court which they believe best suited and most likely to apply the national law they prefer. While that choice is sometimes discredited as forum shopping,¹⁰⁸³ it is primarily the consequence drawn by intelligent plaintiffs and their loyal counsel as to the co-existence of equally competent jurisdictions and the preparedness of other States to give effect to the respective judgments.¹⁰⁸⁴ Thus, the evaluation of forum shopping depends on one’s perspective: while the traditional view “from above” stresses the need to protect substantive policies of the forum State from evasion, the modern approach “from below” highlights the mobility in open societies which shifts to the individuals the responsibility for framing their legal relations. 512. At the universal level, the clearest evidence for the long-term changes in this field results again from a comparison of the 1902 Divorce Convention with the 1970 Convention on the Recognition of Divorces. The old Convention had only granted jurisdiction to the court of the spouses’ domicile, present or past, and to the court of the defendant’s domicile; in addition, the courts

1081 See Article 4, paras. 2 et seq., of the Commission Proposal, supra footnote 1077, and Magnus and Mankowski, ZvglRWiss 110 (2011), 261 et seq.; see now Article 6 of Regulation 1215/2012. 1082 The Proposal mentioned in the previous footnote does not deal with the recognition of third-State judgments; it should however be noted that the European Group on Private International Law submitted precise proposals to the European Commission for an extension of the regulation to third-State judgments, see Marc Fallon, Patrick Kinsch and Christian Kohler, eds., Le droit international privé européen en construction – 20 ans de travaux du GEDIP/Building European Private International Law – 20 Years’ Work by GEDIP, Cambridge, 2011, pp. 791 et seq., 799-805 and pp. 847 et seq. 1083 See e.g. with regard to family matters and in particular the Brussels IIbis Regulation, Johan Meeusen, “Op weg naar een communautaire internationaal familie(vermogens)recht ? Enkele europeesrechtelijke beschouwingen”, Mededelingen van de Nederlandse Vereniging voor Internationaal Recht, Vol. 133 (2006), 1-70 at p. 58, addressing a danger of forum shopping (gevaar voor forum shopping) which has to be countered (p. 61) by a harmonization of conflict rules. 1084 When disclosing the numerous incentives for forum shopping that subsist even after the unification of private law, Ferrari accurately questions whether “the distaste expressed by some in the labelling of certain actions as ‘forum shopping’ makes sense in the light of the lawyer’s obligation to ‘represent a client zealously within the bounds of the law’ ”, citing the American Bar Association Model Code of Professional Responsibility, see Franco Ferrari, “ ‘Forum Shopping’ Despite International Uniform Law Conventions”, Int. Comp. LQ, 51 (2002), 689-707 at p. 707.

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designated by the national law were considered as competent.¹⁰⁸⁵ In particular, the old Convention did not grant jurisdiction to the court at the plaintiff ’s domicile. Quite to the contrary, the long list of competent courts contained in Article 2 of the 1970 Convention explicitly refers to the petitioner’s habitual residence in that country as one of the criteria for establishing jurisdiction. Provided that the plaintiff has some additional links with that country – for example a minimum duration of that habitual residence of one year immediately prior to the institution of proceedings or the nationality of that State – the courts of that country will be considered as competent. In the European Union the Brussels IIbis Regulation has even extended the list of courts having jurisdiction in matrimonial matters (Article 3), directing the jurisdictions of other Member States to recognize the respective judgments without any review of jurisdiction (Articles 22 and 24). Since the threshold of minimum connections between the litigated case and the foreign court has been considerably lowered over the years, it is now possible, although perhaps not very likely, that a spouse will relocate his or her habitual residence to a country just for the purpose of addressing the courts there and benefiting from the law of that country. While forum shopping of this kind is rather new in family matters, it has always played a certain role in commercial law and is part of the freedom of private parties to pursue their interests by appropriate arrangements in a multi-jurisdictional world. 3.

The Liberalization of the Recognition of Foreign Companies

a) Incorporation theory and real seat theory 513. A further example for a liberalization of recognition that enables private parties to make their arrangements in view of the benefits they expect from a particular legal system is provided by the more recent changes in European corporate law. The point of departure of this development was the split in the conflict rules relating to corporations. According to a large number of conflicts regimes, the existence and legal capacity of an entity is determined by the law of the jurisdiction where it is incorporated and where its statutory seat is located (incorporation theory), while other countries designate the law of the place where the company has its principal establishment or actual administrative office (real seat theory).¹⁰⁸⁶ The former solution is

1085 See Article 5 of the 1902 Hague Convention on Divorce; see Meili and Mamelok, pp. 212 et seq. 1086 See Jan von Hein, “Company Law (International)”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. I, Oxford, 2012, pp. 290-293; also in German under the heading “Gesellschaftsrecht, internationales”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen, 2009, pp. 739-741.

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

wide-spread in Anglo-Saxon countries,¹⁰⁸⁷ but also in Latin America,¹⁰⁸⁸ in Asia (for example in Japan¹⁰⁸⁹ and Taiwan¹⁰⁹⁰) and in a number of European countries such as Switzerland,¹⁰⁹¹ the Netherlands¹⁰⁹² or the Russian Federation¹⁰⁹³. This basic incorporation theory rule is sometimes qualified for companies incorporated abroad which, however, have their headquarters or branches in a different country where proceedings are pending; in such cases of “pseudo-foreign” companies, the conflict rule often provides for the application of the law of the forum.¹⁰⁹⁴ 514. The other current of the development of conflict rules in respect of company law has mainly been influenced by French law: according to Article 1837 of the Civil Code, all companies whose seat is situated on French territory are subject to French law. An analogous rule for commercial companies is contained in Article L 210-3 of the New Commercial Code. The significance of the real seat laid down in these unilateral provisions has been acknowledged by the courts as the foundation of a bilateral conflicts rule.¹⁰⁹⁵ It has been

1087 See the survey of the development of the English common law by Nygh, Nos. 35.26 et seq., pp. 717 et seq.; for the United States see Rest. Second, Conflict of Laws, §§ 296 et seq.; for Canada see Walker, HCF-270, p. 799, and for Quebec Article 3083, para. 2, of the Civil Code. 1088 See for Brazil, Article 11, para. 1, of the Introductory Law of the Civil Code; for Mexico Article 2736, Civil Code; for Peru Article 2073, Civil Code; for Uruguay Article 2394, Civil Code; for Venezuela Article 20 of the Law of 1998; see for a broader survey, Rafael Mariano Manóvil, “Das Unternehmensrecht im Mercosur”, in Jürgen Basedow and Jürgen Samtleben, eds., Wirtschaftsrecht des MERCOSUR – Horizont 2000, Baden-Baden, 2001, 143-197 at pp. 152-153, who points out that Argentina, too, adheres to the incorporation theory, while Paraguay considers the principal place of business of a company as relevant. 1089 The incorporation theory is not laid down by statute, but it is unanimously accepted, see Dai Yokomizo, “International Company Law in Japan”, in Jürgen Basedow, Harald Baum and Yuko Nishitani, eds., Japanese and European Private International Law in Comparative Perspective, Tübingen, 2008, pp. 175-186 at p. 181. 1090 See Article 13 of the Law of 2010. 1091 See Article 154 of the Law of 1987. 1092 See Articles 117 et seq. of the Law on Private International Law of 2011. 1093 See Article 1202 of the Civil Code of the Russian Federation. 1094 See for example Article 160 of the Swiss Law of 1987; see also for Korea § 16 of the Law of 2001; for Turkey Article 9, para. 4, of the Law of 2007; Article 25, para. 1, of the Italian Law of 1995; for bilateral versions of the same rule, see also Article 17 of the 1999 Law of Slovenia and Article 56 of the Law of Bulgaria of 2005: both enunciate the principle of incorporation but give priority to the law of the State of the principal place of business where that place is located in a country other than the one of incorporation. 1095 See Cass. civ., 18 April 1972, Rev. crit. dr. int. pr. 61 (1972), 672, with annotation Paul Lagarde; Cour d’appel de Paris, 3 October 1984, Clunet 113 (1986), 156, with annotation Bertold Goldman; Audit/d’Avout, Nos. 1114 and 1127 at pp. 947-948 and p. 959; Mayer and Heuzé, No. 1031 et seq. at pp. 753 et seq.; Jean-Marc Mousseron, Jacques

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followed by various continental European jurisdictions,¹⁰⁹⁶ and numerous countries in the Middle-East and Africa have adhered to it in their confl icts legislation.¹⁰⁹⁷ A strange compromise between the two conflicts approaches to company law which apparently affords the court some discretion can be found in the new conflicts legislation of the Peoples Republic of China: Article 14 basically refers to the law of the country of incorporation; however, where the place of business differs from the place of registration, the law of the principal place of business “may be applied”. The criteria guiding the exercice of the court’s discretion do not surface from this provision. b) International unification of conflicts law 515. Efforts at international unification have been neither particularly numerous nor very successful. A 1956 Hague Convention which afforded much discretion to States adhering to the real seat theory never took effect.¹⁰⁹⁸ Likewise, a 1968 convention on the mutual recognition of companies and bodies corporate concluded between the six initial Member States of the European Economic Community was doomed to failure; again, the framers had allowed the contracting States to not recognize companies which had their real seat outside the country of incorporation.¹⁰⁹⁹ Apparently, in terms of unification of private international law, these conventions did not offer much progress as compared with the situation existing under national conflict rules, neither for the States following the incorporation theory nor for the countries adhering to the real seat theory. Consequently, the necessary number of ratifications was never attained. 516. More successful were efforts for unification inspired by the incorporation theory. After World War II, the United States concluded bilateral treaties of friendship, commerce and navigation with a number of foreign States.¹¹⁰⁰ Raynard, Régis Fabre and Jean-Luc Pierre, Droit du commerce international, 3rd ed., Paris, 2003, No. 45 at pp. 32-33. 1096 For a comparative treatise see Peter Behrens, ed., Die Gesellschaft mit beschränkter Haftung im internationalen und europäischen Recht, 2nd ed., Berlin, 1997. 1097 See for Egypt Article 11, para. 2, of the Civil Code; for Jordan Article 12, para. 2, of the Civil Code; for Mozambique Article 33 of the Civil Code; for Syria Article 12, para. 2, of the Civil Code; for Tunisia Article 40, para. 1, of the Code of 1998; and for Yemen Article 25, 2nd sentence of the Civil Code. 1098 Convention concernant la reconnaissance de la personnalité juridique des sociétés, associations et fondations étrangères, done on 1 June 1956, see Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, p. 34; only the French text is authoritative. 1099 Article 3 of the Convention on the Mutual Recognition of Companies and Bodies Corporate, done at Brussels on 29 February 1968, Bull. EC, 1969, Supplement No. 2, pp. 7-14; the authoritative languages of the Convention are Dutch, French, German and Italian. 1100 Herman Walker, “Modern Treaties of Friendship, Commerce and Navigation”, Minnesota Law Review 42 (1958), 805-824.

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

These treaties ensure national treatment to the companies duly formed under the laws of the other contracting party¹¹⁰¹ and explicitly point out that these companies “shall have their judicial status recognized within the territories of the other party”.¹¹⁰² The Federal Court of Germany has classified this rule as a conflict rule referring to the law of the country of incorporation and taking priority over the otherwise applicable German conflict rule built upon the real seat theory.¹¹⁰³ While the solutions enshrined in bilateral treaties by their very nature may differ as between the various agreements, multilateral treaties basically provide for uniform solutions with regard to all contracting States. In Latin America, two Inter-American Conventions have tackled the issue of the recognition of foreign companies, one dealing with commercial companies,¹¹⁰⁴ the other with juridical persons in general.¹¹⁰⁵ The former Convention states in Article 3 that “commercial companies duly constituted in one State shall be recognized as of course in the other States”, and it also makes clear what already would follow from this obligation of recognition, namely that “the existence, capacity, operation and dissolution of commercial companies shall be governed by the law of the place where they are constituted”, see Article 2. These rules are essentially affirmed with regard to juridical persons in general, i.e. outside the sphere of commercial companies, in the 1984 Convention. The duty of recognition under both instruments is confined to legal persons established under the laws of another contracting party. They are thus limited to the regional purview of the Members of the Organization of American States and do not neces-

1101 On the early debate as to whether a company set up in accordance with the laws of the other contracting State must also have its principal place of business in the territory of that State, see Herman Walker, “Provisions on Companies in United States Commercial Treaties”, Am. Journ. Int. L. 50 (1956), 373-393 at pp. 380-383. 1102 See Article 25, para. 5, of the Treaty of Friendship, Commerce and Navigation between the United States of America and the Federal Republic of Germany signed at Washington on 29 October 1955, United States Treaties and Other International Agreements (TIAS) 3062 = BGBl. 1956, II-487. 1103 BGH, 13 October 2004, JZ (2005), 298, with an annotation by Werner Ebke = IPRspr (2004), No. 16; see also the comprehensive commentary on the impact of the Treaty on the Law Applicable to Corporations by Kindler in Münchner Kommentar zum Bürgerlichen Gesetzbuch, Vol. 11, 5th ed., Munich, 2010, IntGesR, paras. 333-350. 1104 Inter-American Convention on Conflicts of Laws concerning Commercial Companies, done at Montevideo on 8 May 1979. The Convention has taken effect for eight countries: Argentina, Brazil, Guatemala, Mexico, Paraguay, Peru, Uruguay and Venezuela; see the website of the Organization of American States. 1105 Inter-American Convention on Personality and Capacity of Juridical Persons in Private International Law, done at La Paz on 24 May 1984. The Convention has taken effect for four countries: Brazil, Guatemala, Mexico and Nicaragua; see the website of the Organization of American States.

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sarily reflect the national conflict rules applicable with regard to companies incorporated in other jurisdictions.¹¹⁰⁶ c) The conflicts approach and private choice 517. For the context of this treatise it follows from the adoption of the incorporation theory in a growing number of countries that the investors originating in these States can avail themselves of the benefits ensured by the corporate law of other countries even if they do not want to manage their business from an establishment in that country. As mentioned before, corporate law has therefore become a favoured laboratory for what is usually called regulatory or institutional competition.¹¹⁰⁷ To the extent that countries adhere to the real seat theory, however, their investors are foreclosed from benefiting from that regulatory competition. Where they transfer the principal place of business from a State of incorporation (country A) adhering to the real seat theory to another State (country B) equipped perhaps with a company law promising greater benefits, the law of country A will no longer recognize the company’s legal capacity and will require its winding-up. Similar are the legal consequences where the investors establish a company in a country B while the principal place of business is located in country A: they must anticipate that the foreign juridical person will not be recognized in State A given its adherence to the real seat theory. Since that State (A) designates the law of the principal place of business as the one determining the legal capacity of the company and since that company has been registered in a different country, it is lacking the basic precondition for the acquisition of legal personality. d) European developments 518. In more recent years, the anti-competitive effect of the real seat theory has been watered down or even quashed in Europe. In legal terminology, this anti-competitive effect results from the loss of legal capacity of such a foreign entity in the country of desired recognition, see above. French courts were the first to avoid this consequence by applying the European Convention on Human Rights. An Anstalt, i.e. an entity equipped with legal personality but without shareholders,¹¹⁰⁸ had been established under the laws of the Principality of Liechtenstein. It later brought an action in France which 1106 For the national conflict rules of some Latin American countries see supra footnote 1088. 1107 See supra, paras. 104 et seq. 1108 On this type of company which usually does not unfold any activities in the Principality of Liechtenstein, see Marxer & Partner, Liechtensteinisches Wirtschaftsrecht, Vaduz, 2009, pp. 69-70; Roman Capaul and Rolf Dubs, Einführung in das liechtensteinische Recht, Zurich, 1992, pp. 124-125; Florian Marxer, Die personalistische Aktiengesellschaft im liechtensteinischen Recht, Zurich/St. Gallen, 2007, p. 100, indicates a total of 16,000 Anstalten registered in 2007.

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

was dismissed by the lower courts because the Anstalt was not recognized and was therefore held to lack the capacity to conduct legal proceedings. The Cour de cassation pointed out that certain provisions of the first Additional Protocol to the European Convention on Human Rights and the Articles 6 and 14 of that Convention ensure to every legal person, irrespective of its nationality, the protection of its assets by an independent court. Consequently, the Cour de cassation set aside an old law of 1857 that prevented the recognition of the Anstalt in the particular case.¹¹⁰⁹ 519. Several decisions of the European Court of Justice have produced a broader and more sustainable effect in the European Union. The most pertinent judgment dealing with the recognition of foreign companies was handed down in the Überseering case. A limited liability company established under Dutch law (Besloten Vennotschap) had contracted with a German construction company for the building of a structure in a German city. German purchasers acquired the shares of the Dutch company, which later sued the construction company in a German court for defects in the building. Under the real seat theory prevailing in Germany, the Dutch company had lost its legal personality because its principal place of business had been transferred to Germany, where it was however not incorporated; lacking legal personality, according to the German Code of Civil Procedure, this company lacked standing in court.¹¹¹⁰ Upon a request by the Bundesgerichtshof for a preliminary ruling, the European Court of Justice held that Überseering was “entitled to rely on the principle of freedom of establishment in order to contest the refusal of German law to regard it as a legal person with the capacity to be a party to legal proceedings”.¹¹¹¹ Thus, the Court enunciated the direct applicability of the freedom of establishment for companies as ensured by what is now Article 54 TFEU. The loss of legal personality following from the relocation of the company’s central administration came down to a requirement of reincorporation of the company in Germany. But that requirement, according to the Court of Justice “is… tantamount to outright negation of freedom of establishment”.¹¹¹² Restrictions of the freedom 1109 Cass. com., 5 December 1989, Cass. crim., 12 November 1990 and Cass. civ., 25 June 1991, all in Rev. crit. dr. int. pr. 80 (1991), 667, with an annotation by Georges Khairallah. The second decision is also reproduced and annotated in Christoph Engel, “Versetzt die Europäische Menschenrechtskonvention der Sitztheorie des internationalen Gesellschaftsrechts den Todesstoß ?”, ZEuP (1993), 150-158. It has to be noted that the lower court did not decline recognition because of the real seat theory, but because of a special French statute of 1857 which required a country-specific decree or treaty for the recognition of foreign companies; in the case of Liechtenstein, there was no such instrument. 1110 According to § 50 of the Code of Civil Procedure, only persons equipped with legal capacity can be a party to court proceedings. 1111 ECJ, 5 November 2002, Case C-208/00 (Überseering BV v. Nordic Construction Company Baumanagement GmbH), [2002] ECR I-9919, cons. 76. 1112 Ibid., cons. 81.

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of establishment may be justified under certain conditions for overriding reasons relating to the general interest “such as the protection of the interests of creditors, minority shareholders, employees and even the taxation authorities… Such objectives cannot, however, justify denying the legal capacity and, consequently, the capacity to be a party to legal proceedings of a company properly incorporated in another Member State in which it has its registered office”.¹¹¹³ 520. As a consequence, the recognition of companies established in other Member States follows from the freedom of establishment in the European Union. The Court of Justice has elaborated on that freedom of establishment as applied to companies in a couple of other decisions, but none of them highlights the limits of the real seat theory as clearly as Überseering. The German Federal Court had expressly asked the Court of Justice whether it followed from the application of the freedom of establishment to a company incorporated in another Member State that its legal capacity and the capacity to bring legal proceedings had to be determined in accordance with the incorporation theory. The Court of Justice answered in the affirmative,¹¹¹⁴ but it did not comment in this case on the scope of the law of incorporation in respect of other aspects of company law such as the organization and structure of the company, powers of representation, shareholders’ liability, or trade names. e) Reactions of national conflicts law 521. The development of national conflicts law in those Member States which had adhered to the real seat theory prior to Überseering does not point in one and the same direction. Surprisingly, both the Belgian Code of private international law of 2004 and the Polish law of 2011 have affirmed the significance of the principal establishment for the designation of the law governing the company.¹¹¹⁵ Is this adherence to tradition a sign of the legislatures’ ignorance of European developments ? Some commentators have remained “perplexed”.¹¹¹⁶ It appears, however, that the Belgian and the Polish legislatures rather wanted to split the conflicts analysis into two stages: a first one with a general purview in accordance with the national statute of private international law, and a second one, limited to intra-European cases, ensuring freedom of establishment pursuant to the law of the European Union. In Germany, where codified conflict rules governing companies are 1113 Ibid., cons. 92-93. 1114 Ibid., cons. 95. 1115 Despite the Überseering judgment, both statutes even affi rm that the existence and legal capacity of a corporate entity is governed by the law of the real seat, see Articles 110 and 111 of the Belgian Code of 2004 and Article 17 of the Polish Law of 2011; however, Article 19, para. 1, 2nd sentence of the Polish Law codifies the Court of Justice’s opinion in Überseering stating that a transfer of the real seat within the European Economic Area does not entail the loss of legal capacity. 1116 Caroline Tubeuf in Erauw and Fallon et al., p. 575.

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

lacking, the Federal Court has taken a different path. With regard to companies incorporated in other Member States of either the European Union or the European Economic Area, the Federal Court now openly advocates the application of the incorporation theory.¹¹¹⁷ This applies at least to issues such as legal capacity and shareholder liability for company debt.¹¹¹⁸ With regard to companies incorporated in third States such as Switzerland, the Bundesgerichtshof sticks to the traditional approach rooted in the real seat theory, however.¹¹¹⁹ Whatever approach is taken by the national laws of the Member States, ultimately they have to respect the freedom of establishment as interpreted by the Court of Justice. f) International company law and regulatory competition 522. For the purposes of this enquiry, it follows from the legal development outlined above that private investors, irrespective of the Member State they elect as the factual centre for the conduct and organization of their business, may choose the country of incorporation for the company they want to establish for that business purpose. Corporate law thereby becomes a parameter of competition, independent from other important factors such as the availability of qualified workers on the labour market of that country. This came very clearly to the fore in the Centros case, which was the first of a series of cases decided by the European Court of Justice.¹¹²⁰ A Danish couple had established a private limited company under the laws of the United Kingdom and subsequently applied for the registration of a branch of that limited liability company in the company register in Copenhagen. The British limited company was never intended to do business in the United Kingdom but was set up for the sole purpose of avoiding the minimum capital requirement under Danish law. The Danish register therefore rejected the application. However, the Court of Justice decided that not only the establishment of the British company by the Danish couple was covered by the spouses’ (primary) free1117 BGH, 13 March 2003, JZ (2003), 525, with annotation Horst Eidenmüller = IPRspr. (2003), No. 13; BGH, 19  September 2005, RIW (2005), 945, with an annotation by Stefan Leible and Jochen Hoff mann = IPRspr. (2005), No. 7 concerning a corporation set up in the Principality of Liechtenstein, a Member State of the European Economic Area; BGH, 12 July 2011, NJW (2011), 3372 with an annotation by Michael Müller concerning the determination of a British company’s statutory seat under Article 22, No. 2 (now: Article 24, para. 2) of the Brussels I Regulation. 1118 BGH, 5 July 2004, RIW (2004), 787 = IPRspr. (2004), No. 15, concerning a Delaware corporation; see also Werner Ebke, “Gesellschaften aus Delaware auf dem Vormarsch: Der BGH macht es möglich”, RIW (2004), 740-744; the development is outlined and discussed by Horst Eidenmüller, ed., Ausländische Kapitalgesellschaften im deutschen Recht, Munich, 2004, pp. 85 et seq. 1119 BGH, 27 October 2008, NJW (2009), 289, with an annotation by Eva-Maria Kieninger = IPRspr. (2008), No. 11. 1120 ECJ, 9 March 1999, Case C-212/97 (Centros v. Erhvervs- og Selskabsstyrelsen), [1999] ECR I-1459.

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dom of establishment, but that the British company, too, could make use of its own (secondary) freedom of establishment for the formation of a branch in Denmark. The deliberate choice of this legal construction was explicitly addressed by Advocate General La Pergola, who stated that “the right of establishment… is to guarantee to all Community citizens alike the freedom to engage in business activities through the instruments provided by national law… In other words, it is the opportunity to exercise business activities that is protected, and with it the contractual freedom to make use of the instruments provided for that purpose in the legal systems of the Member States.”¹¹²¹

The Advocate General was also fully aware of the regulatory competition which would thereby unfold: “In short, in the absence of harmonisation, competition among rules must be allowed free play in corporate matters.”¹¹²²

It should be noted that this case law has indeed given rise to regulatory competition among European legislatures: to provide only the example of France and Germany, both have virtually abandoned the requirement of a minimum capital for limited liability companies in order to match the low cost incorporation available in the United Kingdom.¹¹²³ All said the liberalization the recognition of companies incorporated abroad – but within the European Union – which is a consequence of the direct application of the freedom of establishment to companies by the European Court of Justice 1121 Opinion of Advocate General La Pergola in the Centros case, delivered on 16 July 1998, [1999] ECR I-1461 at p. 1477. 1122 Ibid., at p. 1479. 1123 In France, the minimum capital of a limited liability company (société à responsabilité limitée, SARL) used to be 50,000 Francs, the equivalent of about 7,622 Euros. The pertinent provision, Article L 223-2, Code de commerce, was amended by Article 1, Loi No. 2003-721 of 1 August 2003 pour l’initiative économique, Journal officiel de la République française of 5 August 2003, to the effect that the capital of a company is prescribed by the articles of association, no minimum being indicated anymore. In Germany, § 5 of the law on limited liability companies (Gesetz betreffend die Gesellschaften mit beschränkter Haftung, GmbHG) still prescribes a minimum capital amounting to 25,000 Euros, but § 5 a, GmbHG, permits the establishment of a limited liability company with a lower capital base provided that it bears the designation “Unternehmergesellschaft (haftungsbeschränkt)” or “UG (haftungsbeschränkt)”, i.e. “entrepreneurial company (limited liability)” as part of its trade name; this amendment was put into effect by the Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG) of 23 October 2008, BGBl. 2008, I-2026. This amendment was clearly intended to countervail the important migration of limited liability companies to the United Kingdom, see supra, para. 114 and in particular footnote 212.

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has turned the choice between the several company laws of the Member States into a production factor which investors can make use of in order to attain greater efficiencies. Section 3: Evasion of Law a) A matter of legal construction 523. It follows from the preceding sections that, as a matter of fact, the scope of private dispositions in respect of the applicable law has been extended by two major developments: first, the gradual replacement of some connecting factors with others which accommodate the greater mobility of population and thereby indirectly favour that mobility. Second, the long-term trend towards the liberalization of recognition equally permits private parties to avail themselves of the advantages offered by foreign jurisdictions irrespective of whether they actually want to abandon the previous centre of their activities. Both developments raise the question whether the creation of links with a foreign jurisdiction that promises benefits not available under the law otherwise applicable can be tolerated or has to be disregarded as a manipulation of the applicable law. This issue has traditionally been discussed under the heading of evasion of law ( fraude à la loi, Gesetzesumgehung). Where the establishment of connections with the foreign legal system is to be disregarded as artificial or fraudulent, the rules of the otherwise applicable legal order will apply. The solution essentially depends on the construction of those legal rules: where according to their text, context and purpose they require application to a given case, they will be applied by the judge regardless of the parties’ attempt to avoid them.¹¹²⁴ Thus, evasion of law is essentially a matter of interpretation of law. As it was put by Oliver Wendell Holmes, “we do not speak of evasion, because, when the law draws a line, a case is on one side of it or the other, and if on the safe side is none the worse legally that a party has availed himself to the full of what the law permits. When an act is condemned as an evasion, what is meant is that it is on the wrong side of the line indicated by the policy, if not by the mere letter, of the law.”¹¹²⁵

b) Codified rules on evasion of law 524. It follows from the preceding analysis that special rules on the evasion of law are not required to cope with private dispositions intended to reap the 1124 See Kurt Siehr, “Evasion of Law”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. I, Oxford, 2012, pp. 652-655 at p. 652; also available in German under the heading “Gesetzesumgehung”, in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. I, Tübingen, 2009, pp. 741-745. 1125 Bullen v. State of Wisconsin, 240 US 625 at 630-631 (1916) per Holmes, J.

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benefits of foreign legislation, and most jurisdictions lack a corresponding prohibition. Still, a limited number of countries in Europe¹¹²⁶ and in other parts of the world¹¹²⁷ have enacted specific rules which render ineffective private maneuvers intended to avoid the application of the law of the forum or, in some cases, also a foreign law.¹¹²⁸ The principle has even been the object of a unification of laws: in Latin America, an Inter-American Convention on general rules of private international law declares that “the law of a State Party shall not be applied as foreign law when the basic principles of the law of another State Party have been fraudulently evaded.”¹¹²⁹ 525. According to most of the codified rules, the assessment of a fraudulent evasion of law depends on two findings.¹¹³⁰ First, the provisions applicable in the absence of evasion must be of a mandatory nature. Second, an intent of the interested parties to avoid their application must be ascertained. As to the first condition, it is obvious that the derogation from dispositive legal rules is permitted and cannot be prohibited as an evasion of law. However, even as to mandatory rules, it should be kept in mind that they may be of two distinct types: the “simple” mandatory provisions whose application can be set aside by a contractual choice of law,¹¹³¹ as opposed to the overriding mandatory provisions which will be enforced irrespective of the otherwise applicable law.¹¹³² In respect of the former contractual derogation is explicitly permit1126 See for Belgium Article 18 of the Code of 2004; for Hungary see § 8 of the Law-Decree of 1979; for Portugal Article 21 of the Civil Code; for Romania Article 8, para. 1 (b), of the Law of 1992, and now Article 2564, para. 1, of the New Civil Code of 2009, French translation in Rev. crit. dr. int. pr. 101 (2012), 459 et seq., for Spain Article 6, para. 4, of the Civil Code, providing for a general prohibition of evasion of law, and Article 12, para. 4, of the Civil Code with regard to the conflict of laws; for Ukraine Article 10 of the Law of 2005. 1127 For Angola see Article 21 of the Civil Code; for Mozambique Article 21 of the Civil Code; for Taiwan Article 7, para. 2, of the Law of 2010; and for Tunisia Article 30 of the Code of 1998. 1128 Article 30 of the 1998 Code of Tunisia explicitly relates to the evasion of the laws of either Tunisia or foreign States whereas Article 7, para. 2, of the Taiwan Act of 2010 exclusively combats the evasion of the laws of Taiwan; the other acts cited in the two previous footnotes do not expressly address the matter. 1129 Inter-American Convention on General Rules of Private International Law, done on 8 May 1979, Article 6; the text is available at the website of the Organization of American States. The Convention has taken effect for 10 States: Argentina, Brazil, Colombia, Ecuador, Guatemala, Mexico, Paraguay, Peru, Uruguay and Venezuela. 1130 The two elements are very clearly highlighted in Article 18 of the Belgian Code of 2004 and in Article 12, para. 4, of the Spanish Civil Code. As to the first condition, it is obvious that the derogation of dispositive legal rules is permitted and cannot be prohibited as an evasion of law. 1131 See supra, para. 185. 1132 The concept of overriding mandatory provisions (lois de police, leggi di applicazione necessaria, Eingriffsnormen) is defined in Article 9, para. 1, of the Rome I Regulation; the concept employed in Article 16 of the Rome II Regulation is similar.

Chapter 5 – Deliberate Connections (Indirect Choice of Law)

ted and cannot be branded as evasion. In respect of the latter, the concept of evasion is redundant because the overriding mandatory rules will be applied in any event. It follows that in the area of party autonomy evasion of law is irrelevant. Its sole significance may be that of a safeguard for mandatory provisions where the applicable law is determined on the basis of objective connections that have deliberately been established by the interested parties for the exclusive purpose of benefiting from another law, see below. With regard to the second precondition of evasion, i.e. the parties’ intent (something which is required by many pertinent instruments),¹¹³³ the courts usually have no choice but to infer it from objective factors which may more easily be ascertained than the thoughts and intentions of individuals.¹¹³⁴ c) Freedoms granted by, and evasion of, law 526. If evasion of law is, as pointed out above, to be ascertained in light of the objectives pursued by the legal provisions which the interested parties want to evade, the changes in private international law that have been outlined in this chapter cannot go unnoticed. These changes can be summarized as favouring mobility through the selection of adequate connecting factors for choiceof-law rules and through the liberalization of recognition. They result from manifold emanations of national and international legal developments. Where conflicts legislation is meant to serve growing mobility, it becomes increasingly difficult to deprive that mobility of its legal effects when it occurs in real life. Suppose for example that a testator of Spanish citizenship and habitual residence intends to make a will disinheriting a child who would be entitled to a portion of the estate as forced heirship under Spanish law.¹¹³⁵ Suppose further that this testator decides to displace his habitual residence to the State of New York, whose law does not provide for forced heirship of family members. In accordance with Article 21 of the European Succession Regulation the law of the decedent’s last habitual residence, i.e. the law of the State of New York will ultimately govern succession in this case.¹¹³⁶ It appears difficult to argue that the testator’s move to New York has to be disregarded as an evasion of the law. First, the transition from the nationality principle to habitual residence as the main connecting factor contains an element of freedom of private choice of one’s home which has to be taken into account when an evasion of law is alleged. Second, since the reasons for, and the consequences of, the choice of a 1133 See Article 6, para. 2, of the Inter-American Convention, supra footnote 1129; see also Article 18 of the Belgian Code of 2004 and the other legal provisions cited supra footnotes 1126 and 1127. 1134 On the significance of objective factors for this evidentiary issue, see Bernard Audit, La fraude à la loi, Paris, 1974, No. 14 at p. 17 and No. 187 at pp. 142-143; see also Rigaux and Fallon, pp. 216-217. 1135 Unless superseded by specific provisions of the regional laws (derecho foral), forced heirship (legítima) amounts to 50 per cent of the estate, see Articles 806 et seq., 809 of the Spanish Civil Code. 1136 See supra, para.491, in particular footnote 1036.

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habitual residence may be manifold, the assertion that the evasion of law was the sole reason will be virtually impossible to prove. 527. The interdependence of legal rules favouring mobility and the restrictions thereby imposed on the operation of the concept of evasion of law has transpired in the case law of the European Court of Justice. Regarding the freedom to supply services in particular, the Court of Justice has indeed repeatedly held that Member States are entitled to prevent their nationals from attempting to circumvent their national legislation or to take advantage of provisions of Community law in an abusive or fraudulent way.¹¹³⁷ A characteristic example is provided by one of the judgments on the Dutch Media Law which essentially prohibited commercial advertising to broadcasting organizations. Veronica Omroep, one of the Dutch broadcasting organizations, established and supported an affi liate company in the Grand Duchy of Luxembourg which produced commercial broadcasting programmes in Dutch that could be relayed by cable to the Netherlands. A Dutch court held this activity to breach the Dutch Media Law and requested a preliminary ruling of the Court of Justice on the issue whether the prohibition was compatible with the law of the European Union, in particular the freedom to provide services. The Court of Justice pointed out that “a Member State cannot be denied the right to take measures to prevent the exercise by a person whose activity is entirely or principally directed towards its territory of the freedoms guaranteed by the Treaty for the purpose of avoiding the professional rules of conduct which would be applicable to him if he were established within that State.”¹¹³⁸

The Court thus made clear that an undertaking cannot escape the application of the laws governing its domestic market by taking a detour via the establishment of an affi liate in another Member State. More specifically, the Court found that “the Netherlands legislation at issue has the specific effect, with the view to safeguarding the exercise of the freedoms guaranteed by the Treaty, of ensuring that those organizations cannot improperly evade the obligations deriving from the national legislation concerning the pluralistic and non-commercial content of programmes.”¹¹³⁹

1137 See the broad survey by Stefan Vogenauer, “The Prohibition of Abuse of Law: An Emerging General Principle of EU Law”, in Rita de la Feria and Stefan Vogenauer, Prohibition of Abuse of Law – A New General Principle of EU Law ?”, Oxford, 2011, 521-571, in particular pp. 526-527. 1138 ECJ, 3 February 1993, Case C-148/91 (Vereniging Veronica Omroep Organisatie v. Commissariaat voor de Media) [1993] ECR I-513, cons. 12. 1139 Ibid., cons. 13.

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528. A very different result was achieved by the Court of Justice with regard to company law in the Centros case reported above.¹¹⁴⁰ In that case, the Danish authorities argued that the establishment, by the Danish couple, of a private limited company in the United Kingdom with the sole view to having a branch of that company registered in the Danish company register was a patent case of “abusive and devious exercise of the right of establishment enshrined in the Treaty.”¹¹⁴¹ Both the Advocate General and the Court distinguished the evasion of national laws regarding the formation of companies from rules concerning the activities a company is pursuing when carrying on certain trades, professions or businesses.¹¹⁴² With regard to setting up a company in the form provided by the law of any Member State of the European Union, the Court of Justice pointed out that “the right to form a company in accordance with the law of a Member State and to set up branches in other Member States is inherent in the exercise, in a single market, of the freedom of establishment guaranteed by the Treaty.”¹¹⁴³

The Court thereby rejected the Danish allegation of an evasive and abusive exercise of the freedom of establishment. The borderline drawn between the regulations on the formation of a company and those concerning its commercial activities may appear elusive. Nevertheless, the Centros judgment demonstrates that the legal guarantee of certain freedoms, whether by the European Treaty or by other legal instruments such as national constitutions, has a restrictive impact on the application of the doctrine of evasion of law. This is the direct consequence of the priority that certain bodies of law such as the law of the European Union or constitutional law take over the general law, inclusive of conflict rules. But the purpose of this section has also been to demonstrate that a similar indirect impact originates in the transformations of conflict laws favouring mobility as have been outlined above. Section 4: Conclusion 529. It has been the purpose of Part II of this enquiry to show that private actors, both individuals and corporate entities, have developed manifold instruments to cope with the particular difficulties arising in a multi-jurisdictional environment. They have to face the inevitable legal uncertainty resulting from the coexistence of numerous court systems and substantive laws which are rel1140 See supra, para. 522, for the facts of the case. 1141 See the opinion of Advocate General La Pergola delivered on 16 July 1998, [1999] ECR I-1461 at p. 1473. 1142 Advocate General La Pergola, ibid., at p. 1474; similarly cons. 26 of the Court’s judgment, supra footnote 1120. 1143 See cons. 27 of the Court’s judgment, supra footnote 1120, following the reasoning of the Advocate General, [1999] ECR I-1477 and pp. 1478-1479.

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evant to the legal framework of cross-border economic and societal relations. They have conceived a number of methods to overcome that dilemma. A very old one is known as the lex mercatoria: it consists of a cumulation of private arrangements intended to channel the particular risks of cross-border uncertainty to professionals specializing in that area. We have seen that alongside the export trade there are other fields where this method has proven successful, in particular in the package tour market. These arrangements do not completely overcome the uncertainties connected to the diversity of laws, but they reduce their significance in commercial practice. Moreover, they reduce the significance of State law and, thereby, the significance of the conflict of laws. The traditional focus of private international law has always been on another method, namely agreements on the choice of the competent court and on the choice of the applicable law. We have shed some light on both the theoretical foundations and the practical side of the latter. In particular, we have studied the theoretical foundations of party autonomy in the political philosophy of the enlightenment, and we have studied the rapid expansion of party autonomy into new areas outside the field of contract law. The third and the fourth method of private ordering refer instead to a mix of State legislation and private initiative. The emergence of optional laws in Europe, in particular in the European Union, gives evidence of a certain willingness of State actors to enlarge the scope for private choice in areas such as company law, intellectual property law and contract law. Finally, we have observed a broad tendency in the development of private international law, both at the national and international levels, towards conflict rules favouring mobility. Where that mobility is put into effect by private decisions creating links which are relevant for the designation of the applicable law, the traditional corrective of evasion of the law ( fraude à la loi, Gesetzesumgehung) will gradually recede in light of a legal environment favouring mobility. 530. The account of private ordering may appear as the assertion of – and a plea for – a world that is exclusively ordered by private initiative, one that is governed by what may be called a private international law beyond the State. Some authors would probably characterize it as a neo-liberal conceptualization of private international law. But this would be a wrong, or at least an overly narrow perception of the main thrust of this enquiry. It is true that in an open society it is in the first instance a matter for the private actors to implement their intentions and to find or conceive of the framework of legal rules facilitating that implementation. It is also true that private international law would not have evolved in the absence of such private initiative to engage in cross-border relations prior to any assessment by courts and legislators. But this does not make the role of States superfluous. They supplement and correct private initiative in numerous contexts, as will now be discussed in Part III.

Part III

Public Regulation

Chapter 1

State Action between International and Municipal Law

Section 1: Forms and Addressees of State Action 531. State activities relevant to the legal framework of private international relations may adopt very different forms. We are not only dealing here with State legislation or regulation or case law shaping or applying conflict rules. These traditional acts of municipal legal systems are supplemented by forms of State action characteristic of public international law and include: the ratification of, or accession to, an international convention; manifold declarations in the context of that treaty, for example a reservation, an extension of its scope to certain dependent territories or an acknowledgement made after a secession by a successor State to the effect of being bound by the treaty; all kinds of other declarations made by a State’s Government, for example a declaration in regards to the non-recognition or recognition of a foreign State or Government, or a claim of sovereignty over a certain territory or part of the sea. 532. The great variety of potential State activities results from the fact that States operate in two legal systems: the system of international law and the municipal legal system. Like Janus of Roman mythology, States have two faces, one looking outward towards other members of the international community, i.e. towards other States and international organizations, the other directed inward towards the domestic society and economy. In both directions, States employ specific forms of action based upon the foundational principles of their respective legal orders. As long as they address other members of the international community, they make use of the forms of action flowing from the principle of sovereign equality as enshrined in Article 2, no. 1 of the UN Charter; such action is targeted at the coordination of the various States and at the preservation of reciprocity.¹¹⁴⁴ When addressing the situation within their respective countries, States can avail themselves of their sovereignty and of the forms of action available as against persons and organizations subject to their jurisdiction. The intrinsic principle of this type of State action is subordination, not coordination. 1144 Charter of the United Nations, done at San Francisco on 26 June 1945, available at the website of the United Nations: http://www.un.org/en/documents/charter.

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533. The relation between the two identities or functions of States is a basic issue of public international law on the one side and the constitutional law of the several States on the other; a comparative survey over the legal systems reveals a great variety of divergent views.¹¹⁴⁵ What matters in our context is that the two facets of State action are not independent from each other. On the one side it is beyond dispute that States, when acting as national rulemakers, may, by the creation of domestic laws or by their application, affect their relations with other countries and even infringe duties arising from public international law; examples can be cited from national¹¹⁴⁶ and international case law.¹¹⁴⁷ The details need not be discussed here. On the other hand, the action taken by States vis-à-vis members of the international community may equally have repercussions in private international relations as regulated by municipal law. This is, for example, shown by the various declarations made by States in respect of international conventions for the unification of substantive law or the conflict of laws as outlined above;¹¹⁴⁸ the effects engendered by those instruments can essentially be ascertained in municipal law. 1145 Dinah Shelton, International Law and Domestic Legal Systems, Oxford, 2011, with numerous national reports on the matter. 1146 In 1982, an embargo levied by the United States Government on exports to the USSR of oil and gas exploration equipment and applicable also to the foreign affi liates of US-controlled companies was declared inapplicable for lack of prescriptive jurisdiction under international law by the President of the District Court of The Hague, see President Rechtbank ’s-Gravenhage (Den Haag), 17 September 1982, Rechtspraak van de Week/Kort Geding, 1982, No. 167, English translation in Int. Leg. Mat. 22 (1983), 66; French translation in Rev. crit. dr. int. pr. 72 (1983), 473, with annotation by Bernard Audit, Extraterritorialité et commerce interntional – L’affaire du gazoduc sibérien, pp. 401-434; German translation in RabelsZ 47 (1983), 141, with annotation by Jürgen Basedow, Das amerikanische Pipeline-Embargo vor Gericht, pp. 147-172. 1147 See for example ICJ, 27 June 2001, LaGrand case (Germany v. United States of America), ICJ Reports 2001, 466, paras. 90-91, where the court points out that the application of the “procedural default rule“ under the law of Arizona in criminal proceedings brought against German citizens prevented Germany from retaining private counsel for the defendants and thereby violated Article 36, para. 2, of the Vienna Convention on Consular Relations, done at Vienna on 24 April 1963, 596 UNTS 261. In a case decided by the European Court of Human Rights, the expropriation of former Greek owners of land located in Northern Cyprus by Article 159 of the constitution of the so-called Turkish Republic of Northern Cyprus was declared invalid for lack of recognition of that State under international law, ECHR, 18 December 1996 (Loizidou v. Turkey), Reports of Judgments and Decisions, 1996-VI, para. 44; the constant refusal, by the Turkish authorities, to allow the owners access to their property was therefore held to be an interference with the peaceful enjoyment of possessions, paras. 63-64, and a breach of Article 1 of the Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms, signed at Paris on 20 March 1952, 213 UNTS 262. 1148 See supra, para 531.

Chapter I – State Action between International and Municipal Law

Section 2: Objectives of State Action 1.

Objectives of State rules on choice of law

534. The diversity in the forms of State action is matched by their objectives. (1) In traditional private law – both domestic substantive law and the conflict of laws – States have always had to deal with default situations. They have had to provide rules designating the applicable law where the private parties involved in a transaction have not identified that law or made other appropriate arrangements. (2) To the extent that third parties are affected, for example in the law of property or family relations, private arrangements are of a limited significance anyway, and the need for State action binding on everyone is obvious. (3) While both types of legal rules are intended to order relations between private actors within a given society for reasons of justice, State legislation may also be intended to protect the self-interest of the sovereign vis-à-vis other States. (4) Since the nineteenth century, States have interfered increasingly often and with varying intensity in private relations. Legislators have become increasingly aware of what economists call market imperfections or market failure: monopolies and dominant positions, spillovers or positive and negative external effects, asymmetric information and motivation.¹¹⁴⁹ As a consequence of these phenomena, private arrangements are sometimes found to not ensure just or efficient solutions. Where such imperfections have been identified, States have enacted an increasing number of mandatory rules, often in pursuance of a certain social model. In some instances this legislation adopts the form of private law, but it is inspired by a new understanding of the public good. (5) In addition, there is legislation pertaining to public law creating institutions in pursuance of the public good which often has repercussions in private relations and has to be accommodated in private international law. Our analysis of the evolution of private international law in view of private ordering in Part II above has already highlighted the developments relating to default situations and to third-party situations in various sectors. What remains for the present enquiry is a closer look at the objectives of public policy, whether the promotion of the State’s self-interest or of a new social model. 2.

Domestic order and foreign policy in international relations

535. States may seek to further policies which exclusively concern their foreign relations with another State or a group of States. Yet, they may also avail 1149 For a survey see for example Robert Cooter and Thomas Ulen, 4th ed., Boston, 2004, pp. 217-225; Michael Fritsch, Thomas Wein and Hans-Jürgen Ewers, Marktversagen und Wirtschaftspolitik, 5th ed., Munich, 2003, pp. 89 et seq., 180 et seq., 278 et seq.; Deregulierungskommission, Marktöff nung und Wettbewerb, Stuttgart, 1991, Nos. 8-13.

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themselves of municipal legislation for that purpose. They may, for example, grant preferential treatment to the persons, goods and services originating in specific foreign countries, or they may discriminate against them through appropriate legislation, by means such as an embargo, a freezing of assets or a ban on the immigration of the foreign State’s citizens. Such measures are not covered by the traditional understanding of private international law; they form part of what on the European continent is called conditions des étrangers or Fremdenrecht, i.e. a body of substantive law dealing with the legal position of foreigners.¹¹⁵⁰ Many of these measures have, however, an impact on private international relations. And they are frequently even intended to have just that effect since the legislature makes deliberate use of private individuals and their international relations as a means of supporting the State’s own foreign policy: the nationals of the legislating State are employed as “tools”, the nationals of other targeted States are taken as “hostages”, for example when economic sanctions are levied against a given country. 536. Although such outward-bound measures of municipal law are aimed at specific States and are adopted for reasons of foreign policy, it is up to the civil courts to decide on the legal consequences they may produce on private international relations. These private relations are a matter of law, not of politics. Politicians can choose the problems they want to address, and they have the option of remaining silent in a given situation. Courts do not have those options. Neither can they choose a topic which deserves particular attention in their eyes, nor can they avoid taking a decision in a case brought to court as that would constitute a denial of justice. These basic institutional differences engender consequences for the relationship between legal arguments and political choices in international relations: where States pursue foreign policy goals not by the usual tools employed in foreign affairs, but by the adoption of legal provisions to be implemented in private litigation within the court system, they make a choice in favour of legal argument and against political opportunity as a guideline for enforcement.¹¹⁵¹ Issues pertaining to the foreign relations of a country have therefore to be decided 1150 Neither the terminology nor the scope of this area of the law is unanimously approved, but see Rigaux and Fallon, No. 1.28 at pp. 36-37 and No. 2.18 at pp. 60-61; Jan Kropholler, Internationales Privatrecht, 6th ed., Tübingen, 2006, p. 10; Kurt Siehr, Das internationale Privatrecht der Schweiz, Zurich, 2002, p. 613; for France Mayer and Heuzé, Nos. 944 et seq. at pp. 699 et seq., limiting the concept to physical persons; in the same sense Kegel and Schurig, p. 64, apparently considering the concept of Fremdenrecht as outdated. 1151 With regard to the conduct of foreign affairs, F. A. Mann has repeatedly elaborated on the priority of law over politics, see F. A. Mann, Foreign Affairs in English Courts, Oxford, 1986, in particular p. 15: “The Executive’s conduct of foreign affairs … cannot, as a rule, control the law and its evolution. Can the law control the conduct of foreign affairs ? The answer to this question certainly is in the affirmative if and in so far as the prerogative has been superseded by legislation, but even where this

Chapter I – State Action between International and Municipal Law

under the applicable rules of law where a court is confronted with them. Political discretion can only prevail to the extent allowed by the applicable rules of law. 537. In other contexts, the primary goal of State action is inward-bound. It is the creation of a specific social and economic order within the country subject to the State’s sovereignty, including the private international relations of its citizens. It is not only municipal legislation that is apt to attain such objectives; a very large number of international conventions serve the same purpose. The choice of a treaty as the legal tool for the implementation of certain societal objectives would suggest that considerations of diplomacy and reciprocity characterizing State-to-State relations within the international community play a significant role. But although the conclusion of treaties is a traditional tool of the conduct of foreign affairs, the foreign policy element, i.e. the shaping of relations between States, is losing significance in this area. This development can at least be ascertained in some traditional sectors of private law relations where international conventions are of particular significance. 3.

An example: private law conventions and the decline of reciprocity

538. Our proposition of a diminishing importance of foreign policy considerations in treaties on private law is underpinned by a closer look at some uniform law conventions and, in particular, at the development of the rules determining their respective scope of application. A first example concerns the Hague Conventions on private international law. Insofar as they deal with choice-of-law issues, the modern Hague Conventions are generally shaped as instruments of universal application. Starting with the Convention on the form of testamentary dispositions of 1961, they have usually contained a provision stating that the convention is to be applied even if the law designated by its conflict-of-law rules is not the law of a contracting State.¹¹⁵² The first conventions containing such a rule used to add that the application of the convention did not depend on any condition of reciprocity,¹¹⁵³ thereby has happened … there usually remains a residue of prerogative power vested in the Executive.” 1152 Article 6 of the Convention on the Conflicts of Laws relating to the Form of Testamentary Dispositions, concluded at The Hague on 5 October 1961, in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, pp. 52 et seq. 1153 Such provisions can be found in Article 11 of the Convention on the Law Applicable to Traffic Accidents, concluded at The Hague on 4 May 1971, in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, pp. 148 et seq.; Article 11 of the Convention on the Law Applicable to Products Liability, concluded at The Hague on 2 October 1973, ibid., pp. 202 et seq.; Article 3 of the Convention on the Law Applicable to Maintenance Obligations, concluded at The Hague on 2 October 1973, ibid., pp. 230 et seq.; Article 4 of the Convention on

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insinuating that in the past the application of a foreign law by the courts of a country was considered as a kind of concession towards the State whose law was designated.¹¹⁵⁴ What at present can be considered as a standard clause of both choice-of-law conventions as well as of EU regulations on private international law¹¹⁵⁵ reveals a fundamental re-orientation of policy objectives in this area. The initial Hague Conventions concluded before World War I¹¹⁵⁶ and also the first instruments adopted after World War II¹¹⁵⁷ were

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the Law Applicable to Agency, concluded at The Hague on 14 March 1978, ibid., pp. 268 et seq.; Article 6 of the Convention on the Law Applicable to Contracts for the International Sale of Goods, concluded at The Hague on 22 December 1986, ibid., pp. 344 et seq., etc. An explicit waiver of any condition of reciprocity is still contained in Article 6 of the Convention on the Form of Testamentary Dispositions, see supra footnote 1152, and also in Article 11 of the Convention on Traffic Accidents as well as Article 11 of the Convention on Products Liability, both in previous footnote. For a thorough study of the matter see Paul Lagarde, “La réciprocité en droit international privé”, Recueil des cours 154 (1977), 103-214 at pp. 182 et seq. See Article 2, Rome I, for contractual obligations, Article 3, Rome II, for non-contractual obligations, Article 4, Rome III, for divorce proceedings and, for maintenance obligations, Article 15 of Reg. 4/2009 in conjunction with Article 2 of the Hague Maintenance Protocol of 2007. See Article 8 of the 1902 Marriage Convention, Convention du 12 juin 1902 pour régler les conflits de lois en matière de mariage, French text available on the website of the Hague Conference: “La présente convention ne s’applique qu’aux mariages célébrés sur le territoire des Etats contractants entre personnes dont une au moins est ressortissante d’un de ces Etats. Aucun Etat ne s’oblige, par la présente convention, à appliquer une loi qui ne serait pas celle d’un Etat contractant.” The last sentence is identical in Article 9, para. 2, of the 1902 Divorce Convention, Convention du 12 juin 1902 pour régler les conflits de lois et de juridictions en matière de divorce et de séparations de corps, French text available on the website of the Hague Conference; see also Article 10 of the 1905 Hague Convention on Effects of Marriage, Convention du 17 juillet 1905 concernant les conflits de lois relatifs aux effets du mariage sur les droits et les devoirs des époux dans leurs rapports personnels et sur les biens des époux, French text available on the website of the Hague Conference: “La présente convention n’aura pas d’application lorsque, d’après les articles précédants, la loi qui devrait être appliquée ne serait pas celle d’un état contractant.” See Article 6 of the Convention of 24 October 1956 on the Law Applicable to Maintenance Obligations towards Children, in Hague Convention on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, p. 38 at p. 39: “La convention ne s’applique qu’aux cas où la loi désignée par l’article premier est celle d’un des Etats contractants.” No corresponding explicit provision is contained in the Hague Sales Convention of 1955, Convention sur la loi applicable aux ventes à caractère international d’objets mobiliers corporels, concluded at The Hague on 15 June 1955, ibid., pp. 20 et seq.; over time, the silence of this Convention on the matter has been interpreted in the contracting States as implying the universal application of the instrument, see Henri Batiffol and Paul Lagarde, Droit international

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confined to the private international relations between contracting States. In more recent times, even where old conventions existed and were replaced by new ones, the new instruments have abandoned reciprocity and turned to universal application.¹¹⁵⁸ 539. A similar observation can be made in respect of uniform law conventions on maritime matters. The first generation of such conventions concluded in the early twentieth century generally confined their respective scope of application to legal relations between vessels flying the flags of contracting States.¹¹⁵⁹ When in more recent times the instruments were modernized and replaced by other texts, this requirement was abandoned. Thus, the 1989 Salvage Convention, contrary to its predecessor of 1910, does not require any link between the facts of a salvage case with a contracting State; it is applicable whenever judicial or arbitral proceedings relating to salvage operations are conducted in a State party.¹¹⁶⁰ The limitation of shipowners’ liability may be cited as a further example: the first international convention concluded in 1924 only covered the owners of a “ship … which is a national of another contracting state” and permitted the contracting parties to deprivé, Vol. 2, 6th ed., Paris, 1976, p. 257 with footnote 4-1 with further references; for Belgium see Rigaux and Fallon, No. 14.182 at pp. 906-907; for Switzerland see Max Keller and Jolanta Kren Kostkiewicz in Anton Heini, Max Keller, Kurt Siehr, Frank Vischer and Paul Volken, eds., IPRG Kommentar, Zurich, 1993, Art. 118, para. 5. 1158 This change is conspicuous in the case of maintenance obligations, see the 1956 Convention, previous footnote, and the 1973 Convention on Maintenance Obligations, supra footnote 1152; another example for the important change of perspective can be seen in the field of the protection of minors: Article 13, para. 3 of the Convention concerning the Powers of Authorities and the Law Applicable in Respect of the Protection of Infants, concluded at The Hague on 5 October 1961, Hague Convention on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, p. 46, reserves the right to limit the application of the Convention to infants who are nationals of a contracting State, while Article 20 of the Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children, done at The Hague on 19 October 1996, ibid., p. 396, enunciates that the choice-of-law rules of the Convention apply even if the law designated is the law of a non-contracting State. 1159 Thus, the Convention for the Unification of Certain Rules of Law with Respect to Collisions between Vessels, done at Brussels on 23 September 1910, authoritative French text in Reichsgesetzblatt 1913, 49, only applies to collisions between vessels belonging to contracting States, see Article 12; Article 15 of the Convention for the Unification of Certain Rules of Law Respecting Assistance and Salvage at Sea, done at Brussels on 23 September 1910, authoritative French text in Reichsgesetzblatt, 1913, 66, requires that either the assisted or the salved vessel belong to a contracting party, but permits the contracting States to make the application of the instrument conditional upon reciprocity where citizens of non-contracting States are involved. 1160 See Article 2 of the International Convention on Salvage, done at London on 28 April 1989, 1953 UNTS 194; for the 1910 Convention see the previous footnote.

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prive the nationals of non-contracting States of the privileges granted by the instrument.¹¹⁶¹ The current 1976 Convention on the limitation of liability for maritime claims basically creates a uniform law that entirely supersedes national provisions when a limitation fund is constituted in a contracting State, regardless of the flag and the nationality of the persons involved; a reservation of reciprocity is still possible under Article 15 paragraph 1, but it is exceptional in practice.¹¹⁶² 540. Thus, the long-term comparison reveals a de-politization of conventionbased private law in the sense that the application of foreign law or the rules of uniform law is no longer perceived as a concession of State A towards the foreign State B which would require a quid pro quo, namely the commitment of State B to apply either the law of A or the same uniform rules in analogous situations. While the requirement of reciprocity has been abolished with regard to the application of foreign or uniform law, it has oftentimes been maintained and confirmed with regard to the recognition and enforcement of foreign judicial decisions; treaty commitments to recognize foreign judgments will invariably be limited to decisions rendered in other contracting States. This requirement has even been endorsed in the same instruments which have abandoned reciprocity for the application of foreign law.¹¹⁶³ Apparently, the international community still considers the application of law in judicial proceedings leading to an enforceable judgment as a sovereign State act of higher intensity than the abstract regulation of legal relations by provisions of law. Whether this is correct may appear questionable since States usually do not monitor the recognition and enforcement – in foreign countries – of the judgments of their courts rendered in civil or commercial matters. Usually, the recognition and enforcement of foreign judgments is a matter between the private parties and does not affect State interests; in this respect, it is very similar to the application of foreign law. Yet, no international instrument has been adopted so far that provides for the recognition 1161 See Article 12 of the International Convention for the Unification of Certain Rules relating to the Limitation of the Liability of Owners of Seagoing Vessels, with Protocol of signature, signed at Brussels on 25 August 1924, authoritative French text and English translation in 120 LNTS 123. 1162 See Convention on Limitation of Liability for Maritime Claims, concluded at London on 19 November 1976, 1456 UNTS 222; according to the survey published in CMI Yearbook 2010, pp. 645 and 648 et seq., no contracting State has made a notification under Article 15, para. 1. 1163 See Article 20 of the Hague Convention on Parental Responsibility, see supra, footnote 699, which abandons the reciprocal application only with regard to the “provisions of this Chapter“, i.e. Chapter III on applicable law; the rules on recognition in Articles 23 et seq. only apply to “measures taken by the authorities of a Contracting State”. In a similar vein, EU Reg. 4/2009 governs only the recognition of decisions on maintenance obligations rendered in other Member States, see Articles 17 and 23, while the choice-of-law provision of Article 15 in combination with Article 2 of the 2007 Hague Maintenance Protocol is of universal application.

Chapter I – State Action between International and Municipal Law

and enforcement of foreign judicial decisions irrespective of whether that instrument is binding upon the foreign State as well. Section 3: Limitations of State Action 541. The prerogative of legislation and regulation is founded on State sovereignty. Sovereignty was initially regarded as an attribute of the individual ruler, but it was later transferred to the anonymous corporation of the State in order to ensure the continuity of treaties made by the sovereign. It was initially characterized as absolute and entirely unrestricted power by the pioneer writers Jean Bodin¹¹⁶⁴ and Thomas Hobbes.¹¹⁶⁵ In light of the social unrest prevailing in France and England at the relevant times, both authors were, however, mainly interested in the internal powers of a sovereign within a given State. In relations between States, the sovereignty of one State can never be unlimited; if it were it would extend to other States and would encroach upon their sovereignty – what would necessarily mean that the other State could not enjoy unrestricted sovereignty. Therefore, the original plea for unrestricted sovereignty has given way to a principle of “sovereign equality” as enunciated in Article 2 no. 1 of the Charter of the United Nations.¹¹⁶⁶ It is consequently assumed that the jurisdiction of a State is not unlimited; it exists within certain boundaries indicated by minimum connections between the State and the object it wants to subject to its powers. 542. The State powers flowing from sovereignty are generally referred to as jurisdiction. In accordance with the triad of State functions, they are subdivided into adjudicatory jurisdiction, enforcement jurisdiction and prescriptive jurisdiction.¹¹⁶⁷ Prescriptive jurisdiction describes the right of a State to make its law applicable to persons, things and activities. Adjudicatory jurisdiction refers to the powers of a State’s court to decide legal disputes. Enforcement jurisdiction designates a State’s faculty to induce or compel compliance with applicable laws by the threat of sanctions or by the use of administrative or judicial force. For all three types of jurisdiction, certain limitations exist under public international law. They have to be distinguished from the national 1164 Jean Bodin, République, French edition of 1583, here cited from a partial English translation: Jean Bodin, On Sovereignty – Four Chapters from the Six Books of the Commonwealth, edited and translated by Julian H. Franklin, Cambridge, 1992. Bodin repeatedly enunciates the absolute character of sovereignty, see pp. 1, 8, 23, 56, without however questioning the supremacy of divine and natural laws, see pp. 10, 13, 31. 1165 Thomas Hobbes, Leviathan, revised student edition by Richard Tuck, ed., based on the edition of 1651, Cambridge, 1996; contrary to Bodin, previous footnote, p. 35, Hobbes rejects the binding effect of contracts made by a sovereign, p. 122, on that ruler, thus driving the absolute character of sovereignty even further. 1166 See supra, footnote 1144. 1167 For this subdivision and the following definitions see American Law Institute, Rest. Third, Foreign Relations Law of the United States, Vol. 1, St. Paul/Minn., 1987, § 401.

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rules which determine the extent of the respective type of jurisdiction. The scope of jurisdiction as indicated by national law may fall short of, but must not exceed what is allowed under public international law. In our context it is primarily prescriptive jurisdiction that matters to the extent that it draws limits on conflict rules enacted by the several States for the implementation of their own laws. 543. At the present state of public international law, the prescriptive jurisdiction of a State is recognized where persons, goods or activities are located within its territory (territorial jurisdiction).¹¹⁶⁸ Outside the territory and the territorial waters of a State, ships are subject to the exclusive jurisdiction of the flag State on the High Seas.¹¹⁶⁹ Moreover, personal jurisdiction, as acknowledged by international law, enables a State to extend the application of its laws to its own citizens even with respect to actions carried out abroad or other fact situations located in foreign countries.¹¹⁷⁰ A third principle is referred to as the protective principle or the passive personality principle: a State may apply its laws to actions carried out abroad but affecting either its nationals or established interests it wants to protect; this principle appears to have less support in international law and to require some qualifications.¹¹⁷¹ Finally, certain criminal acts are subject to what is called the universality principle, allowing every State to intervene.¹¹⁷² These heads of jurisdiction need to be specified with regard to the various areas of the law. They are wide enough to entail overlaps and conflicts of jurisdictions between several States; several methods to cope with such conflicts in the exercise of jurisdiction have been suggested.¹¹⁷³ 1168 Rest. 3rd Foreign Relations Law, § 402, para. 1; Carreau, Nos. 832 et seq., pp. 337 et seq.; Doehring, Nos. 808 et seq., pp. 342-343; with particular reference to penal law Ambos, § 3, Nos. 2 et seq., pp. 27 et seq.; Cassese, p. 451. 1169 See Article 92 of the United Nations Convention on the Law of the Sea, done at Montego Bay on 10 December 1982, 1833 UNTS 397; it should be noted that between the territorial waters and the High Seas several intermediate zones (contiguous zone, continental shelf, exclusive economic zone) are subject to special jurisdictional regimes; for the impact on private international law see Jürgen Basedow, “Rome II at Sea – General Aspects of Maritime Torts”, RabelsZ 74 (2010), 118-138 at pp. 129 et seq.; Andrew Dickinson, “Territory in the Rome I and Rome II Regulations”, Lloyd’s Mar. Com. LQ (2013), 86-132. 1170 Rest. 3rd Foreign Relations Law, § 402, para. 2; Carreau, Nos. 862 et seq., pp. 347 et seq. also Nos. 880-883, pp. 355-356; Doehring, No. 816, pp. 345-346; with regard to criminal law Ambos, § 3, Nos. 37 et seq., pp. 40 et seq.; Cassese, p. 451, both referring to the principle of “active nationality”. 1171 Rest. 3rd Foreign Relations Law, § 402, para. 1 (c), and para. 3; Carreau, Nos. 889 et seq., pp. 359-360; Doehring, Nos. 817-818 at pp. 346-347; with particular reference to penal law Ambos, § 3, Nos. 65 et seq., pp. 51 et seq.; Cassese, p. 451. 1172 Ambos, § 3, Nos. 90 et seq., pp. 58 et seq.; Cassese, pp. 451-452; Carreau, Nos. 892 et seq., pp. 360-361; Doehring, Nos. 819 et seq., pp. 347-349. 1173 See Rest. 3rd Foreign Relations Law, § 403 and the numerous references contained in the comments and notes.

Chapter I – State Action between International and Municipal Law

Section 4: Systematic Considerations and Survey 544. Traditional private international law of the Savignyan type assesses the proximity or closeness of a case to the several legal orders involved in order to ascertain the “seat” of the legal relation and the State that is best placed to determine the outcome of a cross-border case.¹¹⁷⁴ Accordingly, the major interest of conflicts scholars adhering to this approach focuses on bilateral conflict rules which basically treat the law of the forum State and foreign law on an equal footing and interchangeably refer to domestic or to foreign law as indicated by the connecting factor. These are the rules dealing with default situations and third-party situations as outlined above in paragraph 534 and as treated in greater detail in Part II above. Except for those rules which express a clear State interest and a corresponding policy orientation, they shall not be discussed here, in this part III, in greater detail. 545. As opposed to the nineteenth century, the role of the State in contemporary society is much more active. States are no longer confined to some core activities such as the safeguarding of internal and external safety, the administration of justice, the creation and protection of a currency and the construction and maintenance of an infrastructure. Public responsibilities are, rather, more numerous and comprehensive. People expect their Governments to ensure education and the supply of sufficient and healthy food, to protect the weak against the mighty, to preserve cultural heritage and the environment, and to relieve the population of many risks of life, for example unemployment, old age, impoverishment, diseases, accidents, nursing care dependency, bad investments, the purchase of defective goods and services. The public good has become a very complex matter. To a large extent it is furthered by the private initiative of individual citizens, but State intervention in pursuance of these objectives occurs in all parts of the world, although its degree differs widely. Large bureaucracies are devoted in many countries of the world to the continuous creation, review and renewal of legal norms aiming at those goals. 546. Scholarship in private international law has traditionally marginalized such State intervention. The only place in the Savignyan system reserved for such provisions has been a kind of escape hatch designated as “laws of a strictly positive, mandatory nature” by Savigny,¹¹⁷⁵ later as public policy (ordre public) and, in more recent times, as overriding mandatory provisions (lois de police, leggi di applicazione necessaria, Eingriffsnormen). These umbrella terms are both too narrow and rather irrelevant: too narrow because they do not take account of the emergence of a new type of bilateral conflict rule dealing with some of the noted types of State intervention; and irrelevant because they only refer to the common characteristic whereby the enforcement of such provisions heeds the substantive policy goals pursued and not, 1174 See supra, paras. 14 et seq. 1175 Savigny, pp. 275 et seq.: “Gesetz von streng positiver, zwingender Natur.”

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at least not primarily, considerations of proximity or closeness. Given the wide variety of the substantive policies in question, it is not possible to substantiate the scope of application of such provisions beyond the negative and rather meaningless assertion that they are not necessarily part of the law otherwise governing. 547. From the preceding observations it follows that a system of bilateral conflict rules featuring certain formal properties is of limited help when the impact of State interventions on international private legal relations has to be assessed. On the other hand, an analysis of State action intended, for the sake of the public good, to somehow interfere with private arrangements will more than ever before have to take into account the cross-border reach of that State action. The permeability of frontiers in the open society means that the public ordering of society and economy is constantly and increasingly exposed to the threat of remaining ineffective because of circumvention. Consequently, legislators have to think of the geographical and personal scope of application of their policy-driven enactments. While this is mainly a matter for the growing discipline of international administrative law, private international law has to determine the effects of such laws and regulations on cross-border private relations. To attain this goal, it is helpful to take a closer look at the interests pursued by States and at the functions performed by State law against the backdrop of private ordering. 548. A first type of policy in relation to these interests and functions is primarily focused on the role of the acting State in the international community; it deals with the State’s relations with a specific other State or group of States. The measures taken are more inspired by foreign policy considerations than by their subject matter; in this sense, they can be designated as foreign policy measures, see below chapter 2; examples are the recognition or non-recognition of a foreign State or Government, the levy of an embargo on trade with a specific State or the use of a blocking statute aimed against measures adopted by a clearly identified State. The second and third groups of policies are intended to countervail the market imperfections mentioned above.¹¹⁷⁶ They pursue the public interest in shaping a particular social, economic, cultural or political order within the boundaries of a given State’s territory. Some of those policies are meant to outweigh an imbalance that would deprive private arrangements of the promise of furthering social welfare. Where the countermeasures taken by States are confined to the adoption of mandatory private law, enforcement is left to private initiative as, for example, in consumer and labour markets. The result is a new type of conflict rule which preserves its bilateral character but limits party autonomy, see below chapter 3. A third type of policy comprises those values which are generally considered as indispensable and constitutive of the societal identity of a country by its inhabitants. Their implementation is, however, not left to private initiative but is entrusted to public institutions created for that pur1176 See supra, para. 534.

Chapter I – State Action between International and Municipal Law

pose in the first place. While this does not foreclose private litigation, it renders the formulation of bilateral conflict rules difficult and rather suggests a system of double unilateralism. Examples are regulations concerning the fundamental economic order or cultural identity, see below chapter 4.

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549. Measures adopted by States may exclusively address the members of the international community, i.e. other States and international organizations. Yet, they may have repercussions for private law relations and, in particular, for the conflict of laws; as an example, the significance of the recognition or non-recognition of a foreign State or Government will be discussed below, see section 1. Other State acts, adopted in municipal law, although directly addressing individuals and companies, may exclusively or primarily pursue foreign policy objectives. This will often be the case where State Governments believe that the target State is amenable to foreign influence and will comply with the expectations of the international community if the activities of its citizens and undertakings are obstructed. Such considerations often give rise to numerous forms of economic sanctions which make use of the acting State’s own nationals as instruments of foreign policy and take the target State’s nationals as hostages of that country’s foreign policy, see below section 2. A specific type of such measures is the so-called blocking statute; it is conceived as a protective response of the acting State against legal measures taken by a foreign State which are considered as excessively expansive or even unlawful. Here again, the foreign State is the target, although the addressees of the statute are private actors, in most cases the nationals of the State enacting the blocking statute, see below section 3. Section 1: Recognition and Non-recognition of Foreign States or Governments 1.

Background in Public International Law

550. The method of localization employed in private international law aims to allow the assignment of either a transnational dispute or certain of its aspects to a single legal system, usually the legal system of a nation-State. This will sometimes raise the question whether the political entity whose law is designated by conflict rules is a “State” and whether the rules enacted by it can be referred to as “law”. The answers to these questions would, at least at first sight, seem to be found in the principles of public international law.

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These principles also appear to supply the answer where a conflict rule, such as Article 22 Rome I or Article 25 Rome II, does not designate the law of a nation-State, but, because of its federal structure, directly identifies the law of a sub-unit of that State.¹¹⁷⁷ It clearly emerges from such conflict rules that they refer to the territorial sub-unit of a “State”, and that capacity would again seem to depend on principles of public international law. 551. For the purposes of international law, the capacity of statehood does not follow from any national constitutional law, being rather a matter of international law itself. A definition comprising three or four elements has been conceived of and is at present generally accepted. Specifically, the three undisputed elements of statehood are, first, an effective Government, i.e. “a central structure capable of exercising effective control over a human community living in a given territory”;¹¹⁷⁸ the second element is the human community or population; and the third a fi xed territory, the last two elements both being subject to said Government. The 1933 Montevideo Convention on Rights and Duties of States defines a State according to these elements, adding as a fourth one the capacity to enter into relations with other States.¹¹⁷⁹ Further attributes such as the permanence of the population or the independence and effectiveness of Government supplement these criteria and may gain particular weight in appropriate cases. 552. The requirements listed above are not very precise, and their assessment therefore depends on the person called upon to ascertain them. It is in this context that the recognition of an entity as a State by other members of the international community becomes relevant. While it is not constitutive of statehood, it contains an element of volition that goes beyond the mere cognisance of the constitutive elements, namely the intention of a State to approve the capacity of the recognized State as a member of the international community.¹¹⁸⁰ Recognition by one State is not binding on other States, but on the recognizing State; this State will subsequently be estopped from questioning the legal personality of the recognized State.¹¹⁸¹ While these ef1177 See for the different methods of dealing with federal legal systems supra, para.24, and in particular footnotes 45 and 46. 1178 Antonio Cassese, International law, 2nd ed., Oxford, 2005, p. 73; in an analogous sense (“administration permanente”) Dominique Carreau, Droit international, 7th ed., Paris, 2001, No. 23 at p. 17; Karl Doehring, Völkerrecht, Heidelberg, 1999, para. 116 at p. 52 (“oberste Befehlsstelle”); Ian Brownlie, p. 71. 1179 Convention on Rights and Duties of States, adopted by the 7th International Conference of American States, done at Montevideo on 26 December 1933, 165 LNTS 19; Article 1 reads: “The state as a person of international law should possess the following qualifications: (a) a permanent population, (b) a defined territory, (c) government and (d) capacity to enter into relations with the other states.” 1180 See Jochen A. Frowein, “Recognition”, in Rudolf Bernhardt, Encyclopedia of Public International Law, Vol. 4, Amsterdam, 2000, pp. 33-41 at pp. 35-36; Cassese, pp. 7374. 1181 Cassese, p. 74.

Chapter 2 – Foreign Policy Measures and Their Effects in Private Law

fects occur in State-to-State relations, it is up to the municipal legal system of the recognizing State to determine the institution which is internally empowered to recognize a foreign State. This will usually be the Government as a whole or a department of the Government, in particular the Ministry for Foreign Affairs. The assignment of such competence must again be distinguished from the question whether and to what extent the recognition by the competent organ is binding on other institutions of that State, in particular on the courts. It is only the latter question that is relevant for private international law. There is a normative and a factual approach to its solution. 2.

Effects of (Non-)Recognition in Private International Law

a) The normative approach 553. In 1986, a lower court in Northern Germany had to decide on an application to appoint a guardian for a 20-year-old man, allegedly of Palestinian nationality. According to the application, the young man was still underage by virtue of his national law, i.e. the law of Palestine. According to the German conflict rule, it was indeed the national law that would have governed the appointment of a guardian and other aspects of guardianship in this case. The court pointed out that Palestinian citizenship was not recognized in Germany, because Palestine was not recognized as a State at the time in question. Therefore, the court considered the young man as a stateless person; it consequently applied the law of his habitual residence, i.e. German law, and found that under this law he was already of age and therefore no longer a cognisable subject of guardianship. The application was thus dismissed.¹¹⁸² 554. The decision provides an example of what sometimes is called the normative approach to this issue: when ascertaining the statehood of the entity whose law is applicable under the conflict rules of the forum, some courts feel bound by the position taken by their own Government. This view has been very common in Anglo-American jurisdictions.¹¹⁸³ For many years, certificates issued by the Foreign Office on the position of the British Government vis-à-vis foreign States have been considered as conclusive by English courts, apparently for primarily constitutional reasons. Recognition of a foreign State was considered as a matter for the executive branch of Government, not for the courts:

1182 AG Neumünster, 16 December 1986, IPRspr. (1986), No. 108; for a French translation see Rev. crit. dr. int. pr. 77 (1988), 675, with annotation by Joe Verhoeven. On the issue of Palestinian citizenship see Andreas Zimmermann, “The Nationality of the Inhabitants of the Palestinian Autonomous Territories”, in Amos Shapira and Mala Tabory, eds., New Political Entities in Public and Private International Law, The Hague, 1999, pp. 231-246. 1183 Brownlie, pp. 95-96.

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555. The adoption, by a municipal court, of the view expressed by its own national Government with regard to the legal status of a foreign entity may satisfy the need felt in a country for constitutional harmony as between the various institutions of that country. But it does not take account of the differences in motivation which determine the positions taken by the Government, on the one side, and the views of the private parties to the case pending in court, on the other. The Government’s view may result from considerations of political expedience. For example, the non-recognition of the East German State by most Governments of the world in the period between 1949 and 1973 could hardly be ascribed to the absence of the three constitutive elements of a State outlined above.¹¹⁸⁵ The German Democratic Republic had a territory, a population and an effective Government that was no less independent of the Soviet Union than the Governments in Hungary or Czechoslovakia. In those years, most States outside the Soviet bloc did not recognize East Germany out of deference to the position and possible reactions of West Germany and/or other Western powers. At present, similar considerations apply to the position of Taiwan, which very likely fulfills the requirements of statehood but is considered a Chinese province by the People’s Republic of China.¹¹⁸⁶ In order to entertain and preserve diplomatic relations with the PRC, only very few countries have recognized Taiwan de jure as an independent State under the name of Republic of China. Nonetheless, there is not the slightest doubt that people living in East Germany in the 1960s or 1970s were effectively subject to the East German Government and legislation and that currently citizens of Taiwan have to face severe sanctions unless they comply with the Taiwanese laws and regulations. 556. The normative approach outlined above tries to accommodate the factual situation in non-recognized States – which is inescapable for the people living there – with rather artificial legal constructions: in the Zeiss case, the English courts took the view that East Germany, even after the German Democratic Republic had been established, was still considered as the Soviet Zone and that the Soviet Government had simply delegated its authority to the East German State; thus, the laws of East Germany were given effect,

1184 Duff Development Company Ltd v. Government of Kelantan, [1924] AC 797 (HL) at p. 820, per Lord Dunedin; for a broader analysis see Zaim Nedjati, “Acts of Unrecognized Governments”, Int. Comp. LQ 30 (1981), 388-415 at pp. 391 et seq. 1185 See supra, para. 551. 1186 See Cassese, p. 76.

Chapter 2 – Foreign Policy Measures and Their Effects in Private Law

but as pseudo-Soviet laws and not as East German laws.¹¹⁸⁷ In a similar vein, it might appear conceivable to consider China, Taiwan, Macao and Hong Kong as a collective federal entity; conflict rules referring to the whole of this entity would have to be supplemented by further conflict rules designating the laws of Hong Kong or the laws of Macao or the laws of Taiwan as applicable. While it might be possible to achieve justice as between private persons by virtue of such constructions, they are out of touch with reality and should be avoided as artificial. b) The factual approach 557. A more realistic approach that takes account of the private interests involved has gained more and more ground in recent years and appears to prevail nowadays. It may be referred to as the factual approach. It can be traced back to the nineteenth century when the United States Supreme Court, in Texas v. White, made a general statement on the matter. During the US Civil War, the State of Texas, under a rebel Government, had joined the alliance of the Confederate States; in order to raise funds for the support of its military, the State had enacted a statute repealing certain restrictions on the alienation of State property, and the Supreme Court, after the end of the Civil War, had to decide on the validity of that act. The Court stated: “The legislature of Texas, at the time of the repeal, constituted one of the departments of a State government, established in hostility to the Constitution of the United States. It cannot be regarded, therefore, in the courts of the United States, as a lawful legislature, or its acts as lawful acts. And yet, it is a historical fact that the government of Texas, then in full control of the State, was its only actual government; and certainly if Texas had been a separate state, and not one of the United States, … its acts, during the period of its existence as such, would be effectual, and in almost all respects, valid. … It is not necessary to attempt any exact definitions, within which the acts of such a state government must be treated as valid, or invalid. It may be said, perhaps with sufficient accuracy, that acts necessary to peace and good order among citizens, such for example, as acts sanctioning and protecting marriage and the domestic relations, governing the course of descents, regulating the conveyance and transfer of property, real and personal, and providing remedies for injuries to person and estate, and other similar acts, which would be valid if emanating from a lawful government, must be regarded in general as valid when proceeding from an actual, though unlawful government…”.¹¹⁸⁸ 1187 See the discussion in Nedjati, Int. Comp. LQ 30 (1981), 395, with particular reference to Carl Zeiss-Stiftung v. Rayner & Keeler Ltd., [1965] 1 All ER 300 (CA); in that case in the House of Lords Lord Reid said: “We recognize them not because they are acts of a sovereign state but because they are acts done by a subordinate body which the U.S.S.R. set up to act on its behalf”, [1966] 2 All ER 536 (HL) at p. 548. 1188 State of Texas v. White, 74 US 700 at 732-733 (1868).

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558. Two conclusions can be drawn from this passage. First, a distinction must be made between activities of the state in question which are directed against the forum state and other activities aiming at the preservation of peace and order in the respective foreign country. With regard to the former activities of a foreign state, political considerations underlying the foreign policy of the forum state play an important role. Second, and with regard to the latter activities, the interest of the private parties involved in the certainty of their legal and contractual relations prevails and advocates for the application of the non-recognized state’s law and the recognition of crystallizations of the law in that country. 559. The predominance of private interests has also been enunciated by the International Court of Justice in its advisory opinion on Namibia. While the court declared the administration of Namibia by the Government of South Africa as illegal and invalid, it also pointed out that “this invalidity cannot be extended to those acts, such as, for instance, the registration of births, deaths and marriages, the effects of which can be ignored only to the detriment of the inhabitants of the Territory.”¹¹⁸⁹

The court’s advisory opinion only concerned the position of Namibia in the international community, i.e. vis-à-vis other States and international organizations. Individuals were not involved. It is therefore unlikely that the statement above, motivated by considerations of individual rights, establishes a duty under international law to recognize the registrations of civil status put into effect by non-recognized States and Governments. Still, the dictum of the court may be considered as a recommendation to States and their judiciaries in respect of the interests of private persons who are inhabitants of the non-recognized State and are actually subject to its laws and administration. It might also be interpreted as an implicit announcement that under developing human rights standards, a duty of recognition could be established at a later stage. 560. With regard to the application of the laws of a non-recognized State in private international relations, the factual approach has received approval in a number of jurisdictions over time. On the basis of a thorough comparative analysis of national case law, Verhoeven came to the conclusion in 1985 that the first reflex of judges has often been the non-recognition of foreign law emanating from a non-recognized foreign State, but that most of them have ultimately embraced the application of an effective law, irrespective of the recognition of the foreign State.¹¹⁹⁰ Swiss courts were the forerunners in 1189 Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion, ICJ Reports 1971, 16 at p. 56, para. 125. 1190 Joe Verhoeven, “Relations internationales de droit privé en l’absence de reconnaissance d’un état, d’un gouvernement ou d’une situation”, Recueil des cours 192 (1985), 9-232 at p. 134.

Chapter 2 – Foreign Policy Measures and Their Effects in Private Law

this respect. In 1924, the Federal Court of Switzerland held that the non-recognition of the Soviet Government simply deprived that Government from representing Russia in Switzerland in matters of both public and private law, but that this fact did not deprive Russian (or Soviet) law from otherwise producing its effects.¹¹⁹¹ In France, the factual approach was also accepted in a case arising from the Russian October Revolution. Many years later, in 1973, the French Cour de cassation was asked to apply decrees on the nationalization of private property issued by the Soviet Government in 1918, a time when France had not yet recognized the Soviet Union. The court held that the lack of recognition of a foreign Government does not permit the French judge to ignore private law regulations adopted by that Government.¹¹⁹² 561. In Germany, the Federal Court had to decide on issues concerning a limited partnership established in Alsace during the German occupation of that part of France in World War II. The German occupational power had introduced German company law in Alsace which, according to the allegations of one of the parties, violated the Hague Convention of 1899 on the law of war;¹¹⁹³ therefore, the party asserted that the claims in dispute should be governed by the French company law which had been reintroduced in Alsace after World War II. The Federal Court, however, referred to the basic principle governing the conflict of laws, which is the search for the centre of gravity, proximity or the closest relation. This principle should govern not only a conflict between two legitimate legal orders, but also a conflict between a legitimate but ineffective legal order and another legal order that is illegitimate under international law, but effectively governing legal transactions.¹¹⁹⁴ According to the court, the contrary view, i.e. the normative ap1191 BG, 10 December 1924, BGE 50 II 507 at p. 512; see Verhoeven, Recueil des cours 192 (1985), 111; see also Adolf Schnitzer, Handbuch des Internationalen Privatrechts, Vol. 1, 4th ed., Basel, 1957, p. 203; and for the current opinion Anton Schnyder and Manuel Liatowitsch, para. 242, at p. 87; Bucher and Bonomi, para. 442, at pp. 114-115 with further references. 1192 Cass. civ., 3 May 1973 (Stroganoff ), Rev. crit. dr. int. pr. 64 (1975), 426, with annotation Y. L. (Loussouarn) approving that solution: “La solution par elle [i.e. par la Cour de cassation] donnée est la seule valable parce qu’elle est la seule qui soit réaliste.” The solution of the Stroganoff judgment is still approved today, see Mayer and Heuzé, No. 85 at p. 67 and, with regard to companies established in a non-recognized State, No. 1029 at p. 750, footnote 5; Audit and D’Avout, No. 296, at pp. 263-264, No. 454, at p. 395, in respect of the recognition of judgments emanating from a non-recognized State. 1193 See Articles 42 et seq. of the Annex to the Convention (II) with Respect to the Laws and Customs of War on Land, done at The Hague on 29 July 1899, text as amended available on the website of the International Committee of the Red Cross, see http:// www.icrc.org/ihl. 1194 BGH, 26 September 1966, NJW (1967), 36 = IPRspr. (1966/1967), No. 14, at p. 51; for a broader discussion and further references see Hans-Jürgen Sonnenberger, “Anerkennung der Staatsangehörigkeit und effektive Staatsangehörigkeit natürlicher Personen im Völkerrecht und im internationalen Privatrecht”, BerDtGesVR 29

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proach, would lead to a rigid application of the law enacted by the legitimate legislator. It would inevitably entail the need to retroactively adjust legal relations which have essentially been completed or terminated to legal principles which were not contemplated at the time of the transaction.¹¹⁹⁵ 562. It should finally be noted that in the United Kingdom, too, a tendency towards the factual approach has been ascertained. In fact, Lord Denning stated with regard to the self-declared Turkish Republic of Northern Cyprus, which is not recognized by any State except for Turkey, that “the courts of this country can recognize the laws or acts of a body which is in effective control of a territory even though it has not been recognized by Her Majesty’s Government de jure or de facto: At any rate, in regard to the laws which regulate the day-to-day affairs of the people, such as their marriages, their divorces, their leases, their occupations and so forth: and furthermore that the courts can receive evidence of the state of affairs so as to see whether the body is in effective control or not.”¹¹⁹⁶

The comments in legal literature give evidence of different concerns: while some stress the constitutional need that the Government and the courts speak the same language,¹¹⁹⁷ others believe that a strict adherence to the normative approach may “hinder the courts in the just resolution of controversies between litigants.”¹¹⁹⁸ c) A differentiated solution 563. The factual approach has its limits, however; differentiation with regard to the issues in dispute is appropriate. Thus, a non-recognized State will lack the capacity to bring a case in a domestic court to assert certain claims or invoke certain rights; this may be explained either by the lack of legal personality in the non-recognized foreign body or by the fact that the foreign entity in such a case aims at an enrichment which would strengthen its position in the international community – an enrichment which would be contrary to the policy pursued through the non-recognition by the forum

1195 1196

1197 1198

(1988), 9-36 at pp. 22-25; Gerhard Hohloch, “The Failed State – Der Wegfall effektiver Staatsgewalt und das IPR”, ibid. 34 (1996), 87-133 at pp. 101-102, also referring to a number of similar issues; see also Daniel Busse, “New Political Entities and the Conflict of Laws – A German View”, in Amos Shapira and Mala Tabory, eds., New Political Entities in Public and Private International Law, The Hague, 1999, pp. 115138 at pp. 117-119. Ibid. Hesperides Hotels Ltd. v. Aegean Turkish Holidays Ltd., [1978] QB 205 (CA) at p. 218 per Lord Denning MR citing Kurt Lipstein, “Recognition of Governments and the Application of Foreign Laws”, Transactions of the Grotius Society 35 (1950), 157-188 at p. 188. Mann, p. 41. Nedjati, Int. Comp. LQ 30 (1981), 414.

Chapter 2 – Foreign Policy Measures and Their Effects in Private Law

State’s Government.¹¹⁹⁹ From a logical viewpoint, it may also seem difficult to understand how citizenship in a non-recognized State can be ascertained: no nationality without a nation. Thus, even under the factual approach, the German decision reported above¹²⁰⁰ might appear plausible. Yet, in modern private international law, nationality is employed as one indicator among others of proximity rather than as a concomitant of statehood.¹²⁰¹ Where a conflicts statute adheres to the nationality principle, the alleged nationality of a non-recognized State should therefore prevail provided that the foreign entity has an effective administration. In many other contexts, the modern development equally supports the view that a law that has been effective in a given territory and that has provided orientation to the private persons who act in that territory and by necessity trust in its Government’s acts, will be applied for reasons of legal and transactional certainty. Thus, the growing significance of private ordering explained in part II of this enquiry receives additional backing by a restrictive interpretation of the significance, for private international law, of the recognition of States under public international law. Section 2: Trade Embargoes 1.

On Restrictions of Foreign Commerce in General

a) Types of trade restrictions 564. Trade restrictions pursue various objectives and may accordingly be classified into two major groups. Some are intended to exclude certain categories of goods as such from international commerce; this is, for example, the case for regulations in respect of narcotic drugs, endangered species or cultural property relevant for the national identity of a country. The trade in such goods is not covered by the liberalizing provisions of the GATT¹²⁰² and is, moreover, constrained by manifold provisions of a number of international treaties.¹²⁰³ These instruments reflect policies pursued at the national level 1199 See Frowein, p. 36; see in this sense also the Swiss Federal Court, supra in the text preceding footnote 1191, and the citation from Texas v. White, supra, at para. 557; Mann, p. 41, would advocate this solution for foreign policy reasons. 1200 See supra, para. 553. 1201 See the judgment of the ECJ, supra footnote 179. 1202 See Article XX of the General Agreement on Tariffs and Trade (GATT), Annex 1A to the Agreement establishing the World Trade Organization, concluded at Marrakesh on 15 April 1994, 1867 UNTS 190, where some amendments to the original text are reproduced; they must be read together with the GATT 1947, see the website of the World Trade Organisation: http://www.wto.org/english/docs_e/gatt47_e.pdf. 1203 See for example the Convention on International Trade in Endangered Species of Wild Fauna and Flora, signed at Washington, DC, on 3 March 1973, 993 UNTS 243; Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property, done at Paris on 14 November

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in a large number of, or even in all States; they elevate these national policies to the global level of international consensus, but they are not an expression of foreign policy in the proper sense of the word. 565. The other type of trade restrictions differs in this respect. They are not supposed to question the legitimacy of the trade in certain categories of goods as such, but are meant to deprive specific States of the benefit of that trade. Restrictions of this type are usually designated as embargoes. They are often supplemented by similar restrictions relating to services, in particular transport services or financial services. Given their aim in – changing – foreign policy, they are usually of a temporary nature and directed at States which have either violated international law or have otherwise infringed the acting State’s interests. Some of these restrictions, while decreed by the several States, have their origin in obligations arising under international law, namely in resolutions of the United Nations Security Council adopted under Article 41 of the UN Charter.¹²⁰⁴ In other cases, the imposed restrictions raise questions as to their compatibility with international law. According to Article XXI GATT, such restrictions do not infringe the obligations under that treaty if, in particular situations, they are considered necessary for the essential security interests of a State or for the maintenance of international peace and security in accordance with the UN Charter.¹²⁰⁵ This section will exclusively deal with trade restrictions of the latter type, i.e. the ones targeted at other States. b) Tendencies 566. Trade embargoes are a dubious weapon. It is true that they send a political signal to the target State and will be considered as a sign of resolve by 1970, 823 UNTS 231, see infra, paras. 746 et seq.; United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, concluded at Vienna on 20 December 1988, 1582 UNTS 164. 1204 See footnote 1149 supra and for example United Nations, Security Council resolution 1373 (2001) adopted on 28 September 2001, S/RES/1373 (2001), which, in No. 1 (d) decided that “all states shall prohibit their nationals or any persons and entities within their territories from making any … economic resources … available, directly or indirectly, for persons who commit or attempt to commit … terrorist acts.” See Stefan Talmon, “The Security Council as World Legislator”, Am. Journ. Int. L. 99 (2005), 175-193; Nabil Ferjani and Véronique Huet, “L’impact de la décision onusienne d’embargo sur l’exécution des contrats internationaux”, Clunet 138 (2011), 737-760; Kathrin Osteneck, Die Umsetzung von Wirtschaftssanktionen durch die Europäische Gemeinschaft, Berlin, 2004, pp. 26-41; Rainer Hofmann, “Die Rechtskontrolle von Organen der Staatengemeinschaft”, BerDtGesVR 42 (2007), 1-41 at pp. 22 et seq. 1205 For a broader analysis of this provision, see Kees Jan Kuilwijk, “Castro’s Cuba and the U.S. Helms-Burton Act”, Journal of World Trade 1997, 47-61; Riyaz Dattu and John Boscariol, “GATT Article XXI, Helms-Burton and the Continuing Abuse of the National Security Exception”, Can. Bus. L .Journ. 28 (1997), 198-209.

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the public in the State imposing the sanction. It is also true that they do minimal harm as compared with other forms of hostility. But they equally impact the traders of the State levying the embargo and its economy; if trade is of mutual benefit to both parties, its prohibition is necessarily detrimental to both sides as well. Moreover, trade restrictions have often proven themselves ineffective. Two trends emerge from these conflicting considerations: on the one hand, economic sanctions are increasingly often employed as foreign policy tools; the European Union, which is competent under Article 215 TFEU for the imposition of restrictive measures in external relations, has taken such action vis-à-vis about 20 States.¹²⁰⁶ On the other hand, embargoes are becoming more and more tailor-made: in most cases they are confined to the export of arms or of equipment for internal repression including related services. Only few countries, such as Iran or North Korea, are the target of further bans, relating in particular to nuclear equipment and dual-use goods. The body of law governing these trade restrictions is becoming more and more detailed and complicated.¹²⁰⁷ c) Legal issues 567. The enforcement of these restrictive measures in private international relations raises three types of questions: (1) the first concerns the substantive, personal and geographical scope of application as determined by the embargo provisions in question. (2) A second question concerns the compatibility of such restrictions with rules and principles of public international law, in particular with Article XXI GATT,¹²⁰⁸ or with principles limiting the extra-territorial jurisdiction of States.¹²⁰⁹ (3) Finally, the main question for private international law relates to the impact of an embargo on contracts 1206 See the survey European Union, Restrictive Measures (Sanctions) in Force, a list updated on 6 October 2011, see http://eeas.europa.eu/cfsp/sanctions/docs/measures_en.pdf. 1207 For example, the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 of the United States, Public Law 111-195 of 1 July 2010, 124 Stat. 1311, comprises not less than 40 pages; for a treatise on the matter which is, however, not fully up to date, see Eric Hirschhorn, The Export Control and Embargo Handbook, 2nd ed., Dobbs Ferry, NY, 2005. 1208 See supra footnote 1205; it should be noted, however, that the GATT is not directly applicable in the courts of most jurisdictions. This follows from the widespread dualist approach to international law; see for the European Union ECJ, 12 December 1972, Joined Cases 21-24/72 (International Fruit Co. N.V. v. Produktschap voor Groenten en Fruit), [1972] ECR 1219, cons. 27; ECJ, 23 November 1999, Case C-149/96 (Portugal v. Council), [1999] ECR I-8395, cons. 47; see also Christian Tietje in id., ed., Internationales Wirtschaftsrecht, Berlin, 2009, § 15, para. 44, at p. 699. 1209 This issue has repeatedly been discussed, for example in the context of the US Helms-Burton Act, see Werner Meng, “Wirtschaftssanktionen und staatliche Jurisdiktion – Grauzonen im Völkerrecht”, ZaöRV (1997), 269-327; Cedric Ryngaert, “Extra-territorial Export Controls (Secondary Boycotts)”, Chinese Journal of International Law 7 (2008), 625-658.

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and other legal relations between private parties. The latter question has attracted many comments in conflicts scholarship. Litigation focusing on this point is, however, relatively rare, since traders usually have no choice but to comply with an embargo provided that it is applicable. States aiming at the imposition of effective restrictions therefore try to delineate their scope as widely as possible. Before analysing the private law effects, a closer look at the conflict rules governing the scope of restrictive measures is consequently appropriate. .

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The Scope of an Embargo

a) The US pipeline embargo 568. An example of a wide and even excessive scope of application is provided by the US pipeline embargo of 1981-82. At the time, energy supplies in Europe became scarce and West European Governments looked for additional supplies of natural gas from the USSR. The bargain finally agreed upon provided for the construction of a gas pipeline from the Yamal peninsula in Northern Russia to Western Europe, the pipeline to be financed by Western banks and built by Western industry; the USSR promised to reimburse these investments in the form of gas supplies over a number of years. The whole transaction consisted of a large number of single contracts between Western and Eastern companies and also between Western companies. The US Government was opposed to the project, fearing a growth of Soviet influence and a loss of its own in Western Europe. As a first step, US President Reagan prohibited US companies from cooperating; but when it turned out that European industry could build the pipeline without the aid of US undertakings, he enlarged the scope of the embargo.¹²¹⁰ 569. Under the US Export Administration Act 1979, the President was empowered to “prohibit or curtail the exportation of any goods, technology, or other information subject to the jurisdiction of the United States or exported by any person subject to the jurisdiction of the United States, to the extent necessary to further significantly the foreign policy of the United States…”.¹²¹¹ According to the statutory definition,

1210 For a comprehensive account see Klaus Bockslaff, “The Pipeline Affair of 1981/1982: A Case History”, Germ. YBIL 27 (1984), 28-37; further comments contained in the same volume focus on specific views of the pipeline affair, see Detlev Vagts, “The Pipeline Controversy: An American View Point”, Germ. YBIL 27 (1984), 38-53; A. V. Lowe, “International Law Issues arising in the ‘Pipeline’ Dispute: The British Position”, Germ. YBIL 27 (1984), 54-71; Pieter Jan Kuyper, “The European Community and the US Pipeline Embargo: Comments on Comments”, Germ. YBIL 27 (1984), 72-96; Karl Meessen, “Extra-territoriality of Export Control: A German Lawyer’s Analysis of the Pipeline Case”, Germ. YBIL 27 (1984), 97-108. 1211 Export Administration Act 1979 of 29 September 1979, PL No. 96/72, 93 Stat. 503, 50 USC, § 2405 (a) (1).

Chapter 2 – Foreign Policy Measures and Their Effects in Private Law “The term ‘United States person’ means any United States resident or national (other than an individual resident outside the United States and employed by other than a United States person), any domestic concern (including any permanent domestic establishment of any foreign concern) and any foreign subsidiary or affi liate (including any permanent foreign establishment) of any domestic concern which is controlled in fact by such domestic concern, as determined under Regulations of the President.”¹²¹²

On the basis of these provisions, the President issued an order restricting the export to the USSR of goods of US origin in respect of the exploration, production, transmission and refinement of oil and gas by all persons subject to the jurisdiction of the United States which were defined as including “(i) any person wherever located, who is a citizen or resident of the United States; (ii) any person actually within the United States; (iii) any corporation organized under the laws of the United States or of any state, territory, possession or district of the United States; or (iv) any partnership, association, corporation, or other organization, wherever organized or doing business, that is owned or controlled by persons specified in the previous paragraphs.”¹²¹³

570. It was the last point, i.e. the extension of the embargo to foreign affiliates of US companies, which aroused considerable concern in Europe. A Dutch court dealing with the matter pointed out that the various bilateral treaties on friendship, commerce and navigation concluded between the United States and West European countries in the aftermath of World War II provided for the national treatment of companies established under the laws of a contracting State, even if owned by shareholders of the other contracting State; thus, the European subsidiaries were to be considered as European companies, not as US companies.¹²¹⁴ Their affi liation to European States raised the question whether the prescriptive jurisdiction of the United States extended to the acts committed by these subsidiaries outside the United States. The Dutch court, discussing several bases of prescriptive jurisdiction under international law, rejected all of them and disregarded the US embargo as incompatible with international law, reserving however a different answer where an intentional evasion of the US embargo could be

1212 See the Export Administration Act 1979, previous footnote, 50 USC, § 2415 (2). 1213 Interim Rule of 22 June 1982, Fed. Reg. 47 (1982) 27250, also printed in Int. Leg. Mat. 21 (1982), 864. 1214 See President Rechtbank ’s-Gravenhage, cited supra footnote 1147, RabelsZ 47 (1983), 141 at pp. 144-145; it is noteworthy that the US Supreme Court recently rejected general (adjudicatory) jurisdiction of US courts over European affi liates of a US parent company, see Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011); see the summary in Am. Journ. Int. L. 105 (2011), 788.

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ascertained.¹²¹⁵ The pipeline embargo provoked countermeasures in European countries and gave rise to political consultations at the highest level which ultimately led to its repeal not more than five months later.¹²¹⁶ The incident illustrates the legal and political limitations effectively imposed on the levy of embargoes asserting an extraterritorial claim. b) The EU embargo against Iran 571. An example of an apparently more modest restriction is presented by the current trade embargo levied by the European Union on exports to Iran.¹²¹⁷ Article 2, paragraph 1 reads as follows: “It shall be prohibited: (a) to sell, supply, transfer or export, directly or indirectly, the goods and technology listed in Annexes I and II, whether or not originating in the Union, to any Iranian person, entity or body or for use in Iran; or (b) …; (c) to participate, knowingly and intentionally, in activities the object or effect of which is to circumvent the prohibitions referred to in points (a) and (b).”

572. This text covers all transactions concerning goods which are intended for use in Iran or, if outside Iran, by an Iranian recipient. The term of Iranian recipient is not defined by citizenship, but by residence or, in the case of legal entities, by having a registered office in Iran.¹²¹⁸ Thus, the delivery of items to Iranian citizens living outside Iran is permitted. On the other hand, legal persons incorporated and seated outside Iran, but owned or controlled directly or indirectly by persons in Iran, are recipients addressed by the prohibition. Since the “control” of a legal person is not a concept with a clear profile, various forms of joint ventures can be conceived of which are immunized from the embargo. On the other hand, the cited provision does not indicate minimum contacts with the European Union which are required of the goods supplied. Those goods may be of European or extra-European production, and neither their location at the time the contract is concluded 1215 See the previous footnote at pp. 145-146. 1216 See the Final Rule of 16 November 1982, Fed. Reg. 47 (1982), 51851; for the countermeasures see infra, Section 3. 1217 See Council Regulation (EU) No. 961/2010 of 25 October 2010 on restrictive measures against Iran and repealing Regulation (EC) No. 423/2007, OJ 2010 L 281/1 as amended. 1218 See Article 1 (m), Reg. 961/2010: “ ‘Iranian person, entity or body’ means: (i) the State of Iran or any public authority thereof; (ii) any natural person in, or resident in, Iran; (iii) any legal person, entity or body having its registered office in Iran; (iv) any legal person, entity or body, inside or outside Iran, owned or controlled directly or indirectly by one or more of the supra mentioned persons or bodies.”

Chapter 2 – Foreign Policy Measures and Their Effects in Private Law

nor the place of delivery must be in the European Union. Moreover, the provision does not indicate a minimum relation that is required as between the supplier of the goods and the EU. While the embargo looks, at first sight, as if it covers also transactions between a supplier of non-EU goods established in a non-EU country and an Iranian recipient, it follows from the systematic context of the whole act that a more restrictive interpretation is appropriate. Since the Regulation is based on Article 215 TFEU, it applies only to external relations of the European Union and not to relations between different nonMember States. Where European undertakings own shares in non-Member States, it is up to the legislation of those third States to decide whether transactions of these affi liate companies with Iran are lawful or not. Where the prohibition of circumvention in Article 2, para 1(c) is employed to inhibit such transactions, the European Union might be confronted with the same challenges under international law as if it had directly regulated the behaviour of those affi liates. These considerations show that the scope of application of an embargo, even if meticulously regulated, will often be subject to doubts. 3.

“Enforcement” of an Embargo

573. Embargoes are primarily enforced by the public law of the State imposing the restriction. But they may become the object of private litigation. Where such proceedings are conducted in the State of origin of the embargo, the courts are of course bound by the mandatory measure. Of greater interest are cases brought in other countries, where the courts will consider the embargo as foreign public law. However, the traditional view that “no country ever takes notice of the revenue laws of another”,¹²¹⁹ which was also applied to penal laws¹²²⁰ and to public laws in general,¹²²¹ no longer provides an accurate account of the law in this field. A closer analysis has to distinguish different aspects, in particular the enforcement of a claim brought by a foreign State and arising from an embargo, as opposed to the grant of other effects in contractual disputes. 574. Breaches of an embargo are sometimes sanctioned by forfeiture of the title in the goods in question. As a consequence, the State imposing the embargo is put in a position to claim restitution of the goods as their owner. Thus, in A-G of New Zealand v Ortiz, the New Zealand Government claimed restitution of Maori carvings which had been illegally taken out of the country 1219 Holman v. Johnson, (1775) 98 ER 1120 (KB) at p. 1121 per Lord Mansfield, CJ. 1220 Huntington v. Attrill, 146 US 657 at 668-669 (1892); see also supra, footnote 526. 1221 A-G of New Zealand v. Ortiz, [1982] 3 All ER 450 (CA) at p. 459 by Lord Denning, MR; this approach is basically shared in many other continental jurisdictions, see for example Pierre Mayer, “Les lois de police étrangères”, Clunet 108 (1981), 277-345 at p. 311 for France; Edoardo Vitta, Diritto internazionale privato, Vol. 1, Turin, 1972, p. 13 for Italy; Kegel and Schurig, pp. 1092 et seq. for Germany.

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and, under the law of New Zealand, thereby forfeited. The English Court of Appeals regarded the forfeiture as having taken place after the export, i.e. outside New Zealand; as an extraterritorial confiscation it was therefore deemed to be of no effect in England.¹²²² In apparent contrast to this decision, the Tribunale di Torino granted restitution in a similar case. The defendant had bought various objects of pre-Hispanic origin in Ecuador and carried them from that country to Italy. Under the laws of Ecuador, these objects were not allowed to be exported and belonged to a category of cultural property owned in common by the national community and by the private persons who kept custody of those objects. In the Italian court, the Republic of Ecuador thus asserted a title it had already acquired when the objects were still in Ecuador. The Italian court primarily respected this vested right. In addition, it referred to the 1970 Paris Convention against illicit trade in cultural property.¹²²³ While this opinion enunciated a “spirit of solidarity and collaboration among states”, the similar reasoning which had been followed by the lower court in A-G of New Zealand v Ortiz was later rejected by Lord Denning as “too sanguine” in the Court of Appeal. His reference to “diplomatic means” and an eventual “international convention on the matter”¹²²⁴ (something which at the time of the proceedings had already existed for more than 10 years), raise the suspicion that he took a certain satisfaction with the final result of his reasoning, which amounts to a removal of foreign law restraints on the London art market, one of the biggest in the world. 575. While the plaintiffs in both cases brought their actions as owners of the goods in question, the public policy background of the claims is undeniable. As outlined above, the general view declines the enforceability of foreign claims arising from public law in domestic courts. While this view is shared in many countries, the arguments in support of it are hardly convincing. If a foreign State brings an action in a domestic civil court for the enforcement of a claim arising from public law, it does not avail itself, in the domestic court, of sovereign rights or of any prerogatives it has within its own – foreign – territory. Rather, it steps down from this superior position in order to enter into a controversy with a private person on equal footing. An a priori exclusion of such foreign claims sounding in public law is therefore unfounded. Neither in public international law nor in the constitutional law of the several States can we find a principle that would reject the enforcement of such public law claims in domestic courts.¹²²⁵ On the other hand, 1222 A-G of New Zealand v. Ortiz, [1982] 3 All ER 450 (CA) at p. 456 by Lord Denning, MR. 1223 Tribunale di Torino, 25 March 1982, Riv. dir. int. priv. proc. 18 (1982), 625 at p. 634; for the Paris Convention of 1970 see supra footnote 1203. 1224 A-G of New Zealand v. Ortiz, [1982] 3 All ER 450 (CA) at p. 460, CA 1225 See the broad and thorough study by Anatol Dutta, Die Durchsetzung öffentlichrechtlicher Forderungen ausländischer Staaten durch deutsche Gerichte, Tübingen, 2006,

Chapter 2 – Foreign Policy Measures and Their Effects in Private Law

the growing permeability of national frontiers in open societies makes the need for a cross-border enforcement of claims sounding in public law more and more perceptible. Without such enforcement, even the essential State functions cannot be performed any more in the long run since individuals and companies will be able to abscond from the laws and duties by migration. Since numerous bilateral and some multilateral instruments provide for such enforcement measures in specific areas of the law, the general principle of categorically rejecting that enforcement has lost its foundation. This does not amount to acknowledging the opposite principle, however. What is needed is a detailed analysis of the formalities that have to be observed when foreign claims arising from public law are brought in domestic civil courts. This analysis will have to include procedural aspects, issues of applicable law and the limits imposed by public policy.¹²²⁶ It is an analysis that reaches far beyond the limited issue of the enforcement of foreign embargoes and cannot be carried out in this context. 4.

Other “Effects” of an Embargo

a) Contract terms assigning the risk of an embargo 576. In the relation between two contracting parties, litigation will hardly ever concern the “enforcement” of the embargo by one of them, but rather the “effects” the restrictive measure unfolds for their relation.¹²²⁷ When taken into consideration by the judge, an embargo may render the contract void or excuse its non-performance. This is primarily a matter of contractual risk distribution, which the parties agree upon in many contracts either individually or by the incorporation of standard terms. Thus, for an FOB sales contract, it is provided in definition A2 of the Incoterms 2010: “Where applicable, the seller must obtain, at its own risk and expense, any export licence or other official authorization and carry out all customs formalities necessary for the export of the goods.”¹²²⁸

Thus, an FOB seller who fails to procure the required export licence because of a supervening embargo imposed by his own State or by the State of the place of delivery will generally not have his performance excused. The situin particular pp. 143 et seq., 176: “Das Völkerrecht verbietet damit nicht die gerichtliche Durchsetzung öffentlichrechtlicher Forderungen ausländischer Staaten.” See also pp. 179 et seq., 231: “Auch das deutsche Verfassungsrecht begründet damit keinen höherrangigen Nichtdurchsetzungsgrundsatz.” 1226 See Dutta, previous footnote, pp. 364 et seq., 393 et seq. and 416 et seq. 1227 For this discussion see the broader analysis by Jürgen Basedow, “Private Law Effects of Foreign Export Controls – An International Case Report”, Germ. YBIL 27 (1984), 109-141 at pp. 118 et seq. 1228 International Chamber of Commerce, ed., Incoterms 2010 (ICC-Publikation 715 ED), p. 92.

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ation may be different where the restriction is adopted by a third State, as it was in the pipeline affair.¹²²⁹ In that case, it is doubtful whether the embargo was “applicable” as required by FOB clause A2; this is a matter of the interpretation of the clause which, it is submitted, should not only look at the scope of the embargo as claimed by the foreign State, but also at both the limits under international law and the conflict rules of the forum as outlined below.¹²³⁰ 577. It follows from what has been outlined above that the contracting parties will in most cases contemplate the existence or the imminent adoption of an embargo, and they will take account of it by appropriate contract terms. It is a rare occurrence indeed that parties enter into a contract whose performance they know to be forbidden by a closely related law. The scholarly debate on the conflict rules determining the impact of a foreign embargo on a private transaction is, therefore, only of limited significance. Few situations have arisen in practice: the parties may, after an embargo has been imposed, enter into what could be called an evasion contract in order to circumvent the prohibition. Or the parties may in the first instance have concluded a contract without any evasive intention, but out of inadvertence, no specific contract clause has been agreed upon to allocate the risk of a supervening trade prohibition. Even where that risk has been assigned by a contractual term, doubts may arise whether the specific embargo that has been imposed is covered by that clause, see above paragraph 576. 578. Litigation arising from these situations may be conducted either (1) in the embargo State or (2) in the country whose law governs the contract in question, or (3) in a third State. There is no doubt that a judge in the embargo State (situation 1) will invalidate a contract concluded in violation of the trade restriction, excuse non-performance of such contract on grounds of impossibility or public policy and determine that no action for damages lies. The answers in situations (2) and (3) are not as easily assessed. Situations (2) and (3) have one aspect in common: the embargo is imposed by a country other than the forum State. In situation (2), the law governing the contract and the law providing for the embargo differ; in situation (3), this may be the case (what might be termed 3a), but the law applicable to the contract and the embargo may also originate in the same legal system (3b). There are basically two approaches which have been advocated to cope with these situations. b) The lex causae theory and shared values 579. Some legal scholars take the view that the law governing a contract is applicable in its entirety, i.e. including public law provisions such as trade restric-

1229 See supra, paras. 568-570. 1230 See supra, paras. 571-572 and infra, paras. 579 et seq.

Chapter 2 – Foreign Policy Measures and Their Effects in Private Law

tions.¹²³¹ While this approach appears to be endorsed by the Swiss codification, commentators tend to interpret the respective provisions narrowly¹²³² since the approach meets with a number of serious objections. Where the law applicable to the transaction results from a contractual selection by the parties, it can be taken for granted that this choice is not made in view of regulations which inhibit the whole arrangement. It is, moreover, out of question that the parties cannot be permitted to deselect, by a contractual choice of law, otherwise applicable export regulations, and a dépeçage splitting the whole relation into a contractual part and a part dealing with the admissibility of the transaction under the export regulations of a selected law is equally unthinkable.¹²³³ Finally, the choice of a “neutral” contract law of a country that has no other connection with the transaction in question, while appropriate in some instances, cannot reasonably be assumed to lead to the application of that country’s export regulations. What has been said with regard to a law governing the contract because of the parties’ choice equally applies to a contract law applicable on objective grounds. If, for example, an EU embargo prohibits certain shipping services with a destination of Iran, the carriage undertaken by an Egyptian shipping company from a Greek port to Iran would of course be prohibited by the embargo notwithstanding Egyptian law governing the contract of carriage under Article 5 paragraph 1 Rome I. It clearly follows that trading prohibitions are not within the scope of the law governing the contract.¹²³⁴ 580. Moreover, it is difficult to explain on the basis of this so-called lex causae theory why an embargo levied by a third State should unfold its effects given that it is an embargo imposed by a country which is neither the forum State nor the country whose law governs the contract under private international 1231 See e.g. F. A. Mann, “Conflict of Laws and Public Law”, Recueil des cours 132 (1971), 107-196 at pp. 157 and 190, who considers that the provisions of private international law form part of a comprehensive system of conflict of laws and designate a legal system including both its private law and public law; in a similar sense Anton Heini, “Die Anwendung wirtschaftlicher Zwangsmaßnahmen im internationalen Privatrecht”, BerDtGesVR 22 (1982), 37-55 at pp. 43-45 and 48-49; see however the same author’s more balanced view infra, next footnote. 1232 According to Article 13 of the Swiss Law of 1987, the reference to a foreign law encompasses all provisions of that law which are applicable to the facts of the case; the application of provisions of the law governing the private relation in the pending case is not excluded for the sole reason that it forms part of public law, see Bucher and Bonomi, para. 453, at p. 118; a narrow interpretation of Article 13 by the majority of scholars is, however, reported with some sympathy by Heini, in Heini, Keller, Siehr, Vischer and Volken, Article 13, para. 23, and strongly advocated by Vischer, ibid., Article 19, paras. 1 and 2. 1233 See the explicit admission of dépeçage in Article 3, para. 1, 2nd sentence, Rome I. 1234 In this sense Bernard Audit, Rev. crit. dr. int. pr. 72 (1983), 401-434 at p. 431; Karl Kreuzer, Ausländisches Wirtschaftsrecht vor deutschen Gerichten, Heidelberg, 1986, pp. 81-86.

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law. Yet, the judicial practice of many countries has shown that such thirdState embargos cannot be totally ignored. Where a seller invokes hardship, force majeure or imprévision, frustration or impossibility to excuse his nonperformance of a sales contract and where the underlying reason is a thirdState embargo, courts will usually evaluate the particular aspects of the individual case under substantive law and not refuse to take account of the embargo for the sole fact that it does not form part of the law governing the contract. In particular, the embargo will be accepted as a valid excuse where the goods sold are located in, and have to be delivered from, the embargo State.¹²³⁵ 581. Even when the validity of a contract is in question, courts may give effect to prohibitions originating in a national law other than the one governing the contract. In a case decided by the German Federal Court in 1960, the defendant West German company had promised to deliver 100 tons of borax to the plaintiff, another West German trader. The borax was produced in Germany from basic material imported from the United States, which granted export licences on the condition that no borax be shipped to socialist countries. The parties, who knew that the final destination of the borax was Rostock in East Germany, connived to conceal this fact by selling the goods CIF Copenhagen/Denmark. When the seller/defendant declined to deliver and was sued for damages by the buyer, the Bundesgerichtshof dismissed the claim, holding that the contract which was governed by German law contemplated immoral conduct. This assessment was explained by the parties’ intention to defraud the US export administration and by the violation of German interests concerned with the maintenance of peace and freedom which were allegedly protected by the US embargo. Consequently, the contract was held void under § 138 of the German Civil Code.¹²³⁶ The opinion, essentially based upon the identical interests of West Germany and the United States,¹²³⁷ did not explicitly address conflicts issues. But it goes without saying that finding an infringement of an embargo established by a foreign law other than the one governing the contract is conditional upon the ascertainment of some relevant contacts between the case and the foreign State imposing the embargo. 582. That such finding of significant contacts is important can also be inferred from a judgment of the English House of Lords in Regazzoni v Sethia.¹²³⁸ 1235 See the cases reported in Basedow, Germ. YBIL 27 (1984), at pp. 129 et seq., and the discussion by Ferjani and Huet, Clunet 138 (2011), 756-760. 1236 BGH, 21 December 1960, BGHZ 34, 169, at pp. 176-177. 1237 On the identity of interests approach see Bernhard Grossfeld and C. Paul Rogers, “A Shared Values Approach to Jurisdictional Conflicts in International Economic Law”, Int. Comp. LQ 32 (1983), 931-947 at pp. 943 et seq.; see also Oliver Remien, “Außenwirtschaftsrecht in kollisionsrechtlicher Sicht”, RabelsZ 54 (1990), 431-480 at pp. 466 et seq. 1238 Regazzoni v. Sethia, [1958] AC 301 (HL).

Chapter 2 – Foreign Policy Measures and Their Effects in Private Law

There, the defendant had sold jute bags to the appellant which were to be shipped under the contract from India to Genoa for resale in South Africa. Both parties were aware of an embargo on the export of jute to South Africa, which the Indian Government had decreed to penalize the racial discrimination of non-white people by the South African apartheid regime. Before delivery fell due, the defendant repudiated the contract and was consequently sued for damages resulting from non-delivery. The House of Lords dismissed the claim, since “an English court will not enforce a contract, or award damages for its breach, if its performance would involve doing an act in a foreign and friendly State which violates the law of that State. This principle is based on public policy and international comity.”¹²³⁹ This holding appears to be exclusively guided by foreign policy considerations sounding like the identity of interests referred to by the Bundesgerichtshof above: English courts, regarded as institutions of the United Kingdom, should respect the “friendly” relations of their country with the foreign State, relations essentially entertained by the Governments. However, it was also made clear “that it may well be that different considerations will arise and a different conclusion will be reached if … the contract can be wholly performed in England or at least in some other country than that whose law makes the act illegal.”¹²⁴⁰ While the close connection of the contract with the embargo State was beyond dispute in Regazzoni, it could have been outweighed by a closer connection of the case with England, had such a closer connection with the forum State existed. c) The special connection theory (Sonderanknüpfung) 583. The requirement of a local connection is highlighted by a different approach that is sometimes designated as the special connection theory. Its roots laid in early German writings of Wilhelm Wengler¹²⁴¹ and Konrad Zweigert,¹²⁴² it has gained substantial scholarly support in more recent years.¹²⁴³ Alongside the system of private international law, it postulates the need for an independent system of conflict rules determining the scope of application of those legal provisions which, though classified as public law and generally 1239 Ibid., at p. 302. 1240 Ibid., at p. 318 per Viscount Simonds. 1241 Wilhelm Wengler, “Die Anknüpfung zwingenden Schuldrechts im internationalen Privatrecht”, ZvglRWiss 54 (1941), 168-212 at pp. 178 and 183 et seq. 1242 Konrad Zweigert, “Nichterfüllung auf Grund ausländischer Leistungsverbote”, RabelsZ (1942), 283-307 at pp. 303-304. 1243 Numerous scholars have approved this approach, see more than 20 references to German and foreign authors in Kreuzer, Ausländisches Wirtschaftsrecht, p. 59 in footnote 195, who himself advocates a special connection for economic regulations, see pp. 89-90; in more recent years this scholarly discussion of principles has been superseded by a more positivistic approach focusing on the interpretation of several statutory provisions on the matter, see infra, paras. 636 et seq. with regard to consumer law and para. 682 in respect of employment law.

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enforced by means of public law, have some impact on private legal relations (Sonderanknüpfung or Sonderstatut); such provisions include embargoes. While this separate approach has been recognized in European legislation since 1980,¹²⁴⁴ the notion of the structure and the connecting factors to be employed for the new type of conflict rules is still vague and not very well developed. Three points, however, appear to settled: first, the foreign “overriding mandatory provisions” (as they are now called in the EU) must be applicable according to their own scope rules, regardless of the law that otherwise governs the dispute. Second, there must be a “close” connection between the fact situation and the country that has enacted those mandatory provisions. Third, the application of those foreign provisions is not binding on the court; where the two preceding conditions are met, the court is afforded discretion as to whether to give effect to the provisions. The first of these conditions looks exclusively at the foreign law; it gives evidence of what may be called a reverse unilateralism. The second permits the court to control the foreign State’s claim that effect be given to its law; it is an element of proximity as traditionally employed in conflict rules. The third point – the discretion of the court – allows taking account of both the content of the foreign mandatory rule and foreign policy considerations espoused by the forum State. The variety in respect of embargoes, the policies pursued by them and the situations they are meant to cope with is such that it is not possible to forgo the balancing of values that the court is designed to carr y out. 584. The most recent enactment of a conflict rule of this type can be found in Article 9 paragraph 3 of the Rome I Regulation which has replaced Article 7 paragraph 1 of the Rome Convention in all Member States except Denmark, which does not take part in EU action based on Article 81 TFEU:¹²⁴⁵ 1244 See Article 7, para. 1, of the Convention on the Law Applicable to Contractual Obligations, done at Rome on 19 June 1980, OJ 1980 L 266/1: “When applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract …” As pointed out by the French Cour de cassation, Cass. com., 16 March 2010, JCP édition entreprise et affaires, 2010, No. 1438, with annotation Dominique Bureau, a lower court, instead of simply rejecting the foreign embargo, has to determine the effect that could be given to it. Another example is provided by Article 19, para. 1, of the Swiss law of 1987: “If, pursuant to Swiss legal concepts, the legitimate and manifestly preponderant interests of a party so require, a mandatory provision of a law other than that designated by this Code may be taken into account if the circumstances of the case are closely connected with that law.” 1245 For the position of Denmark, see Article 24 and Recital 46 of the Rome I Regulation as well as Article 69, EC, and Protocol (No. 5) on the Position of Denmark (1997), OJ 2006 C 321 E/201, categorically excluding Denmark’s participation in legislation

Chapter 2 – Foreign Policy Measures and Their Effects in Private Law “Effect may be given to the overriding mandatory provisions of the law of the country where the obligations arising out of the contract have to be or have been performed, in so far as those overriding mandatory provisions render the performance of the contract unlawful….”

The concept of overriding mandatory provisions is now defined in Article 9 paragraph 1: “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 organization 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.”

585. The new version deviates from its predecessor in several respects: first, Member States could, under Article 22 of the Rome Convention, reserve the right to not apply Article 7 paragraph 1, which in fact several Member States did, for example the United Kingdom and Germany; the Rome I Regulation does not admit any reservations. Second, Article 7 paragraph 1 is explicitly limited to the law of a country other than the one whose law governs the contract, thereby excluding its application to mandatory provisions emanating from the lex causae; by contrast, Article 9 paragraph 3 Rome I refers to all mandatory provisions of the law of the country of the place of performance, regardless of whether this law is also the law governing the contract or the law of a third State. The scope afforded to the special connection theory would thus appear to be enlarged. Third, the definition of Article 9 paragraph 1 now suggests that the mandatory provisions in question are not those which are intended to counterbalance the dominance of one party in its relation with the other party, instead referring to precepts meant to protect public values.¹²⁴⁶ Fourth, Article 9 paragraph 3 Rome I refers only to the overriding mandatory provisions of the State of performance whereas Article 7 paragraph 1 of the Rome Convention can apply to the mandatory laws of any State that has a “close” connection with the situation. The difference is noteworthy. When an embargo is imposed not by the State where delivery is due, but by the country of the seller’s nationality, and when that based on Article 65, EC (now Article 81, TFEU); now that the Treaty of Lisbon has taken effect, Denmark would be allowed to join the Rome I Regulation, see Article 4 of the Annex added, by the Treaty of Lisbon, to the aforementioned Protocol which is now Protocol (No. 22) on the Position of Denmark, consolidated version in OJ 2010 C 83/299 and 302. 1246 The definition of Article 9, para. 1, is drawn from ECJ, 23 November 1999, Joined Cases C-369/96 and C-376/96 (Arblade and Leloup), [1999] ECR I-8453, cons. 30. By contrast, Article 19 of the Swiss law of 1987 explicitly focuses on private interests, see the text supra, footnote 1244.

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embargo is binding upon all citizens of that country, Article 9 paragraph 3 would still be inapplicable even though the seller might be exposed to criminal prosecution by performing the contract. Neither would Article 9 paragraph 3 apply where the embargo is levied in the country of the supplier (A) of the seller (B) and directed against the end use of the respective goods in the State of the final purchaser (C); if C claims damages from B for the non-performance of the contract, B might not be able to invoke the embargo in his supplier’s home country as an excuse under Article 9 paragraph 3. Article 9 paragraph 3 is a compromise resulting from negotiations with the United Kingdom, which initially did not want to join the Rome I Regulation.¹²⁴⁷ While the wording appears to accord with the previous English case law,¹²⁴⁸ the preceding observations show that it might be too narrow to do justice to the parties’ legitimate expectations. Section 3: Countermeasures (Blocking Statutes) 1.

Concept and Reasons for Their Adoption

a) Concept 586. Where a State’s action is considered by another State as unlawful, offensive or simply as an infringement of national interests, the latter will often react by the adoption of countermeasures which may take on a variety of forms. The endeavours to codify public international law have focused on those countermeasures consisting in the temporary “non-performance … of international obligations of the State taking the measures towards the responsible State.”¹²⁴⁹ A similar conceptual confinement can be ascertained in world trade law. The member States of the World Trade Organization are required by the Treaty of Marrakesh to obtain the authorization of the Dispute Settlement Body “before suspending concessions or other obligations under the covered agreements in response to the failure of the member concerned to

1247 The United Kingdom and Ireland only take part in the measures adopted on the basis of what is now Article 81, TFEU, if they notify the President of the Council accordingly, see Articles 1 and 3 of Protocol (No. 21) on the position of the United Kingdom and Ireland in respect of the area of freedom, security and justice, OJ 2010 C 83/295. 1248 See Plender and Wilderspin, Obligations, Nos. 12-018 et seq., in particular No. 12028 at p. 348. 1249 See Article 49, para. 2, of the Draft Articles on responsibility of States approved by the International Law Commission as laid down in resolution 56/83 of the General Assembly of the United Nations of 28 January 2002 (A/RES/56/83); in the same sense, also the conceptualization by Elisabeth Zoller, Peacetime Unilateral Remedies – An Analysis of Countermeasures, Dobbs Ferry/NY, 1984, p. 3, but see the critical comments by Eckart Klein, BerDtGesVR 37 (1998), pp. 39-71 at pp. 42-44.

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implement the recommendations and rulings …”.¹²⁵⁰ This approach is inspired by the attempt to establish legal limits to reprisals which undermine an effective rule of law in international relations. 587. But this concept is too narrow for the purposes of private international law. There are numerous possibilities for a State to retaliate against a foreign country without infringing or suspending any rules of public international law. An example may be the order given to the courts of a country to terminate judicial cooperation with the judiciary of the foreign State, for example not to notify petitions anymore at the request of the courts of a foreign State, not to hear witnesses on behalf of a foreign court, and not to procure other evidence needed in the foreign proceedings. In the absence of treaty obligations to provide such assistance, these measures are entirely lawful under international law; yet, they may have perceptible repercussions in international private relations. In the context of private international law, a more factual understanding of the concept of countermeasure is therefore appropriate, an understanding that applies irrespective of whether any obligations under public international law are affected.¹²⁵¹ In this sense, countermeasures are all measures taken by a State against another State in response to – and with the aim of curbing – the latter’s conduct. 588. It is not uncommon that such measures are primarily meant to hurt the specific interests of a foreign State notwithstanding the fact that they directly address private actors. Examples are given by numerous so-called blocking statutes enacted in response to particular actions of foreign States. Thus, the sanctions enacted by a number of States against Iraq in 1990 were countered, by the Supreme Revolutionary Council of that country chaired by Saddam Hussein, with an anti-boycott law declaring those sanctions unlawful and invalid, and, inter alia, freezing the assets owned by undertakings of the countries imposing such sanctions.¹²⁵² A similar reaction occurred in Cuba when the United States enacted the LIBERTAD or Helms-Burton Act

1250 Article 23, para. 2 (c), of the Understanding on Rules and Procedures Governing the Settlement of Disputes, Annex 2 to the Marrakesh Agreement establishing the World Trade Organization, concluded at Marrakesh on 15 April 1994, 1869 UNTS 401. 1251 For the terminological distinction between public international law and private international law as relates to the concept of countermeasures, see also Anton Schnyder, “ ‘Gegenmassnahmen’ im Internationalen Privat- und Zivilverfahrensrecht”, BerDtGesVR 37 (1998), 73-107 at pp. 95-98. 1252 See Hilmar Krüger, “Das irakische Antiboykottgesetz 1990”, RIW (1990), 934-936 with a German translation of law No. 57/1990.

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of 1996,¹²⁵³ which imposed severe sanctions in response to the downing of two private airplanes by Cuban jet fighters above the Caribbean Sea.¹²⁵⁴ b) A weapon for economic warfare 589. These reactions of target States are unsurprising. In the countries on each side of the blocking statute they create a situation of strictly territorial application of laws: while the courts in the country imposing the sanctions will exclusively enforce the prohibitions of the lex fori where applicable, the judiciary of the reacting State will declare such enforcement as invalid and insist on the performance of contracts and the application of the law as if no sanctions had been imposed; in addition they may even implement counteroffensive measures such as clawback provisions. In such a conflict, both sides tend to use their own undertakings as leverage for the implementation of their own foreign policies and to take the businesses of the other State as hostages of the latter’s conduct. Regarding the private litigation between parties from the two sides, no common legal denominator subsists. The outcome of such disputes simply depends on the venue and the possibility of enforcing a legal decision in that country. 590. The practical significance of countermeasures in private international relations is due to the fact that, in particular, the United States has over many years favoured the extraterritorial application of their laws to companies incorporated and acting abroad, but controlled by US owners. The pipeline embargo against the USSR has already been presented as an example.¹²⁵⁵ The sanctions against Cuba were extended in a similar fashion.¹²⁵⁶ Title III of the Helms-Burton Act of 1996 declared the expropriation by the Cuban Government of property owned by US nationals to be an unlawful confiscation.¹²⁵⁷ In order to deter third State undertakings from investing in joint 1253 Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, P.L.104-114, 110 Stat. 785 (1996), 22 USC §§ 6021 et seq., also in Int. Leg. Mat. 35 (1996), 359-378; on the background and an assessment of the Act under public international law, see Claus Kress and Jochen Herbst, “Der Helms-Burton-Act aus völkerrechtlicher Sicht”, RIW (1997), 630-641; see also Andreas Lowenfeld, “Agora: The Cuban Liberty and Democratic Solidarity (LIBERTAD) Act – Congress and Cuba: The Helms-Burton Act”, Am. Journ. Int. L. 90 (1996), 419-434; Brice Clagett, “Title III of the Helms-Burton Act Is Consistent with International Law”, Am. Journ. Int. L. 90 (1996), 434-440. 1254 On the Cuban response legislation see Schnyder, BerDtGesVR 37 (1998), 92. 1255 See supra, paras 568 et seq. and footnote 1146. 1256 See Lowenfeld, Am. Journ. Int. L. 90 (1996), 419, with an account of the anti-Cuban sanctions adopted since 1961; see also Werner Meng, “Extraterritoriale Jurisdiktion in der US-amerikanischen Sanktionsgesetzgebung”, EuZW (1997), 423-428 at pp. 324-325. 1257 Section 301 (2) and (3) of the Act, supra footnote 1251, 22 USC § 6081 (2) and (3); see also the definition of “confiscated” in Section 4 (4) of the Act, 22 USC § 6023 (4). Title III of the Act was suspended by the President, see Statement by the President of 3 January 1997, Int. Leg. Mat. 36 (1997), 216-217.

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ventures in Cuba for the exploitation of such property, the Act further established the liability of any person – including foreign entities, agencies and instrumentalities¹²⁵⁸ – towards the former US owner for trafficking in such confiscated property.¹²⁵⁹ The law obviously threatened the commercial interests of businesses involved in Cuban trade across the globe. It provoked a number of reactions from third countries eager to protect their undertakings, see below paragraph 591. A third example of the extraterritorial application of US laws that gave rise to countermeasures of various countries relates to the US antitrust laws. Contrary to the embargoes mentioned before, the antitrust laws are not directed against a specific State or group of States, but are intended to further prosperity in the United States; they will therefore be discussed below in chapter 3. But since they were applied to acts committed abroad by foreigners, they stimulated vivid reactions in those foreign countries aimed at the United States; the latter reactions may therefore be addressed as State-targeted measures inspired by considerations of foreign policy. 2.

Occurrence and Content of Blocking Statutes

591. The first blocking statutes were adopted after World War II as a response to orders made by US courts and agencies to disclose certain information and grant access to certain records located in other countries.¹²⁶⁰ The statutes in question empowered the respective national Governments to prohibit the production of such evidence to its owners or to seize the respective records. These reactions were either isolated or confined to specific sectors of the economy, particularly shipping. The resulting conflict came to an end when an agreement was negotiated between various shipping nations under the aegis of the OECD in 1965.¹²⁶¹ Further blocking legislation was stimulated in many industrialized countries in the 1980s as a consequence of the extra-

1258 See the definition of “person” and “agency or instrumentality of a foreign state” in Section 4 (1) and (11) of the Act, supra footnote 797, 22 USC § 6023 (1) and (11). 1259 Section 302 (a) (1) of the Act supra footnote 1251, 22 USC § 6082 (a) (1); the term “traffics” is defined comprehensively and in a broad manner by Section 4 (13) of the Act, 22 USC § 6023 (13). 1260 An outline of the history of blocking statutes with many references to national statutes can be found in Rest. Third, Foreign Relations Law, § 442, Reporters’ note No. 4; see also Ivo Schwartz and Jürgen Basedow, “Restrictions on Competition”, IECL, Vol. 3, Chap. 35, Sect. 94, with some further references. 1261 Timothy Smith, “Discovery of Documents Located Abroad in U.S. Antitrust Litigation – Recent Developments in the Law concerning the Foreign Illegality Excuse for Non-production”, Va. Journ. Int. L. 14 (1974), 747-774 at pp. 770-774; for the content of that agreement, see “Agreed Minute Provides for Exchange of Shipping Information”, Int. Leg. Mat. 4 (1965), 356-358.

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territorial enforcement of US antitrust laws.¹²⁶² Later, the aforementioned Helms-Burton Act of the United States gave rise to responses in Canada¹²⁶³, Mexico¹²⁶⁴ and the European Union.¹²⁶⁵ Some of these instruments, such as the European blocking regulation, are only meant to contain the extraterritorial application of US embargoes; others also apply where antitrust laws are being enforced extraterritorially. 592. It is a common feature of most blocking statutes that they only provide for measures in an abstract way, leaving their enforcement to an implementing decision to be made by the respective Government vis-à-vis a particular State. Thus, while they grant powers to the Government, they also enable it to make use of its foreign policy discretion. The act giving evidence of the greatest governmental resolve is probably the British Protection of Trading Interests Act 1980.¹²⁶⁶ Now a model for other laws in this respect, the Act identifies five problems and tackles them by the following countermeasures.. The first one, already mentioned, is the prohibition of disclosure of information required by the Government of a foreign country for the extraterritorial enforcement of its laws. Secondly, the British Act also empowers the Government to forbid its own citizens and undertakings from complying with the judgments and orders of foreign courts and administrative authorities. Third, UK courts are prohibited from giving effect to a request of a foreign tribunal for the procurement of evidence where that evidence is needed for the extraterritorial enforcement of the foreign tribunal’s laws. A fourth countermeasure is a ban on the recognition and enforcement of foreign judgments, in particular those awarding multiple damages or intended 1262 For a survey, see Schwartz and Basedow, IECL, Vol. 3, Chap. 35, Sect. 94, with further references. 1263 The Canadian Extraterritorial Measures Act, 1984, was amended in 1996 so as to counter the US Helms-Burton Act, an aspect which is explicitly indicated in the schedule, see the current version in R.S.C. 1985, c. F-29, available at the website of the Canadian Minister of Justice http://laws-lois.justice.gc.ca, also in Int. Leg. Mat. 36 (1997), 117-124 with an introductory note by Douglas Forsythe at pp. 111-114. See also Andrew Dekany, “Canada’s Foreign Extraterritorial Measures Act: Using Canadian Criminal Sanctions to Block U.S. Anti-Cuban Legislation”, Can. Bus. L. Journ. 28 (1997), 210-220 at pp. 212 et seq., in respect of the amendments of the act caused by the Helms-Burton Act. 1264 Ley de Protección al Comercio y la Inversión de Normas Extranjeras que Contravengan el Derecho Internacional of 10 October 1996, Diario Oficial of 23 October 1996, English translation in Int. Leg. Mat. 36 (1997), 145-147, with an introductory note by Jorge Vargas, “Mexico: Act to Protect Trade and Investment from Foreign Norms that Contravene International Law”, pp. 133-145. 1265 Council Regulation (EC) No. 2271/96 of 22 November 1996 protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based therefrom or resulting therefrom, OJ 1996 L 309/1. 1266 Protection of Trading Interests Act 1980, c. 11; on that Act see A. V. Lowe, “Blocking Extraterritorial Jurisdiction: The British Protection of Trading Interests Act, 1980”, Am. Journ. Int. L. 75 (1981), 257-288 at pp. 272-280.

Chapter 2 – Foreign Policy Measures and Their Effects in Private Law

to enforce the extraterritorial application of foreign law. A fifth element of blocking statutes is the so-called clawback provision: where a foreign court has rendered a judgment against a citizen or body corporate of the blocking State which would not be enforceable under the blocking statute, the protected domestic person is entitled to recover – from the person who has the benefit of the foreign decision – the amount of money paid abroad in compliance with the foreign judgment in the courts of the blocking country. The European regulation which has adopted most of these blocking devices has rendered the clawback rule even more effective by explicitly declaring the Brussels I Regulation applicable to the respective proceedings;¹²⁶⁷ as a consequence, clawback judgments will be enforceable in all Member States of the European Union. 3.

Clawback Claims in Private International Law

593. The claims for recovery just mentioned have apparently never given rise to any choice of law considerations. The general idea underlying the clawback provisions appears to be strictly unilateral and territorial: a person protected by the blocking statute, usually a citizen of, or a company incorporated in, the respective country, may claim under that statute recovery of the amount that should not have been paid. Jurisdiction is usually bestowed on the courts of the blocking country by the blocking statute or general rules of civil procedure, and the cause of action arises from that act.¹²⁶⁸ Provided that the clawback provision is subject to a strictly territorial application, no problem appears to arise. But what of an undertaking doing business in several States affected by the extraterritorial enforcement of foreign law, for example in Canada and the United Kingdom ? Both the Canadian and the British courts would have jurisdiction to hear a recovery claim under their respective blocking statutes. Would each court exclusively apply its own act to the whole claim or only to that part which is meant to compensate the losses suffered in the forum State ? 594. At least for the Member States of the European Union, this issue would require some further reflection. The recovery claims in question refer to non-contractual obligations covered by the Rome II Regulation. Under the general conflict rule of Article 4, the recovery claim would be subject to the law of the country in which the damage occurred irrespective of the country in which the indirect consequences of that event are ascertained. 1267 See Article 6, para. 3, Reg. 2271/96; see Schnyder, BerDtGesVR 37 (1998), pp. 9394; Martin Gebauer, “Kollisionsrechtliche Auswirkungen der US-amerikanischen Helms-Burton-Gesetzgebung”, IPRax (1998), 145-155 at p. 154. 1268 See for Canada Article 9 of the Foreign Extraterritorial Measures Act, R.S.C. 1985, c. F. 29; for the United Kingdom see Section 6 of the Protection of Trading Interests Act, 1980, c. 11; Article 6, para. 3, 2nd sentence, Reg. 2271/96 for the European Union; all provisions cited provide for a competent court.

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Thus, if the damage follows from a US order issued on the basis of an act considered as infringing international law for its extraterritorial reach, but enforced against a non-US plaintiff in the United States, Article 4 Rome II might very well lead to the application of US law which would, of course, dismiss the claim for recovery. The result would be the same if the clawback were considered as a claim of restitution for an unjust enrichment under Article 12 paragraph 3 Rome II. The only way out of the resulting inconsistency would be to acknowledge the clawback provision of the blocking statute as an overriding mandatory provision which could prevail in accordance with Article 16 Rome II. The same consideration would permit the British court to disregard the fact that part of the loss is due to the plaintiff ’s business activity in Canada. 595. But what of those aspects of the claim for recovery which are not regulated by the overriding mandatory provisions of the blocking statute ? Neither the British Protection of Trading Interests Act nor any other national blocking statute nor the European blocking regulation provides for a comprehensive regime of recovery claims. Gaps in respect of matters such as the prescription of the claim or the treatment of multiple debtors will have to be fi lled by national law. Should that law be determined in Europe by the general conflict rules of the Rome II Regulation ? As pointed out, they might lead to the law of the country that has given rise to the whole recovery proceedings by implementing its own excessive legislation. It is submitted that resulting gaps in the blocking statutes should rather be filled by the general tort law of the blocking statute’s country of origin and, in the case of a recovery claim based upon the European blocking regulation, on the lex fori. 4.

Blocking Legislation – a Political Instrument

596. The fragmentary regulation of the recovery claim shows that the various States (and the European Union) which enacted the blocking statutes did not devote much attention to the legal analysis of such claims. As with the other elements of the blocking statutes, the recovery claims are of little practical importance.¹²⁶⁹ Two reasons have been identified for this assessment in a previous writing:¹²⁷⁰ “Firstly undertakings often have no interest at all in the protection offered to them by their home states against the United States. The undertakings want to continue to do business in the United States. Realistically, they know that this is not possible if they do not comply with the orders of American officials and 1269 According to A. Vaughan Lowe, “Extraterritorial Jurisdiction – The British Practice”, RabelsZ 52 (1988), 157-204, at p. 186, The Protection of Trading Interests Act of 1980 “has been used much less frequently” than its predecessor of 1964. 1270 Schwartz and Basedow, IECL, Vol. 3, Chap. 35, Sect. 94, at p. 100; in a similar sense, also Lowe, RabelsZ 52 (1988), 189-190.

Chapter 2 – Foreign Policy Measures and Their Effects in Private Law courts. [Second], where undertakings do risk conflict, the blocking statutes often lack the necessary degree of legal certainty. They give governments a wide discretion which must be exercised in accordance with extremely vague criteria such as “national interest” or compatibility with international law, comity, or international usage. It is impossible [for a private actor] to assess in advance whether, if a conflict arises, a government will actually pass blocking measures …”

597. The main purpose of the blocking statutes is a political one: they are meant to increase political leverage on the Government of the foreign State whose acts and policy are disapproved. The individuals and corporate entities involved are only tools to achieve that purpose. The Governments of the countries involved mutually display the various weapons of economic hostility – extraterritoriality, embargoes and blocking statutes – without however fully staying the course of their application. As between the countries of the Western world, the confrontation has usually been terminated after some time. In some cases, international agreements were concluded, for example ones on the exchange of information on shipping matters¹²⁷¹ or on the cooperation in the enforcement of competition laws¹²⁷²; in other cases the United States withdrew the threat of an extraterritorial application of its respective laws.¹²⁷³ The State-targeted measures discussed in this chapter thus have turned out to be only of minor significance for the operation of private international law. Where they have been adopted, private actors were used to increase political leverage, but little attention was paid to their actual operation in international relations between private parties.

1271 See supra footnote 1260. 1272 The most important of these agreements is the Agreement between the Government of the United States of America and the Commission of the European Communities regarding the application of their competition laws, OJ 1995 L 95/47; for a broader survey of corresponding agreements, see Dietmar Baetge, Globalisierung des Wettbewerbsrechts, Tübingen, 2009, pp. 305-308. 1273 See for the pipeline embargo supra footnote 1214; for the suspension of Title III of the Helms-Burton Act see supra footnote 1257.

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Countervailing State Measures for Asymmetric Private Relations

598. The protection of the “weaker party” has always been the office of the judge and a major task of State legislation. There is, however, little common ground with regard to the measures that States should take in this respect. This chapter is intended to shed some light on what weakness means in the light of economic considerations and with a particular view to international private relations, see below section 1. The analysis will then focus on two examples and discuss the particular conflict rules emerging in the fields of consumer contracts, see below section 2, and individual employment contracts (as opposed to collective labour relations), see below section 3. Section 1: The “Weaker Party” and Its Protection 1.

Traditional Civil Law

599. The plea for party autonomy as the basic conflicts principle does not amount to the assertion that parties electing the applicable law are always fully aware of what they are doing. In this respect the situation is not different from any substantive agreement under the applicable national law. According to traditional civil law rules, a choice may be invalid or invalidated because a party involved is under age or has been compelled to agree by mistake, threat or fraud. All legal systems provide for some kind of remedy in such situations which, however, only infrequently give rise to legal disputes in national and international commercial practice. The protection of the “weaker party” in the case of defective consent appears to be generally subjected to the putative lex contractus, i.e. to the law that would have governed the contract had the choice been valid.¹²⁷⁴ 1274 See for the United States Rest. Second, Conflict of Laws § 201; Hay, Borchers and Symeonides, p. 1212; for the European Union see Article 10, para. 1, Rome I, and Mayer and Heuzé, No. 736 at p. 567; Martiny in Reithmann and Martiny, Nos. 299 and 302 at pp. 226 and 229. Without explicitly addressing defects of consent, the report of Giuliano and Lagarde points out that Article 8, para. 1, of the Rome Convention, which is now Article 10 para. 1, Rome I, “is intended to cover all aspects of

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600. There are, however, special conflict rules applicable to minimum age requirements for contracting as well as other aspects of the capacity to act. In most jurisdictions they are governed by the law of personal status,¹²⁷⁵ namely either by the national law¹²⁷⁶ or by the law of the habitual residence.¹²⁷⁷ But the protection granted by that law is qualified where the person in question acts in a different country; if he or she is considered as being of age and fully capacitated in that country, an incapacity resulting from the personal law will usually not be considered.¹²⁷⁸ Thus, with regard to these traditional types of “weaker parties”, no need for an enforcement of the protective provisions under special conflict rules has been acknowledged so far. In fact, the opposite has been observed: with regard to minors and other incapacitated persons, legislatures rather protect the opposing market participants against foreign legislation that would generally be applicable under the relevant conflict rules but which would unexpectedly invalidate an agreement. It is not the “weaker party” that private international law protects, but its contracting partner who therefore can trust in the capacity of the other party without any need to investigate a foreign law. In economic terms this rule can be interpreted as keeping transaction costs low. 2.

Categorical “Weakness” Resulting from Asymmetric Information

a) Findings in legislation and economic explanation 601. In the course of legal developments occurring since the nineteenth century, more and more categories of market participants have been acknowledged as “weak” and, under certain conditions, deserving of protection from their contracting partners: workers from employers; shippers of goods and passengers from carriers; policyholders vis-à-vis insurers; investors, borrowers and mortgagors from banks; commercial agents and franchisees in their relations with their principals and franchisors; consumers from professionals; tenants from landlords; builders vis-à-vis construction companies. De-

1275 1276 1277 1278

formation of the contract other than general [i.e. formal] validity”, OJ 1980 C 282/1 at p. 28; the French and the German versions of the report make clear that the “general” validity mentioned in the English version is the formal validity. See supra para. 373 and the reference to deviating approaches in common law countries in para. 374. See for example Article 10 of the law of Taiwan of 2010 and Article 7 of the Introductory law of the German Civil Code. Article 12, para. 1, of the Law of China of 2010; Article 35 of the Swiss Federal Law of 1987. See for China the bilateral conflict rule of Article 12, para. 2, and for Taiwan the unilateral conflict rule of Article 10, para. 3; both German law (Article 12) and Swiss law (Article 36) grant this protection only where the other party did not know and cannot reasonably be expected to know of the limited capacity to act. This is also the solution of Article 13, Rome I, with regard to contractual obligations in the European Union.

Chapter 3 – Countervailing State Measures for Asymmetric Private Relations

pending on the market structure in the respective country and the political representation of the interest groups, legislation limiting the freedom of contract to the benefit of the weaker party can be found in many countries. It is a characteristic of these statutes that they do not require any specific evidence demonstrating the relative weakness and the relative strength of the parties involved in the individual case. The protective rules apply to categories of persons who conclude contracts of particular types and who act in a certain capacity or in characteristic situations – what matters is that the two parties involved in a dispute belong to opposite categories. 602. The economic explanation for most of these legislative interventions is a disparity of information and motivation between the contracting parties.¹²⁷⁹ In the absence of protective legislation, standardized contract terms drafted by one side with a corresponding bias would shift all kinds of risks to the other party, i.e. to the employee, to the policyholder, to the consumer, etc. While the employer, insurer or professional has empirical or statistical evidence on establishing the likelihood that a given risk materialises in one out of the many cases they have to deal with, the employee, policyholder or consumer only seldom conclude contracts of the type in question. Therefore, they do not have such a base of knowledge and will contemplate the occurrence of such risks as too unlikely to justify even reading the fine print of the contract, which is drafted in a language most of them will consider as incomprehensible anyway. Since time is money, it may even be more efficient for these parties not to read a lengthy document which will in 99 per cent of all cases be immaterial for their transaction; thus, the asymmetry of their information amounts to a disparity of motivation of the contracting parties. When, however, a risk materialises this may be a heavy blow for the weaker party if the consequences are fully determined by the one-sided standard contract terms. Against this backdrop, mandatory legislation preempting such one-sided stipulations has the indirect effect of insurance: where a risk regulated in the contract term materialises, the consequences are not borne by the weaker party as provided for by the contract term. The invalidity of that term has the effect of shifting them to the stronger party, which in turn will distribute the economic consequences to the whole clientele through regular business procedures, for example by a price increase that usually is small and hardly perceptible for the customers or, in the case of labour relations, by a small reduction of wages that would otherwise correspond to market conditions. 603. This operation of mandatory contract law can also be observed in respect of contract terms dealing with private international relations, in particular choice-of-forum clauses and choice-of-law clauses.¹²⁸⁰ Which employee will make the acceptance of the employment contract conditional upon arrangements which he does not understand – without legal advice about a foreign 1279 See the references supra footnote 1149. 1280 Rühl, pp. 451 et seq. with further references.

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law – and which he believes will remain insignificant for the future course of his employment anyway ? And which consumer will decline to buy goods he would otherwise like to purchase, for the sole reason that a potential and very unlikely dispute will be decided by a court in a foreign country under a foreign law ? In real life consumers do not even read the fine print of the contracts they conclude.¹²⁸¹ It is seldom the case that individuals enter into contractual relations with an eye to subsequent litigation, and they are even less likely to contemplate the judicial risks in cross-border relations. b) Pros and cons of State intervention in cross-border contracts 604. While contract terms covering remote risks do not determine the acceptance or rejection of an offer that appears attractive for other reasons, they may amount to grave injustice when such risks materialise. Thus, a contract clause conferring exclusive jurisdiction on a distant tribunal may make it difficult for the weaker party to have his day in court. On the other hand, the undertaking which makes use of such a clause can concentrate its whole litigation business at a single place with potential costs savings in respect of lawyers that rebound to the client himself. This has led judges on both sides of the Atlantic to very different conclusions. As pointed out by the European Court of Justice, such a clause “could be a deterrent and cause him [i.e. the consumer] to forego any legal remedy or defence.” Because of “excluding or hindering the … right to take legal action … [the clause] must be regarded as unfair ….”¹²⁸² Quite to the contrary, the US Supreme Court (in the context of cruise liners) has pointed out that recognition of a standard-form forum selection clause would spare the costs of pre-trial motions concerning jurisdiction and would benefit passengers “in the form of reduced fares reflecting the savings that the cruise line enjoys by limiting the fora in which it may be sued.”¹²⁸³ 605. The marked difference between these two judgments is the more remarkable as the courts had to deal with a contractual assignment of jurisdiction in intra-nation cases, the European Court with a domestic case from Spain 1281 O’Hara and Ribstein, p. 136, point out that a “survey of first-year law students showed that, although many students read their electronic contracts for price and product features, virtually none read the choice-of-law, choice-of-court and arbitration provisions”. 1282 ECJ, 27 June 2000, Joined Cases C-240/98 to C-244/98 (Océano Grupo Editorial SA v. Rocío Murciano Quintero) [2000] ECR1-4963, cons. 22 and 24. The Court applied the test of unfairness under Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993 L 95/29, to a forum selection clause that provided for the exclusive jurisdiction of the court of Barcelona for all disputes of a publishing house with its customers domiciled in other parts of Spain. 1283 See Carnival Cruise Lines, Inc. v. Shute, 499 US 585 at 594 (1991). The Court considered a choice-of-forum clause employed by a cruise operator established in Florida and conferring exclusive jurisdiction on the courts of that state as valid when passengers resident in the State of Washington brought a claim in a Washington court.

Chapter 3 – Countervailing State Measures for Asymmetric Private Relations

and the US court with a conflict between the States of Washington and Florida. The contrast is only slightly attenuated by the Supreme Court’s statement “that forum selection clauses contained in foreign passage contracts are subject to judicial scrutiny for fundamental fairness.”¹²⁸⁴ It is, however, difficult for a court to strike the balance between cost savings and potential price reductions on the one side and fundamental fairness of a forum selection clause on the other. Empirical studies conducted in transport law suggest that the share of the litigation and liability costs in the overall costs of a carrier is usually greatly exaggerated.¹²⁸⁵ The underlying findings very much depend on the ascertainment and selection of statistical data which take time, are very difficult to organize and can hardly be put into effect by a court in a single case. The balancing of fairness and cost savings which the Supreme Court hinted at should therefore rather be left to legislative proceedings and political determination. This applies to both choice-of-forum clauses and choice-of-law clauses, and it is modern legislation that increasingly tackles the task of drawing the borderline between the full respect of such clauses and State intervention in favour of the weaker party, see below Sections 2 and 3. 3.

Categorical “Weakness” Resulting from Market Dominance

606. Next to the disparity in information, dominant power is another type of market imperfection that has led to State intervention. Market dominance may have various origins: a natural monopoly resulting from the indivisibility of production, i.e. from the fact that the entire market demand can be satisfied at the lowest average costs per unit by a single supplier;¹²⁸⁶ legal monopolies granted by a State for fiscal or other non-competitive purposes, for example currency protection or the more effective government control of a sector; an oligopolistic market structure with the risk of parallel behaviour by the few competitors; reputation advantages in competitive markets resulting in particular from the use of widespread and attractive brands. While market dominance is ascertained as between the competitors in a market, i.e. at the 1284 Ibid., 499 US 585 at 595 (1991). The Court did not see any reason to question the fairness in this case because the passengers had admittedly been aware of the forum selection clause from the very beginning, because the cruise company was based in Florida and because the clause did not compel plaintiffs to bring a case in a “remote alien forum”. On the ascertainment of unfairness, see also Felix Sparka, Jurisdiction and Arbitration Clauses in Maritime Transport Documents, Berlin, 2010, pp. 131132. 1285 See for the 1970s and 1980s Jürgen Basedow, Der Transportvertrag, Tübingen, 1987, pp. 482-484 for passenger transport and pp. 484-487 for the carriage of goods, relying on an earlier US study in this respect. 1286 See Fritsch, Wein and Ewers, pp. 180-181; William Baumol, “On the Proper Cost Tests for Natural Monopoly in a Multiproduct Industry”, American Economic Review 67 (1977), 809-822.

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horizontal level, it often gives rise to a disparity as between the dominant firm on the one side and its suppliers and/or customers on the other, i.e. in vertical relations. Abuses resulting therefrom have always been a challenge for the law in many legal systems, and responsive State action designed to counterbalance the disparity of power in private relations is an example of early State intervention. Some of the resulting mandatory provisions, for example in shipping, relate to international markets;¹²⁸⁷ Others, such as mandatory rules on the purchase of power and natural gas by consumers have been of domestic significance only because cross-border consumer markets for energy supply have not yet emerged. 607. Many dominant positions are of a transitory nature. Legal monopolies depend on certain valuations; where the political prioritization changes, they may be abrogated. In fact, in the era of deregulation of the 1980s and 1990s, legal monopolies have been repealed in many countries. The subsistence of oligopolistic market structures and reputation advantages is subject to review by competition authorities and to changes which spontaneously occur in the course of economic development. Even natural monopolies are less permanent than it may appear at first sight. Technical innovations within the respective sector or in neighbouring sectors may considerably reduce the power of the natural monopolist and install competition which benefits its suppliers and/or customers. Thus, the rise of the automobile entailed the end of the land transport monopoly held by the railroads, and the telephone monopoly gave way to competition when wireless communication became practicable. A natural trend to contain and reduce monopolistic power can be ascertained; it flows from competitive forces and State measures, in particular antitrust law. The consequence for our enquiry is that the geographical scope of application of antitrust laws deserves particular attention, see below Chapter 4. 608. In this chapter 3, the focus lies not on the protection and unfolding of competition, but on private law legislation designed to cope with abuses in private relations resulting from the absence or reduction of competition. However, the number of such State interventions that raise problems with regard to their application in international markets, i.e. cross-border private relations, does not appear to be very significant. Our following analysis will therefore concentrate on areas of State intervention in private relations which are mainly due to an asymmetric distribution of information between the parties: consumer contracts and employment contracts. Both areas have one aspect in common: legislators often attempt to protect the weaker party – the consumer or the employee – not only by ensuring the application of provisions this party should or could be familiar with, but also by conferring jurisdiction on a court in that party’s country. The latter rules are probably more important for the weaker parties: they reduce procedural risks by permitting them to enforce their rights without paying twice for legal 1287 See already supra, paras. 226-228.

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advice – namely at home as well as in the foreign country of the proceedings – and without erecting a language barrier between them and the court abroad. Moreover, the use of the same connecting factors for jurisdiction and choice-of-law rules enables the competent court to apply the lex fori; again, this will save the costs of ascertaining the content of foreign law and will prevent delays of the proceedings. We shall first look into the private international law of consumer contracts, below section 2, and then into conflicts issues relating to employment, below section 3. Section 2: Consumer Protection 1.

Survey

609. Consumer protection is a broad concept. According to Article 169 TFEU it serves such diverse objectives as “the health, safety and economic interests of consumers, as well as … their right to information, education and to organize themselves in order to safeguard their interests.” This may include a wide variety of measures relating to food inspection or the safety of products such as toys or electric appliances. The concept employed in the present context is much narrower and confined to the protection of economic interests of consumers to the extent that protective measures pertain to contract law. Ever since US President John F. Kennedy’s consumer message of 1962, consumer law in general and consumer contract law in particular have become a focus of legislation in industrialized nations.¹²⁸⁸ Over the years, this legislation has covered numerous topics in respect of consumers: their right to withdraw from distance contracts or from contracts made off business premises, i.e. potentially by surprise; their protection against unfair contract terms; their right to information about the transaction and its consequences; the safeguarding of their interests in specific contracts, for example after the purchase of defective goods, after the booking of an unsatisfactory package tour or in instances of the overbooking of a scheduled flight. 610. This legislation is invariably of a mandatory nature. Depending on the relative strength of the interest groups, it differs from country to country, with regard to both the subjects treated and the rights granted. An international unification is currently unrealistic, and even a mere approximation such as the one in the European Union has not succeeded in making any progress

1288 President John F. Kennedy, “Special Message to the Congress on Protecting the Consumer Interest, 15 March 1962”, in Public Papers of the Presidents of the United States, John F. Kennedy, containing the Public Messages, Speeches and Statements of the President, January 1-December 31, 1962, pp. 235-243, here cited from the reprint in Eike von Hippel, Verbraucherschutz, 2nd ed., Tübingen, 1979, pp. 225-234.

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beyond the creation of minimum standards.¹²⁸⁹ In cross-border transactions, choice of law is therefore inevitable, and numerous legislatures have in more recent years addressed the specific problems of consumer contracts in their respective codifications of private international law. Three models of legislation can be discerned: (1) the complete suppression of party autonomy by a conflict rule referring to the law of the consumer’s habitual residence; (2) the admission of party autonomy subject to the mandatory provisions enacted in the country where the consumer resides; (3) the selection, out of the laws involved, of the one which is most favourable to the consumer. It is noteworthy that all three patterns are designed as bilateral conflict rules. At least in theory, they not only accord rights to domestic consumers in transactions entered into with foreign professionals, but also induce a judge to protect a foreign consumer in a business relation with a domestic trader. Practice, however, looks a bit different, as we shall observe at a later stage. Given the difference in content between these conflict rules and the general conflict rules for contracts, and in view of the protective purpose of consumer contract law, their scope deserves closer scrutiny. The following analysis will focus on the delineation of this scope in terms of personal, substantive and situative requirements. 2.

Personal Scope

a) The consumer and the professional 611. What is a consumer contract ? The term is employed without any further explanation in the Chinese Law of 2010 and in the Civil Code of Quebec.¹²⁹⁰ The Swiss Code relates this type of contract to the concept of the “consumer”. Since the contract, according to Swiss law, must be intended to serve the consumer’s personal or family use, the legislative materials conclude

1289 So far, the legislation of the European Union on consumer contract law has always explicitly confirmed the right of Member States to “adopt or retain the most stringent provisions compatible with the treaty in the area covered by this directive, to ensure a maximum degree of protection for the consumer”. See Article 8 of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993 L 95/29. An attempt of the European Commission to merge four consumer directives into one instrument and at the same time overcome the traditional method of minimum harmonization was only successful in respect of two directives dealing with distance and off-premises contracts, see Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/ EC of the European Parliament and of the Council, OJ 2011 L 304/64, Article 4. 1290 See Article 42 of the Chinese Law of 2010; Article 3117 of the Civil Code of Quebec; on the latter see Geneviève Saumier and Pierre-Gabriel Jobin, “Quebec”, in Fernández Arroyo, ed., pp. 121-138 at pp. 130-131.

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that the consumer must be a natural person.¹²⁹¹ Following the model of the Rome Convention of 1980, Korean and Russian legislation, too, define the scope of the conflict rule solely by the description of the consumer, and so does Turkish law.¹²⁹² These laws designate the other party only as the supplier or as the contracting party of the consumer, but not by the indication of any personal quality of his own. From the wording of the respective conflict rules, it only follows that they do not relate to contracts made between businesses (so-called B2B transactions), but it is often unclear whether they exclusively cover contracts between a business and a consumer (a so-called B2C transaction) or also a transaction between two consumers (a so-called C2C transaction), for example sales of used cars, antique furniture or paintings. The absence of a disparity of power suggests that C2C contracts are not subject to the special conflict rules,¹²⁹³ but this could and should have been made clear as it is in a number of other pieces of legislation. In the European Union, but also in a rather complicated provision in Japan¹²⁹⁴, a consumer contract is defined as being “concluded by a natural person for a purpose which can be regarded as being outside his trade or profession (the consumer) with another person acting in the exercise of his trade or profession (the professional)”.¹²⁹⁵

b) Inconvenience of the definition 612. The European definition has the advantage of clarity, but it should be noted that it does not cover all cases where the disparity of information and motivation analysed above¹²⁹⁶ can be ascertained. The confinement to natural persons categorically excludes all legal entities¹²⁹⁷ even when they resemble 1291 See Article 120 of the Swiss Law of 1987 and the reference to the legislative materials by Keller and Kren Kostkiewicz in Heini, Keller, Siehr, Vischer and Volken, Article 120, No. 18. 1292 See § 27 of the Korean Law of 2001; Article 1212 of the Russian Civil Code (but see the slight amendment of 2013); Article 26, para. 1, of the Turkish law of 2007; see Nuray Ekşi, “Turkey”, in Fernández Arroyo, ed., pp. 473-486 at pp. 480-483. Article 5, para. 1, of the Rome Convention of 1980 has served as a model to these national laws. 1293 In the same sense Michael Bogdan, Concise Introduction to EU Private International Law, 2nd ed., Groningen, 2011, p. 130; Calliess, pp. 67-69 with further references; Stefan Leible, “Germany”, in Fernández Arroyo, ed., pp. 211-232 at p. 220, in respect of Article 29 of the Introductory Law of the Civil Code, the German provision implementing Article 5 of the Rome Convention. 1294 See Article 11, para. 1, of the Act on General Rules for Application of Laws of 2006; on Japanese law see Yayoi Satoh, “Japan”, in Fernández Arroyo, ed., pp. 315-337, who criticizes Article 11 as “very complex and confusing”, see p. 333. 1295 See Article 6, para. 1, first sentence, Rome I. 1296 See supra, para. 602. 1297 ECJ, 22 November 2001, Joined Cases C-541/99 and C-542/99 Cape v. Idealservice, [2001] ECR I-9049, cons. 15 and 16, in relation to Directive 93/13/EEC on unfair con-

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natural persons on account of their size, financial capacity, inexperience of personnel, etc. An academic association, a sports club, a church congregation or a small charity may very well be in the economic position of a consumer, but it does not qualify for this status under the legal definition outlined above. Moreover, the organization of such a group of persons as a legal entity may be purely accidental and depend on the particular legal environment of the specific Member State of the Union. Where such an association is not incorporated, the single persons acting on its behalf would be considered as consumers for the purposes of consumer contract law. Thus, there is a price to be paid for the clarity of the definition. 613. A further point of concern are contracts of dual purpose and contracts whose purpose is not known to the professional. In the latter case, the contract should be regarded as a consumer contract where the professional ought to have known the private purpose of the transaction, either from the communication with the consumer, if any, or from the objective facts of the case, in particular the typical use of the goods or services in question.¹²⁹⁸ The functional approach to the assessment of a contract also gives rise to uncertainty where goods or services are procured for both private and professional use. The Swiss law explicitly excludes contracts associated with the professional or commercial activities of the consumer; even a minor professional component of a contract would appear to suffice for its exclusion.¹²⁹⁹ However, the prevailing view rather advocates looking for the predominant use and suggests applying the consumer’s law where the private purpose of the contract prevails.¹³⁰⁰ 614. The European Court of Justice had to decide the matter in a case concerning the special rules of the Brussels I Regulation on jurisdiction in consumer proceedings. An Austrian farmer had purchased tiles for the roof of his farm building from a German trader. The farm building was partly used as a dwelling for himself and his family and partly as both a stable for about 200 pigs and as a barn for fodder and machinery. In a dispute arising from tract terms in consumer contracts, which employs a definition of consumers that is almost identical to the one of the Rome I Regulation cited in the text supra. 1298 In this sense the report of Giuliano and Lagarde on Article 5 of the Rome Convention, see note 2, OJ 1980 C 282/1 at p. 23; see also Bogdan, p. 130; Martiny in Martiny and Reithmann, No. 4179 at p. 1261; Peter Mankowski, “ ‘Gemischte Verträge’ und der persönliche Anwendungsbereich des Internationalen Verbraucherschutzrechts”, IPRax (2005), 503-509 at pp. 506-507. 1299 In this sense, Bucher and Bonomi, para. 914, at p. 244. 1300 See Alexander Brunner in Honsell, Vogt and Schnyder, Article 120, para. 22, at p. 875; Schnyder and Liatowitsch, para. 754, at p. 261; the Swiss Supreme Court discussed the issue without taking a stand in the context of jurisdiction under Article 13 of the Lugano Convention, see BG, 4 August 1995, BGE 121 III 336 at pp. 341-342. Keller and Kren Kostkiewicz in Heini, Keller, Siehr, Vischer and Volken, Article 120, para. 20, suggest to refer to the perception of the other contracting party: could that party realise that the contract was made for private purposes ?

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the purchase of the tiles, the question arose whether the courts in Austria had jurisdiction to decide the case, which they would only have possessed if the contract qualified as a consumer contract for the purposes of Article 13 Brussels I (now: Article 17 of the recast version). The Court pointed to the exceptional character of the rules on jurisdiction in consumer cases. Therefore, it concluded that the concept of consumer must be “strictly construed“ and that, “where a contract has a dual purpose, it is not necessary that the purpose of the goods or services for professional purposes be predominant for Articles 13 to 15 of the Convention not to be applicable.”¹³⁰¹

The Court concluded that in such a case a person claiming to be a consumer may not rely on the special rules of jurisdiction, unless “the trade or professional purpose is so limited as to be negligible in the overall context of the supply, the fact that the private element is predominant being irrelevant in that respect.”¹³⁰² In accordance with these findings, the delineation of the personal scope of application of the special conflict rules for consumer contracts may be far from easy where goods such as cars or computers, furniture or construction materials are bought for both personal and professional use. 3.

Substantive Scope

615. Article 5 paragraph 1 of the Rome Convention provided for its application to consumer contracts on the “supply of goods or services” and thereby gave rise to doubts about its comprehensive character.¹³⁰³ Article 6 paragraph 1 Rome I now applies to all consumer contracts, subject to specific exclusions in paragraph 4 relating to contracts of carriage, in rem rights in immovable property, financial instruments and services to be supplied outside the consumer’s country of habitual residence. The conflict rules of a number of other jurisdictions have been modelled in this respect on Article 5

1301 ECJ, 20 January 2005, Case C-464/01 (Johann Gruber v. BayWa AG), [2005] ECR I-439, cons. 36 and 42; see the critical annotation by Peter Mankowski, IPRax (2005), 505-506. 1302 Ibid., para. 54. 1303 See with regard to independent loan contracts the French Cour de cassation, Cass. civ., 19 October 1999, Rev. crit. dr. int. pr. 89 (2000), 29, and in particular the annotation by Paul Lagarde, at p. 33; the German Federal Court held that Article 5 did not apply to contracts for the purchase of the right to use immovable property on a timeshare basis, see BGH, 19 March 1997, IPRspr. (1997), No. 34 at pp. 64 et seq., in respect of the German provision implementing Article 5, i.e. Article 29 of the Introductory Law of the Civil Code.

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of the Rome Convention, without however adopting all the exceptions.¹³⁰⁴ It should be noted that the definition laid down in Article 6 paragraph 1 Rome I detaches the concept of the consumer contract from the notion of consumption. Where, for example, a private owner sells his used car to a dealer or rents a valuable painting to a museum, he makes those contracts for private purposes and consequently acts in the capacity of a consumer although he does not consume anything and the role of the recipient of goods or services is rather that of the other party.¹³⁰⁵ Thus, the Swiss Bundesgericht characterized a commission contract concluded between a private stampcollector resident in England and a Swiss auction company as a consumer contract.¹³⁰⁶ The divergence from everyday language is appropriate since the principal, seller or lessor will usually act without the experience of a professional in these cases and can therefore be regarded as the party whose protection is intended by consumer law. 4.

Situative Scope – “Active” and “Passive” Consumers

a) Rationale of the special connection 616. Legal protection responds to legitimate expectations on the side of the protected persons. Nobody travelling the world can expect to find the same habits and laws in foreign countries that he is accustomed to at home.¹³⁰⁷ Consequently, the law cannot procure protection to the “active” consumer who leaves his country of residence for contracting attractive bargains elsewhere. But those who stay at home, the “passive” consumers, may trust in the benefit of their own legislation when they enter into contracts with foreigners. But where is the borderline ? How is it possible in times of mass tourism, of plentiful migration and of electronic purchases via the internet to demarcate a consumer’s purely domestic activities from his or her cross-border activities ? Would anybody booking a car with a rental service over the internet in a foreign city really believe themselves protected by the mandatory laws of the law of their country of residence ? And what of an EU citizen booking accommodation in Hong Kong via the website of a hotel ? Is it reasonable to trust in the protection prescribed by minimum standards of EU consumer law ? The European Commission expects the cross-border potential of distance selling to be more fully exploited in the future.¹³⁰⁸ If that happens, would it not also change the consciousness of customers in 1304 See Article 120 of the Swiss law of 1987 (no exception); § 27 of the Korean law of 2001 (no exception); foreign-services contracts and contracts for carriage are excluded in Article 26, paragraph 4, of the Turkish law of 2007 and in Article 1212 para 3 of the Russian Civil Code as amended in 2013. 1305 See the wording of Article 6, para. 1, supra in para. 611. 1306 BG, 4 August 1995, BGE 121 III 336, at pp. 343-344. 1307 See the observations of Popper, supra in para. 37. 1308 See Recital 5 of Directive 2011/83 EU, OJ 2011 L 304/64.

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respect of their involvement in international transactions ? In view of such predictions, the expectations of consumers as to the legal framework of their transactions, if any, will change or will no longer be recognized as legitimate. 617. In a world with open frontiers people can hardly engage in cross-border commerce and reap the benefits of international trade and mobility while simultaneously pretending to be “passive” consumers. The latters’ protection by mandatory provisions of their country of origin therefore requires a different rationale than one of legitimate expectations. Unrealistic expectations cannot be legitimate. It is submitted that the true rationale rather is an encouragement of consumers to become involved in international trade and mobility. The message sent by legislators and courts to the populations of their respective States is: do not worry about legal diversity when you buy from foreign undertakings or travel abroad; purchase as you do at home. This message is sent to the national population of the respective States, not to foreign peoples. It is therefore rather unilateral in nature, although the pertinent conflict rules are bilateral. b) The contracting situation of the passive “consumer” 618. Against the backdrop of the legitimate expectation theory, legislatures first tried to identify as precisely as possible the contracting situations which should give rise to a mandatory protection of consumers by the law of their State. This should clearly be the case where the professional receives the consumer’s assent in the consumer’s State.¹³⁰⁹ There is less unanimity with regard to a second group of cases where the contract is made outside the consumer’s country but preceded by some business activity of the professional within that country; would simple advertisements inviting the consumer to enter into a contract be sufficient ?¹³¹⁰ Or will additional activities of either the professional or the consumer in the consumer’s State be required ?¹³¹¹ It is submitted that such attempts at detailing these requirements are futile. 1309 See in this sense the unilateral conflict rules of Louisiana and Oregon, § 51:1418 (A) Louisiana Revised Statutes, and Oregon Revised Statutes § 81.109 (4) (a) (B), renumbered as § 15.320 (4) (a) (B) in 2011; in a bilateral setting also Article 5, para. 2, second indent, Rome Convention; Article 120, para. 1 (a), of the Swiss Law of 1987; Article 3117, para. 1, of the Civil Code of Quebec; § 27, para. 1, No. 2, of the Korean Law of 2001; Article 26, para. 2 (b), of the Turkish Law of 2007; § 41 of the Austrian law of 1978, which was the first bilateral conflict rule on the matter, addressed this situation by requiring an activity of the professional or of his staff in the consumer’s country directed at the conclusion of contracts. 1310 In this sense, the law of Oregon, previous footnote, which requires, however, that the advertisement or invitation “in substantial measure” induced the consumer to enter into the contract. 1311 In this sense, Article 5, para. 2, first and third indent of the Rome Convention and the similar provisions cited in footnote 1308 supra of the laws of Korea, Quebec, Switzerland and Turkey; see also for Louisiana § 51:1418 (A) (2) of the Louisiana Re-

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Marketing strategies and procedures of traders may vary considerably. And they evolve over time. The steps leading from the first notification of the consumer about a good or service to a “meeting of the minds” may be parsed out and allocated in the consumer’s country or elsewhere; but once the transaction is consummated these steps form an indivisible whole. Under the circumstances of the case, the judge may or may not conclude in hindsight that this overall process was predominantly located in the consumer’s country. But the attempt to identify ex ante the links for a sufficiently close connection with the consumer’s country invariably stimulate the trader’s invention of new strategies – which were overlooked by the legislature – in order to evade the consumer’s law. A more comprehensive description of the contracting situations subject to the protective provisions of the consumer’s law should be preferred. In this sense, Article 6 paragraph 1(a) Rome I Regulation refers to the consumer’s law where “the professional pursues his commercial or professional activities in the country where the consumer has his habitual residence …”

This formula requires some activities of the professional in the consumer’s country and permits the judge to value these activities in light of the causal nexus to be assessed between them and the conclusion of the contract. c) Electronic commerce 619. The increase of electronic commerce over the last 20 years has rendered the assignment of a contract to the consumer’s country even more difficult. Websites offering the goods and services of professional traders as well as trading platforms established by intermediaries are accessible everywhere in the world. Do professionals who make use of such marketing devices thereby pursue activities in the country of the consumer’s habitual residence in the sense just outlined ? Must they consequently take into account the mandatory provisions of all jurisdictions across the globe ? If that were the solution, private international law could not attain one of its main objectives, i.e. the selection of a single applicable law or, at least, only a few of them out of the multitude of legal systems existing in the world. Only a small number of legislatures have addressed this problem so far. 620. In the United States, the Uniform Computer Information Transactions Act (UCITA) focuses on transactions consisting in the use or transfer of data. Its choice-of-law provision excludes the contractual election of the applicable law in consumer contracts and distinguishes so-called “access contracts” to be performed by online delivery from contracts that require delivery of a copy on a tangible medium. The former contracts are governed by the law of the licensor’s location at the time the agreement was made, the latter by vised Statutes requiring negotiations between the parties in the consumer’s state preceding the conclusion of the contract in another jurisdiction.

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the law of the jurisdiction where the tangible copy is or should have been delivered to the consumer.¹³¹² Where that place was chosen by the consumer, reference to the law of the place of delivery is also made in Article 42 of the Chinese Law of 2010, which does not specifically mention online contracts. Again however, the risk of evasion is obvious: the professional might, for instance, promise delivery at its own premises while offering at the same time, as an agent, to establish contacts between the customer and a carrier who will then transport the goods on behalf of the consumer to the address indicated. Again, a more flexible and comprehensive wording of the conflict rule is to be preferred so as to allow for an adjustment of the application of the conflict rule to the great variety of possible business models. 621. The European Union has taken account of electronic commerce with regard to both jurisdiction and the applicable law in corresponding provisions of the Brussels I and the Rome I Regulations. The special provisions on jurisdiction over consumer contracts are declared applicable by Article 15, paragraph 1(c) Brussels I (now: Article 17, paragraph 1(c) of the recast version) where the contract with the consumer “has been concluded with a person who pursues commercial or professional activities in the Member State of the consumer’s domicile or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities.”

It is the second part of this provision enunciating the requirement of “directed” activities that matters in the present context. Similar language can be found in Article 6 paragraph 1(b) Rome I Regulation. It designates the law of the consumer’s habitual residence (not the law of the country where the internet is accessed by him¹³¹³) as the law governing the contract, “provided that the professional … by any means, directs such activities to that country or to several countries including that country, and the contract falls within the scope of such activities.”

622. In the context of jurisdiction, the national case law of the Member States displays some hesitations and uncertainties concerning the concept of the

1312 See Section 109 (a) and (b) (1) and (2) of the Uniform Computer Information Transactions Act of 2002, available on the website of the National Conference of Commissioners on Uniform State Laws: http://www.nccusl.org/acts.aspx; the Act has been implemented by the States of Maryland and Virginia. See Calliess, pp. 158-160; Rühl, pp. 548 et seq. 1313 See Ugo Draetta, “Internet et commerce électronique en droit international des affaires”, Recueil des cours 314 (2005), 9-232 at pp. 216-217.

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“direction” of the professional’s activities to a certain country.¹³¹⁴ A judgment of the Grand Chamber of the European Court of Justice has subjected the matter to a very careful analysis. The Court had to deal with two cases: in the first, Mr. Pammer, an Austrian tourist, had discovered the website of a travel agent who offered freighter voyages as an intermediary for a German ship owner. Mr. Pammer booked a voyage but refused to embark when he found that, according to his allegations, the conditions on the vessel did not correspond to the description of the voyage on the website. He claimed reimbursement in an Austrian court. In the second case, a German tourist had booked, over the internet, a hotel room in an Austrian hotel called Alpenhof, which he left however without paying when he found the services unsatisfactory. The hotel Alpenhof then brought an action before an Austrian court for payment. In both cases the Court of Justice was asked whether Article 15 paragraph 1(c) Brussels I (now: Article 17, paragraph 1(c) of the recast version) was applicable.¹³¹⁵ 623. The Court of Justice pointed out that the requirement of “directed” activities differs from the mere existence of a website which is accessible worldwide. It includes facts indicating that potential clients in certain States are targeted or addressed by the professional.¹³¹⁶ The Court discussed a number of tests for such “directed” business. A positive indication may be the interactive character of the website which allows customers from selected (or from all) countries to place online orders; but according to the Court the lack of an interactive website is not equivalent to the absence of such a “direction”; nor is it necessary that the professional’s intention to “direct” activities to a specific foreign market be proven.¹³¹⁷ The “direction” of the professional’s activities to the Member State of the consumer’s domicile depends on objective factors, namely the appearance of a website and the trader’s overall activity. Particular indications, “possibly in combination with one another,” may be: the international nature of the activity at issue, such as certain tourist activities; the provision of telephone numbers with international codes; the use of a top-level domain name other than the one of the Member State of the trader’s establishment, for example “.com” or “.eu”; the description of itineraries from one or more other Member States to the place where the professional’s service is provided; the presentation on the website of ac-

1314 See the report by Schlosser in Hess, Pfeiffer and Schlosser, paras. 299-300 at pp. 8485. 1315 ECJ, 7 December 2010, Joined Cases C-585/08 and C-144/09 (Peter Pammer and Hotel Alpenhof), [2010] ECR I-2527; see Verica Trstenjak, Internetverträge in der Rechtsprechung des EuGH im Bereich des Verbraucherschutzes. Rheinische Friedrich-Wilhelms-Universität Bonn, Zentrum für Europäisches Wirtschaftsrecht, Vorträge und Berichte, Nr. 185, Bonn, 2011, pp. 13-18. 1316 ECJ, previous footnote, cons. 71-72. See in the same sense Pedro de Miguel Asensio, Derecho privado de internet, 4th ed., Cizur Menor (Navarra), 2011, p. 1008. 1317 Ibid., paras. 79 and 82.

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counts written by customers domiciled in various countries.¹³¹⁸ While the language employed on the website and references to currency are basically irrelevant, the use of a specific language may serve as an indication where it differs from the language of the trader’s country.¹³¹⁹ Clear evidence is of course the explicit statement on the website that certain countries are or are not served by the trader. 624. As the Court has explicitly pointed out, it is “appropriate to interpret Article 15(3) of Regulation No. 44/2001 [now: Article 17, paragraph 3 of the recast version] in the light of the corresponding provision in Regulation No. 593/2008”, i.e. the Rome I Regulation, which reiterates the plea for a convergent and harmonizing interpretation of both instruments.¹³²⁰ Having this plea in mind, its limitations should, however, be taken into account. The substantive scope of application of Article 15 paragraph 1(c) (now: Article 17, paragraph 1(c) of the recast version) Brussels I and Article 6 paragraph 1(b) Rome I are not the same: contracts for services to be supplied entirely outside the consumer’s country such as the hotel reservation in the case of Alpenhof are governed by Article 15 paragraph 3 Brussels I with regard to jurisdiction, but they are excepted from the operation of Article 6 Rome I by its paragraph 4(a). Nevertheless the situational explanations in Pammer and Alpenhof are of general significance. It follows that in electronic commerce, the situational scope of the special conflict rule of Article 6 paragraph 1(b) Rome I requires the ascertainment and weighting of a variety of details relating to the trader’s website and to the manner of contracting. This approach has however considerably been diluted by later decisions, in particular the Emrek case which pointed out that Article 15, paragraph 1(c) (now: Article 17, paragraph 1(c) of the recast version) Brussels I requires no causal link between the trader’s website and the conclusion of the contract.¹³²¹ Taken together, the case-law might lead to an unrestricted application of the consumer’s law to virtually all consumer contracts concluded even by very small traders who entertain a website indicating their telephone number. This appears excessive and, if extended to Article 6 Rome I, hardly in line with the rationale of that provision;¹³²² it might deter such traders from serving any consumers from foreign countries, even on the traders’ own premises. 1318 Ibid., paras. 83 and 92. 1319 Ibid., para. 84. Thus, the use of German on a website operated by an undertaking in Turkey and offering Turkish goods is a strong indication for its services being “directed” to Germany and Austria. 1320 See ECJ, supra at footnote 1315, para. 43; see also Recital 24 of the Rome I Regulation which makes explicit mention of Article 15, para. 1 (c), Brussels I (now: Article 17, para. 1 (c), of the recast version). 1321 ECJ, 17 October 2013, Case C-218/12 (Emrek v. Sabranovic), [2013] ECR I-0000, not yet reported. 1322 See the critical assessment by Geneviève Saumier, “Case Emrek: Expanding Jurisdiction for Consumer Claims under the Brussels Regime“, European Journal of Consumer Law 2014, 199-206 at pp. 202-206.

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Public Regulation

Special (Bilateral) Conflict Rules for Consumer Contracts

625. Where the personal, substantive and situational conditions discussed above are fulfilled, a broad international trend towards the enactment of special conflict rules can be ascertained. But what is the objective of those conflict rules ? In Europe, it is sometimes said to be the application of the law of the consumer’s social environment.¹³²³ This explains the first model of conflict rules for consumer contracts favouring the unrestricted application of the law of the country where the consumer is habitually resident as opposed to the supplier’s law or a law elected by the parties. In fact, Swiss and Chinese law as well as the laws of Louisiana and Oregon exclude party autonomy in respect of consumer contracts and subject these transactions to the consumer’s law.¹³²⁴ 626. The law of the European Union and the laws of numerous other jurisdictions belonging to the second group do not provide for such an inflexible designation of the consumer’s law. These laws allow for a contractual election of the law governing the consumer contract, but they invalidate a choice which has the result of depriving the consumer of the protection afforded to him by mandatory provisions of the law of his country of residence.¹³²⁵ The laws of this second group do not prescribe an outright application of the mandatory provisions of the consumer’s law;¹³²⁶ they only safeguard the protection granted by those provisions in substance, regardless of whether the level of protection is attained by the law otherwise governing the contract or by the law of the consumer’s habitual residence. Thus, the determination of the applicable provisions finally depends on an evaluation of the substantive level of the consumer’s protection; in theory, the result may be a mix of the law governing the contract otherwise and mandatory protective provisions of the law of the consumer’s habitual residence. Where the law chosen by the parties (in practice usually determined by the professional) is more favourable than the consumer’s law, the result of the conflict rules of this type may even be an unrestricted application of the elected law. It follows that the goal pursued by the legislatures of this second group is not just safeguarding a relation of proximity between the consumer and the applicable law, it is 1323 Schnyder and Liatowitsch, No. 753, at p. 261: “Recht der sozialen Umwelt”; Audit and d’Avout, No. 830, at p. 730: “L’application de la loi la plus proche de la partie à protéger …”. 1324 See Article 120, para. 2, of the Swiss Law of 1987; § 51:1418 (B) of the Louisiana Revised Statutes and § 81.109, in 2011 renumbered as § 15.320 of the Oregon Revised Statutes; this is basically also the rule under Article 42 of the Chinese Law of 2010. 1325 See Article 5, Rome Convention, and now Article 6, para. 2, Rome I; § 27, para. 1, of the Korean Law of 2001; for Quebec see Article 3117, para. 1, of the Civil Code; for Russia Article 1212 of the Civil Code as amended in 2013, for Turkey Article 26, para. 1, of the law of 2007. 1326 But see Article 11, para. 1, of the Act on general rules for application of laws of Japan prescribing the application of the consumer’s law.

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rather a substantive policy, i.e. the protection of the weaker party; it is only the minimum level of protection that depends on considerations of proximity, namely the habitual residence of the consumer and the links between the elements of the contracting process with this residence. 627. It is the predominance of substantive considerations which lays the groundwork for what may become the third model of regulation, i.e. the application of the most favourable of the several laws involved. Sponsored by the Organization of American States in the framework of the so-called CIDIP VII program, an expert group is in fact preparing an inter-American Convention on consumer contracts.¹³²⁷ Under Article 4 of the most recent proposal of Buenos Aires, the parties to a consumer contract can avail themselves of limited party autonomy: they may choose the law of the consumer’s domicile, the law of the place of conclusion of contract, the law of the place of performance, or the law of the seat of the professional; the law elected by the parties will be applied provided that it is the most favourable to the consumer among the laws listed in Article 4 paragraph 2.¹³²⁸ It is noteworthy that the comparison commanded by Article 4 of the proposal relates to the whole law of a country or to those parts of the law which are relevant for the dispute in question. By contrast, the comparison prescribed in the legislation of the second group above focuses on the protection granted by single provisions.¹³²⁹ 628. The comparison of different laws in view of the protection they afford to the consumer is an attractive notion for scholars of comparative law and, in theory, also for consumers. But it is much less attractive for counsel and the judge: it is time-consuming and costly since information on laws other than the lex fori will often have to be provided by experts commissioned by the parties or by the court. In light of the usual low values in dispute in consumer cases, the fees charged for the information on foreign law will usually appear excessive or prohibitive. While compliance with a single provision of a foreign law may be an acceptable solution every now and then, a comparison of whole bodies of law is not feasible and is pure theory; moreover, the benchmark of such comparison is unclear where some rules of the law 1327 See Diego Fernández Arroyo, “Current Approaches towards Harmonization of Consumer Private International Law in the Americas”, Int. Comp. LQ 58 (2009), 411-425; id., “Consumer Protection and International Private Relations”, in id., ed., 659-748 at pp. 681-682; for the course of the deliberations see Claudia Lima Marques and María Laura Delaloye, “La propuesta ‘Buenos Aires’ de Brasil, Argentina y Paraguay: El más reciente avance en el marco de la CIDIP VII de proteccíon de los consumidores”, Revista de direito do consumidor 19 (No. 73, 2010), 224-265. 1328 The text of the current proposal is printed in the annex to the article of Lima Marques and Delaloye, previous footnote, pp. 249 et seq. 1329 See Article 6, para. 2, Rome I: The choice of the applicable law may not have the “result of depriving the consumer of the protection afforded to him by provisions [German: “diejenigen Bestimmungen, … von denen …”, French: “les disposition auxquelles …”] that cannot be derogated from …” (emphasis added).

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of State A grant better rights to the consumer than corresponding provisions of law B, while the law of State B is more favourable in other respects. Even where single provisions are at issue, the said comparison is unlikely to occur. This is the result of an investigation conducted some years ago into published judgments on the matter.¹³³⁰ Since jurisdiction in consumer proceedings is usually vested in the courts of the consumer’s habitual residence, the judges can make a rather quick assessment of the non-derogable rights of the consumer under the latter’s law, which is the lex fori. According to the published decisions, they are not prepared to take the lex fori into consideration as a mere exception to an otherwise applicable foreign contract law; this would require the ascertainment of the foreign law in a first step. Rather, instead of making the necessary investigation of the foreign law, they turn to the law of forum right from the beginning.¹³³¹ There is no evidence that the reservation made in favour of the consumer’s law of habitual residence has any practical significance when the consumer is domiciled in a country other than the forum State. 629. The first and the second model differ in respect of the admission of party autonomy: while the contractual choice of the applicable law is basically allowed in the European Union and some jurisdictions following the European model, it is not permitted in Switzerland and the jurisdictions indicated above which designate the consumer’s law as the one governing the contract.¹³³² With regard to issues covered by mandatory provisions of the consumer’s law, the two models do not differ in their practical result: these provisions will be enforced anyway. A contractual election of the governing law would, however, extend beyond mandatory provisions; in the area of dispositive contract law the admission or non-admission of party autonomy may play a significant role for commercial practice. An example is given by the consequences of late payment or non-payment by the consumer, which is the most frequent form of breach of contract in retail markets. Professionals will often employ specific staff or even entertain a whole department for the collection of receivables; in other cases they will assign these claims to special debt-collecting agencies or factoring banks. While the law relating to interest on late payment differs from country to country with regard to the inception, rate and computation of the interest claim, the pertinent provisions usually are not mandatory and are therefore subject, even in consumer contracts, to a contractual choice of the applicable law. It goes without saying that the specialized collecting departments and agencies can operate in a much more cost-efficient way if the claims they have to collect 1330 Jürgen Basedow, “Consumer Contracts and Insurance Contracts in a Future Rome I-Regulation”, in Johan Meeusen, Marta Pertegás and Gert Straetmans, eds., Enforcement of International Contracts in the European Union, Antwerp, 2004, pp. 269-294 at pp. 279-282. 1331 See the cases reported in the article cited in the previous footnote. 1332 See supra the reference in footnotes 1324 and 1325.

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are governed by one and the same law, a solution made possible by a contractual election of the law governing the contracts with consumers resident in a variety of countries. In this respect the EU solution is to be preferred to the rigid and unrestricted application of the consumer’s law – with both its mandatory and dispositive provisions – to the whole contract.¹³³³ 6.

The Unilateral Approach

a) The absence of specific conflict rules for consumer contracts 630. Contrary to what the bilateral character of the conflict rules discussed above suggests, the case law emerging from their application does not provide evidence for the protection of foreign consumers vis-à-vis domestic professionals of the forum State.¹³³⁴ Such protection has been afforded in respect of judicial competence when courts in the professional’s country have dismissed a claim for lack of jurisdiction.¹³³⁵ Where that happens, as it usually does, the court in the professional’s State will not have any opportunity to address the case on the merits and the dispute will be litigated in the consumer’s country. For the courts of this country, the special conflict rules such as Article 6 Rome I have in practice a unilateral character. They lead to the application of the lex fori. The “law in action” therefore does not differ in these countries from those jurisdictions which have not yet enacted any special conflict rules on consumer contracts but in which the courts have nevertheless felt the need to protect their own consumers against the law of foreign jurisdictions elected by the professional. 631. Numerous jurisdictions lack special conflict rules for consumer contracts. They apply the general principles of international contract law to consumer contracts, which would include the reservation of public policy. Some of them respect a contractual choice of the applicable law without interference; the simple fact that the protective provisions cannot be derogated from is not sufficient to enforce them against a choice-of-law clause of the contract. This appears to be the case, for example, in Australia¹³³⁶ and in the Canadian common law jurisdictions; while certain limits to party autonomy are discussed by legal scholars in these countries, they have not yet been examined by the courts, and it seems that at least the contractual choice of the law of the professional’s jurisdiction will not be challenged since that law is 1333 For a broader theoretical discussion leading to the same preference, see Giesela Rühl, “Consumer Protection in Choice of Law”, Cornell Int. L. Journ. 44 (2011), 569601 at pp. 595-598. 1334 See the text accompanying footnotes 1330 and 1331, supra, with the references in these footnotes. 1335 See the case of the Swiss Federal Court supra footnote 1306. 1336 See Dan Jerker Svantesson, “Australia”, in Fernández Arroyo, ed., pp. 17-30 at pp. 2526, referring to some potential limits of party autonomy which, however, have not been examined by the courts so far.

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considered to be reasonably related to the facts of the case.¹³³⁷ The Carnival Cruise Lines opinion of the US Supreme Court suggests that this view also prevails in the United States at least with regard to interstate conflicts; where the law of a remote foreign country has been chosen, the courts may be more inclined to enforce consumer protection standards of the consumer’s own jurisdiction.¹³³⁸ b) Public policy as the vehicle of consumer protection 632. In other countries the courts do not leave any doubt that rights and obligations of domestic consumers arising from contracts with foreign professionals are governed by domestic consumer protection law. This is already achieved by the general rules of international contract law in countries such as Brazil, where party autonomy outside the field of arbitration is excluded and contracts are governed by the law of the place of conclusion.¹³³⁹ But Brazilian law apparently does not stop there: the mandatory provisions of the Consumer Protection and Defense Code of 1990 have been enforced as overriding mandatory provisions or as public policy because of the constitutional background of consumer protection.¹³⁴⁰ A similar view has, for example, also been expressed in Tunisia, where the new law on private international law does not contain pertinent conflict rules for consumer conflicts.¹³⁴¹ 633. It should be noted, however, that the enforcement of domestic consumer law as part of the forum’s public policy or as overriding mandatory law is often advocated irrespective of the degree of proximity between the facts of the case and the lex fori. A case decided by the (federal) Superior Court of Justice of Brazil sheds light on this practice: a tourist from Brazil had bought a camcorder in Miami, Florida, apparently from the US subsidiary of Panasonic International (Japan). When back home in Brazil, he found the camcorder defective and brought an action against Panasonic (Brazil). He was undoubtedly an “active” consumer, and Panasonic (Brazil) was definitely not 1337 Marina Pavlović, “Canada (Common Law Jurisdictions)”, in Fernández Arroyo, pp. 97-119 at pp. 110-111, who explicitly points out that it does not seem likely that the courts will override a choice of the applicable law where the parties to an international consumer contract “choose the law of the business’s domicile or residence, therefore, a law connected to the transaction …”, p. 111. 1338 See supra, para. 605; see also Hay, Borchers and Symeonides, pp. 1108 et seq., citing, however, decisions that quashed choice-of-law clauses referring to a State law permitting standard terms in consumer contracts which provided for arbitration, excluding class actions against the professional. State law prohibiting such contract terms has been held by the US Supreme Court to be pre-empted by the Federal Arbitration Act, see AT&T v. Concepcion, 583 US 321 (2011). The case law cited by Hay, Borchers and Symeonides therefore has lost its significance in substantive law. 1339 See supra, para. 187. 1340 See Claudia Lima Marques, “Brésil”, in Fernández Arroyo, ed., pp. 47-95 at pp. 78-80 with reference to the case law of Brazilian courts. 1341 Lotfi Chedly, “Tunisie”, in Fernández Arroyo, ed., pp. 467-472 at p. 470.

Chapter 3 – Countervailing State Measures for Asymmetric Private Relations

the supplier of the camcorder, but only affiliated with the seller Panasonic (United States). It was even pointed out in the proceedings that the type of product in question was not sold on the Brazilian market at the relevant time. Nevertheless, the Superior Court, in a 3:2 decision, quashed a lower court judgment dismissing the claim and declared the Brazilian consumer law applicable to the case.¹³⁴² The majority arguments pointed to the globalization of the economy and the existence of brands soliciting a worldwide trust of consumers in the respective products; according to the court, this was intended to be countered by an application of national protective laws to fact situations extending beyond national boundaries. Moreover, a multinational company such as the defendant Panasonic was said to be omnipresent regardless of the existence of national affiliates incorporated under the respective national laws. 634. The opinions of the five judges did not explicitly address concepts of private international law, neither the general conflict rules for contracts nor public policy nor the need to enforce overriding mandatory provisions (lois de police, Eingriffsnormen). They might be interpreted as advocating a worldwide application of Brazilian consumer law. The only indirect limitation of Brazilian law, i.e. of the lex fori, that could possibly be detected in this judgment might be inferred from the repeated reference to the global character of the defendant’s activities and brands. Could the conclusion be drawn that the court would have abstained from enforcing the law of the forum if the defendant had been a medium-sized trader doing business in a handful of US States and nowhere else ? If that is the message of the Brazilian judgment, international consumer protection in that country would depend on qualities of the defendant professional (such as shareholder structure and an extension of business activities), which often neither the consumer nor the court will be in a position to correctly ascertain. Legal certainty would be curtailed for both the consumer and the professional. By contrast, the specific bilateral conflict rules of the Rome I type discussed above employ criteria amenable to being assessed by the civil courts; they are also more detailed and therefore more conducive to an adequate protection of “passive” consumers, leaving “active” consumers to bear the risk of their own initiatives. c) Unilateral enforcement in addition to a specific conflict rule ? 635. Where specific conflict rules of the Rome I type are in force, the courts will sooner or later have to answer the question whether the domestic consumer protection laws of the forum State can be enforced unilaterally, whether by specific unilateral conflict rules or as overriding mandatory law or as part 1342 Superior Tribunal de Justiça 11 April 2000, Resp. 63.981 – SP, Revista de Jurisprudência do Superior Tribunal de Justiça 137 (2001), 387, here cited from the website of the Superior Tribunal de Justiça (STJ): http://www.stj.gov.br/portal_stj/publicacao/ engine.wsp.

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of public policy. Even with the flexible and rather open wording of Article 6 Rome I, this question will inevitably be raised one day. For the European Union, Article 23 Rome I makes an explicit reservation for “provisions of Community law which, in relation to particular matters, lay down confl ictof-law rules relating to contractual obligations.” It is generally assumed that isolated unilateral conflict rules contained in EU consumer directives are thereby given priority over the provisions of the Rome I Regulation.¹³⁴³ Those conflict rules usually prescribe the enforcement of the minimum standards of the respective directive where the consumer contract in question has a “close” connection with the territory of the Member States.¹³⁴⁴ It is unlikely, however, that a connection not covered by Article 6 paragraph 1(a) and (b) Rome I can qualify as a “close” connection for the purpose of the directives. 1343 Martiny in Münchener Kommentar, Rom I-VO Art. 23, No. 15; Plender and Wilderspin, Obligations, No. 9-092 at p. 259; Stefania Bariatti, “Les limites du choix de la loi applicable dans les contrats impliquant une partie faible”, in Corneloup and Joubert, pp. 325-351 at p. 337; Benedetta Ubertazzi, Il regolamento Roma I sulla legge applicabile alle obbligazioni contrattuali, Milan, 2008, pp. 25-27; Matthias Weller in Calliess, Article 23, Rome I, para. 8. 1344 See the thorough analysis by Stéphanie Francq, L’applicabilité du droit communautaire dérivé au regard des méthodes du droit international privé, Brussels, 2005, pp. 307 et seq. An example is Article 6, para. 2, of Directive 93/13/EEC on unfair terms in consumer contracts (OJ 1993 L 95/29): “Member States shall take the necessary measures to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-Member country as the law applicable to the contract if the latter has a close connection with the territory of the Member States.” Similar provisions are contained in Article 7, para. 2, of Directive 1999/44/EEC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees, OJ 1999 L 171/12; Article 12, para. 2, Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer fi nancial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC, OJ 2002 L 271/16; Article 22, para. 4, Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC, OJ 2008 L 133/66. Directive 97/7/EC on distance contracts contained an analogous provision in Article 12, para. 2, but has been repealed and substituted by Directive 2011/83/EU on consumer rights, OJ 2011 L 304/64; its Article 25 no longer refers to the international character of the transaction. Article 9 of Directive 94/47/EC of the European Parliament and of the Council of 26 October 1994 on the protection of purchasers in respect of certain aspects of contracts relating to the right to use immovable property on a timeshare basis, OJ 1994 L 280/83, differs from the other provisions since it clearly confines the protection granted by the Directive to immovables situated in the territory of a Member State; this Directive has been replaced by Directive 2008/122/EC of the European Parliament and of the Council of 14 January 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts, OJ 2009 L 33/10, see now Article 12, para. 2.

Chapter 3 – Countervailing State Measures for Asymmetric Private Relations

The result may differ where a contract such as a contract for services to be supplied abroad falls outside the substantive scope of Article 6. Here, the unilateral conflict rule of a directive may indeed provide protection to the consumer. 636. But can national consumer protection laws also be enforced as overriding mandatory provisions under what is now Article 9 Rome I ? The answers appear to diverge in different Member States of the European Union. In 1997 the German Bundesgerichtshof had to deal with the sophisticated marketing strategy of a company established on the Isle of Man, an independent jurisdiction which, with regard to its foreign affairs, belongs to Great Britain; the law of the European Union, however, is not in force for the Isle of Man.¹³⁴⁵ The plaintiff company established on that island in the Irish Sea was engaged in the business of selling the rights to use holiday apartments located on the Canary Islands on a timeshare basis. The sales promoters employed by the company addressed German tourists in the Canary Islands in German and invited them to an event where further information was conveyed and defendants signed a standard declaration obligating them to pay the purchase price expressed in German currency to a German recipient. The standard declaration contained a clause excluding any right of withdrawal and subjecting the contract to the law of the Isle of Man, which does not grant the mandatory right of withdrawal established by the European directive on off-premises contracts.¹³⁴⁶ When the defendants, after returning to their German domicile, repudiated the contract, the plaintiffs sued for the promised payment. 637. The Federal Court pointed out that the contracting situation was not covered by Article 29 of the Introductory Law of the Civil Code, which implemented Article 5 of the Rome Convention; the defendants had clearly signed the contract as “active” consumers not protected by those provisions. The Court further rejected the defendants’ allegation that the German statute implementing the EU off-premises directive should be enforced as an overriding mandatory provision for the purposes of Article 7 paragraph 2 of the Rome Convention,¹³⁴⁷ i.e. a provision requiring application irrespective of the law otherwise applicable to the contract. According to the Bundesgerichtshof, the consistency of Articles 5 and 7 of the Rome Convention (now: Articles 6 and 9 Rome I) requires that the preconditions for the application 1345 See Article 355, para. 5 (c), TFEU, and Protocol No. 3 on the Channel Islands and the Isle of Man, attached to the Act concerning the conditions of accession [of Denmark, Ireland and the United Kingdom] and the adjustments to the Treaties of 22 January 1972, OJ 1972 L 73/164. 1346 Council Directive (85/577/EEC) of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises, OJ 1985 L 372/31, see Article 5; the Directive has recently been replaced by Directive 2011/83/EU on consumer rights. 1347 Implemented in Germany by Article 34 of the Introductory Law of the Civil Code, now replaced by Article 9, para. 2, Rome I.

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of consumer protection laws outside the situative scope of Article 5 cannot be less demanding than where Article 5 applies.¹³⁴⁸ Put in other words: an “active” consumer not protected by Article 5 cannot invoke Article 7 paragraph 2 of the Rome Convention. 638. The French Cour de cassation is generally assumed to have taken the opposite view in a judgment handed down in 2006.¹³⁴⁹ In that case, a German bank had given a loan to a French couple and had sued for reimbursement in the Tribunal de grande instance of the couple’s residence. The defendants alleged that jurisdiction would lie, in accordance with the French Code de la consommation, with a lower court, namely the Tribunal d’instance, and moved for a dismissal of the action. In deciding in favour of the defendants, the Cour de cassation enunciated that the respective provision of the consumer code was an overriding mandatory provision as defined in Article 7 paragraph 2 of the Rome Convention. This has been interpreted as a clear statement that the provisions of the French Code de la consommation in general are overriding mandatory provisions in the sense of the Rome Convention.¹³⁵⁰ 639. The bearing of this decision on the issue in question appears doubtful, however. The identification as a loi de police by the court relates only to a single provision of the Code de la consommation, namely to the one on jurisdiction and not to any other rule dealing with the substantive rights and obligations of the consumer and the professional. But the Rome Convention and Rome I do not touch upon jurisdiction anyway. Since Article 1 paragraph 3 Rome I (corresponding to Article 1 paragraph 2(h) of the Rome Convention) excludes all issues of procedure from the scope of the Regulation, Article 9 – being part of that Regulation (and equally Article 7 of the Rome Convention) – cannot apply to procedural issues either. At the present stage, the law of the European Union in general does not deal with the question whether ju1348 BGH, 19 March 1997, IPRspr. (1997), No. 34 = IPRax (1998), 285-290 at pp. 288-289; for a French translation see Rev. crit. dr. int. pr. 87 (1998) 610 with an annotation by Paul Lagarde at pp. 619-631. 1349 Cass. civ., 23 May 2006, Rev. crit. dr. int. pr. 96 (2007), 85 with an annotation by Delphine Cocteau-Senn. 1350 Pascale Deumier, “France”, in Fernández Arroyo, ed., pp. 191-210 at pp. 201-202 with further references; Stéphanie Francq and Fabienne Jault-Seseke, “Les lois de police, une approche de droit comparé”, in Corneloup and Joubert, pp. 357-393 at pp. 364365, who mention some earlier case law from Belgium, Italy and Spain to the same effect, but also point out that recourse to Article 9, Rome I, is redundant in light of the special conflict rules of Articles 6, 7 and 8, Rome I; similar to the Cour de cassation is the assessment, in respect of the Rome Convention, by Trevor Hartley, “Mandatory Rules in International Contracts: The Common Law Approach”, Recueil des cours 266 (1997), 337-425 at p. 373: “At least in England, most consumer-protection rules that are domestically mandatory [within the meaning of Article 5, para. 2] would also be internationally mandatory [for the purpose of Article 7, para. 2, of the Rome Convention].”

Chapter 3 – Countervailing State Measures for Asymmetric Private Relations

risdiction for an action lies with a lower or with a higher court within a given Member State. Except for single EU rules regulating specific proceedings, this is still a matter exclusively dealt with by the national law of procedure of the respective country. Since the issue as such is a matter of national law, there is consequently no need for recourse to reservations of national law such as Article 7 paragraph 2 which are contained in European instruments. Using the terminology of the “overriding” mandatory provisions employed by Article 9 Rome I one might also say that there is nothing to be “overridden”. Thus the statement of the Cour de cassation is simply irrelevant to the outcome of the case and can at best be characterized as (a rather dubious) obiter dictum which should not be considered as closing the debate. 640. The relation between Article 6 and Article 9 Rome I, i.e. between the specific conflict rule for consumer contracts and the conflict rule dealing with overriding mandatory provisions, requires a detailed analysis. It is submitted that the answer given by the German Bundesgerichtshof is correct to the extent that a case falls into the substantive and personal scope of application of the special conflict rule on consumer contracts as delineated by paras. 1 and 4 of that provision. Where the contract has, however, been concluded in circumstances which are outside the situational scope of application as defined in Article 6 paragraph 1(a) and (b), it would be contradictory indeed if the court of a Member State were to enforce its national consumer protection law under Article 9. The situation is different for contracts not covered by the substantive scope of application of Article 6, for example contracts of carriage or contracts for services to be exclusively supplied outside the consumer’s country of habitual residence. Here it is conceivable that, under the circumstances of the case, Article 9 paragraph 2 serves to enforce certain consumer protection provisions of the lex fori, provided they safeguard the public interest of that Member State – a point which will be discussed later on.¹³⁵¹ 7.

Conclusion

641. Economic theory provides good reasons for States to protect consumers in their contractual relations with professionals. But the implementation of the resulting policy depends on the relative political strength of the interest groups in the respective countries; it consequently differs from State to State and raises choice-of-law questions in international private relations. The political background of consumer protection policy favours unilateral trends: when promoting consumer protection, politicians think of the voters/consumers in their own constituency and their protection vis-à-vis professionals, both domestic and foreign. They are much less concerned with foreign consumers vis-à-vis domestic professionals: in this relationship they rather tend to favour the domestic professional who is a voter and who – as 1351 See infra, Part III, Chapter V, at paras. 702 et seq.

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an employer – helps to promote prosperity at home. Many of the resulting statutory conflict rules are therefore of a unilateral nature: the examples provided by the various EU consumer directives,¹³⁵² by the laws of Louisiana and Oregon¹³⁵³ and by the widespread characterization of consumer protection laws as overriding mandatory provisions¹³⁵⁴ speak a clear language. 642. Contrary to these assumptions, the European model of the 1980 Rome Convention has introduced a bilateral conflict rule on consumer contracts and inspired national legislatures in numerous countries in Europe and Asia to do the same.¹³⁵⁵ The current American CIDIP VII discussions on a convention dealing with international contracts, too, aim at the adoption of bilateral conflict rules.¹³⁵⁶ How can these findings be reconciled with the unilateralist orientation flowing from the political background ? The main reason probably is the legislative history of the European model. The Rome Convention was drafted by an expert group composed of scholars from several European countries, before any of these States developed specific national conflict rules on consumer contracts; the expert group was working in a kind of conflicts vacuum in this respect.¹³⁵⁷ International expert committees are, thankfully, a poor forum for chauvinism, and in this case no participant was constrained to “defend” national law against foreign influences as so often occurs in international negotiations. This facilitated the agreement on a bilateral conflict rule. 643. Moreover, the Brussels Convention of 1968, with its special rules on jurisdiction for certain consumer proceedings, was already in force and guaranteed the consumer the conduct of proceedings in a court in his home country.¹³⁵⁸ Consequently, a bilateral conflict rule would allow that court to apply its lex fori, whereas courts outside the consumer’s country would hardly ever be confronted with such cases. In light of the EU rules on jurisdiction one might argue that the bilateral drafting of Article 5 of the Rome Convention (now: Article 6 Rome I) has something of a fictitious nature: it is extremely unlikely that it will ever refer to a foreign law for the protection of a con1352 1353 1354 1355 1356 1357

See supra, para. 626, and footnote 1344. See supra, footnote 1309. See supra, paras. 632 et seq., 635. See supra, paras. 625 et seq. See supra, para. 627. It is noteworthy that the draft convention presented by the Commission of the European Communities in 1972 had not yet touched upon consumer contracts at all, see Ole Lando, Bernd von Hoffmann and Kurt Siehr, eds., European Private International Law of Obligations, Tübingen, 1975, pp. 230 et seq. (English) and pp. 220 et seq. (French); the point was apparently first raised in a 1974 conference in Copenhagen, see Ole Lando, “Les obligations contractuelles”, ibid., pp. 125-154 at pp. 135-136. 1358 See the Articles 13-15 of the original version of the Brussels Convention of 1968, printed in the four official languages of the founding Member States (Dutch, French, German and Italian) in OJ 1972 L 299/32; these provisions only dealt with instalment sales to consumers.

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sumer. And indeed, no such judgment has come to this author’s knowledge. The case law centres entirely on protection of the domestic consumer by domestic law, never on the protection of foreign consumers by the law of their country.¹³⁵⁹ Is the European model a pseudo-bilateral rule, i.e. merely a unilateral conflict rule in disguise ? Even if that question is answered in the affirmative, the bilateral approach has a decisive advantage: it does not claim for the forum State what this State is not – at least in theory – prepared to grant to the law of a foreign country. Whatever rule may, for example, be inferred from the Brazilian Panasonic case,¹³⁶⁰ it cannot be bilateralized. Where applied in a bilateral way, the reasoning of the Brazilian court – in particular the reference to the worldwide presence of Panasonic – would uphold the application of any consumer-friendly law under the sun, even if totally unconnected to dispute in question. Such a conflict rule would not reduce the complexity of the international case as it should do. Bilateralism, conversely, has a domesticating effect on legislators and judges. Section 3: Employment Contracts 1.

Market Imperfections and Countervailing State Measures

a) Market imperfections 644. The market imperfections outlined above¹³⁶¹ have a strong impact on labour relations. Where employers have to manage a large workforce, they generally have much better insight into the eventualities of labour relations than the individual employee. In certain situations, the disparity is further exacerbated by market conditions, especially a particular power or even a monopoly of the employer on the labour market; this may be the case in rural areas or in certain specialized sectors where jobs are offered only by a single or by few undertakings and workers cannot easily switch to other employment. Sometimes, the employee’s dependency is aggravated by family ties or other factors which reduce mobility. Moreover, employment contracts are relational in nature: they give rise to long-run labour relations which cannot be comprehensively regulated ex ante.¹³⁶² They continuously require a cooperative spirit of the parties who have to adjust to situations not contemplated at the time the contract was made: new technology, new customers, new 1359 See supra, para.628. 1360 See supra, para.633. 1361 See supra, paras.534, 601 et seq., 606 et seq.; with a particular focus on employment contracts, these market imperfections are discussed by Bruce Kaufmann, “Labor Law and Employment Regulation: Neoclassical and Institutional Perspectives”, in Kenneth Dau-Schmidt, Seth Harris and Orly Lobel, eds., Labor and Employment Law and Economics – Encyclopedia of Law and Economics, 2nd ed., Cheltenham, 2009, pp. 3-58 at pp. 14-20. 1362 Cooter and Ulen, pp. 225-235; Ann-Sophie Vandenberghe, “Employments Contracts”, in Dau-Schmidt, Harris and Lobel, pp. 61-95 at pp. 62-63.

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suppliers, new colleagues, etc. This adjustment occurs in the framework of the existing contract, i.e. outside or perhaps rather in the shadow of the job market. Like all relational contracts, employment contracts bear the risk of moral hazard or opportunistic behaviour, another form of market imperfection.¹³⁶³ Either party may try to shift the balance of contractual rights and obligations initially agreed upon in its own favour. b) Complex regulation 645. These market imperfections have become conspicuous after the industrial revolution which, in the second half of the nineteenth century, gave rise to a mass exodus from the countryside and a concentration of factory work in metropolitan areas. The extreme exploitation of workers aroused broad interest for what became known as the “social question”. It induced, apart from the October Revolution in Russia in 1917, two lines of legal development which have brought about the current body of labour law: (1) a broad trend towards the association of workers in trade unions with a view to selfhelp, in particular through collective bargaining, conciliation and arbitration proceedings, and (2) an increasing intensification of the State regulation of labour markets. The resulting normative framework of employment relations is therefore particularly complex: it consists of the individual employment contracts agreed upon by the parties involved within the framework of contract law; by various types of collective agreements and arbitration awards made for single plants or enterprises or for whole sectors of an economy, some of which may even be vested by the State with binding force on all workers and employers in a certain line of business; and by State regulation within the areas of both private and public law that provides for minimum working conditions. The subjects of this normative environment cover all aspects of labour relations: the formation, modification and termination of employment contracts; salaries, working hours and the entitlement to an annual leave; health and safety conditions at work; risks of unemployment, of accidental injury and disease, and of impoverishment in old age; equality of treatment; agreements in restraint of trade, representation of employees and their organization at the plant and enterprise levels for the purpose of co-determination; the prevention, settlement and consequences of strikes and lock-outs. Considerable differences exist from country to country with regard to the basic policy approaches, the substance of the rules, the extent of their mandatory character, and the share of State regulation, collective agreements and arbitration awards in the overall framework.¹³⁶⁴ 1363 Fritsch, Wein and Ewers, pp. 317-318; see also Deregulierungskommission, No. 13. 1364 For a general survey of comparative labour law and its academic treatment see Matthew Finkin, “Comparative Labour Law”, in Matthias Reimann and Reinhard Zimmermann, eds., The Oxford Handbook of Comparative Law, Oxford, 2006, pp. 1131-1160; for a more detailed treatment of the black letter law in a comparative perspective, see Bob Hepple, ed., IECL, Vol. 15, with currently 11 chapters; Herbert

Chapter 3 – Countervailing State Measures for Asymmetric Private Relations

c) Application to cross-border labour relations: characterization 646. Whether and to what extent the single components of the legal framework outlined above are applied to cross-border labour relations depends on the specific conflict rules, these differing with regard to public regulation of labour conditions, collective agreements, and mandatory and dispositive contract law. Particular difficulties arise from the fact that precepts having equivalent functions may be part of a collective agreement in one country, may belong to the State’s contract law in another and may even be interconnected with public law regulation in a third country.¹³⁶⁵ This gives rise to considerable problems of characterization. 647. An example is provided by the employee’s protection against unfair dismissal: in many countries, limits on the unilateral termination of the contract by notice from the employer are drawn by mandatory contract law requiring the employer to respect certain procedures and notice periods, and to prove and specify a “just cause” for the termination.¹³⁶⁶ In the Netherlands, this is also a matter of public law. A decree promulgated in 1945 requires the approval of the termination by the authority competent in matters of social security.¹³⁶⁷ The decree was adopted to serve the national labour market which had not yet recovered in the aftermath of World War II. At the time of its enactment, dismissal was equivalent to enduring unemployment and to an additional burden on the State-run unemployment insurance; hence the competence of the social security authority. What are the consequences for the application of the decree to cross-border cases ? Is it part of contract law or part of the framework of the labour market applicable in accordance with territorial criteria ?¹³⁶⁸

1365

1366 1367

1368

Kronke, Regulierungen auf dem Arbeitsmarkt – Kernbereiche des Arbeitsrechts im internationalen Vergleich, Baden-Baden, 1990. Already 40 years ago, Malintoppi observed that in labour law the traditional borderline between private and public law was vanishing, see Antonio Malintoppi, “Les rapports de travail en droit international privé”, Recueil des cours 205 (1989), 331-394 at p. 345; the course was in fact held in 1973, but published only after the author’s death. See Bruno Veneziani, “Formation, Modification and Termination of Employment Contracts”, in IECL, Vol. 15, Chap. 4, Sects. 81-87. Article 6 of the Buitengewoon Besluit Arbeidsverhoudingen, 1945, requiring the approval of the Uitvoeringsinstituut Werknemersverzekeringen; the current version of this instrument can be found on http://wetten.overheid.nl. The literature on private international law usually classifies the decree as an overriding mandatory provision, see Aukje van Hoek, Internationale mobiliteit van werknemers, The Hague, 2000, pp. 114-115; Strikwerda, p. 177; see also Herbert Kronke, Rechtstatsachen, kollisionsrechtliche Methodenentfaltung und Arbeitnehmerschutz im internationalen Arbeitsrecht, Tübingen, 1980, pp. 20 and 132 with further references. It should be noted that this classification only clarifies that the law governing the contract is irrelevant for the application of the decree. But it does not specify the connecting factors for its application. Does the decree apply when a Belgian citizen resident in Antwerp and commuting across the Dutch border is dismissed

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648. For another example, one can refer to the legislation prescribing staff representation bodies for worker co-determination. It will usually be classified as forming part of the law governing the conditions for the operation of a plant or factory; accordingly, the law of the site of the establishment will be applied. But does this classification also extend to the statutory prohibition against dismissing members of a works council ? An affirmative answer is supported by the purpose of that prohibition, which is intended to protect the independence and the operation of the co-determination body vis-à-vis the employer. It may in fact be regarded as a kind of private law extension of the legislation on works councils. Or should the prohibition of dismissals be considered as relating to the termination of individual employment and, thus, as an issue of contract law which is to be separated from the incidental question of the constitution of, and membership in, a works council ? While at a first stage the courts of Luxembourg apparently took the former view,¹³⁶⁹ the European Court of Justice has dealt with the issue under Article 8 Rome I, i.e. as a matter of contract law, without however explicitly discussing the issue of classification.¹³⁷⁰ 649. It is submitted that the concept of an “individual employment contract” embodied in Article 8 Rome I should be interpreted in a uniform, i.e. autonomous, way.¹³⁷¹ This would be in line with the interpretation of similar conby his Dutch employer ? And what about a Dutch resident employed in Belgium ? According to van Hoek, p. 114, the application of the decree requires that the worker is likely to fall back on the Dutch labour market. But is that likelihood to be assessed in accordance with the habitual residence ? It is not very meaningful in a time of open frontiers and mass commuting; this appears to lead to a new construction of the decree in the aftermath of HR 24 February 2012, Ned. Jur. 2012, No. 274 with annotation by M. V. Polak; see also A. A. H. van Hoek, “De werkingssfeer van het BBA na het NUON arrest van de Hoge Raad, Tijdschrift Recht en Arbeid 4 (2012), Issue 12, pp. 5-9 (I), and 5 (2013), Issue 1, pp. 5-12 (II). 1369 See the case history in ECJ, 15 March 2011, Case C-29/10 (Koelzsch v. Luxembourg), [2011] ECR I-1595, cons. 23. The same view has been taken by some German writers, see Rolf Birk, “Das internationale Arbeitsrecht der Bundesrepublik Deutschland”, RabelsZ 46 (1982), 384-420 at p. 402; Sebastian Krebber, Internationales Privatrecht des Kündigungsschutzes bei Arbeitsverhältnissen, 1997, p. 325; the Federal Labour Court of Germany has, however, applied the law governing the labour contract to the general protection against unfair dismissal, i.e. to the protection available for all employees and not only for members of works councils, see BAG, 24 August 1989, IPRspr. (1989), No. 72. The application of the lex contractus to all issues of termination has been advocated by Martin Franzen, “Internationales Arbeitsrecht”, in Arbeitsrecht-Blattei 920 (2006), para. 136. 1370 See the judgment of the ECJ in Koelzsch, previous fn., paras. 31 et seq. in respect of Article 6 of the Rome Convention, the predecessor of Article 8, Rome I. 1371 In the same sense Plender and Wilderspin, Obligations, No. 11-011, at p. 304; Louise Merrett, Employment Contracts in Private International Law, Oxford, 2011, para. 3.29, at p. 58; Martiny in Reithmann and Martiny, para. 4832, at p. 1422; Franzen, in Calliess, Rome I, Article 8, para. 5.

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cepts in the Brussels I Regulation, where the Court of Justice has advocated, from the very beginning and continually, an independent and autonomous interpretation of concepts such as civil and commercial matters. This approach was meant “to ensure, as far as possible, that the rights and obligations which derive from [the Convention] for the contracting States and to whom it applies are equal and uniform…”.¹³⁷² Analogous considerations apply to the present question, too. The demarcation of contract issues from other regulations concerning labour relations and other types of contract concerns the scope of application of Article 8 Rome I, the relevant conflict rule for employment contracts. It should therefore also be carried out in a uniform and autonomous way. This is not an easy undertaking, but it is possible because of the existence of a supra-national court. It is much more difficult for courts sitting in different States which are not connected by supra-national judicial structures. But they could and should also proceed to a comparative and functional assessment of how an employment contract can be distinguished from other contracts and from other parts of labour law, such as the legal framework for the operation of single plants or whole enterprises, or collective agreements. d) Survey: confinement to bilateral conflict rules 650. In light of the difficulties described above, international employment law cannot currently be said to be well developed. In most countries, legal literature is confined to what in substance is a unilateral approach: to what degree do the labour law regulations of the lex fori require application to a given cross-border case ? It is only with regard to the core of individual employment contracts that the gradual emergence of bilateral conflict rules can be observed; in respect of other instruments of labour regulation, unilateral approaches are being discussed, but in many areas clear conflict or scope rules are lacking. Article 6 of the Rome Convention and its successor rule, i.e. Article 8 of the Rome I Regulation appear to be the first legislative steps towards bilateral conflict rules explicitly addressing individual employment contracts. They form a model for a gradual extension of the bilateral approach in labour law to jurisdictions outside the European Union. But before the analysis turns to these conflict rules, see below 3, their object, i.e.

1372 ECJ, 14 October 1976, Case C-29/76 (LTU v. Eurocontrol), [1976] ECR 1541, cons. 3. In numerous cases the Court of Justice has confirmed the principle of autonomous interpretation of the concepts employed by the Brussels I Regulation for the determination of its scope or of the scope of single provisions, see the references by Pippa Rogerson in Ulrich Magnus and Peter Mankowski, eds., Brussels I Regulation, 2nd ed., Munich, 2012, Art. 1, paras. 8-11; see also Jürgen Basedow, “Civil and Commercial Matters – A New Key Concept of Community Law”, in Torstein Frantzen, Johan Giertsen and Giuditta Cordero Moss, eds., Ret og Toleranse. Festskrift til Helge Thue – 70 år, Gyldendal, 2007, pp. 151-164.

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the factual circumstances of cross-border labour relations, deserves a closer look. 2.

Manifestations of Cross-Border Labour Relations

a) General 651. In present times, the legal framework summarized above has to cope with an increasing number of labour relations presenting connections with more than one country. The variety of such cross-border cases is remarkable. Not all foreign elements are relevant, however, for legal purposes. In the light of a territorial approach, a cross-border dimension may appear to be completely insignificant, particularly where a foreign immigrant worker is hired by a domestic employer for work to be performed in the country where both of them are habitually resident. Despite considerable cultural differences that may exist between employer and employee and that may have a serious impact on the labour relation, such a situation will be considered as purely domestic for the purposes of labour law.¹³⁷³ Similar is the inverse situation of a domestic company establishing an affi liate subsidiary in a foreign country which hires members of the local workforce to run its business there; the labour relations will in principle be considered as internal ones of the foreign country. Cross-border employment relations which raise issues of conflicts law are of a more complex nature. They comprise the employment of workers with a mobile workplace, such as seafarers and flying personnel, or with multiple workplaces located in more than one State, for example a researcher who spends 50 per cent of his time at his employer’s premises and the other 50 per cent in a foreign country where he lives with his family and carries out his work as a telecommuter under an apposite collective or individual agreement with the employer. b) Posting of workers 652. More and more numerous are cross-border labour relations resulting from the posting of workers, which may occur in several forms:¹³⁷⁴ employees may be posted between affiliated companies belonging to the same group or for the performance of the employer’s obligations to render services to a foreign customer, or by a temporary employment undertaking or a placement agency hiring out a worker to a foreign undertaking. Where a parent company posts a worker to a foreign affiliate and assigns the employment contract to it, there is arguably a change of employer; the resulting situation might be 1373 These cases result from the migration of workers reported supra in paragraphs 51 et seq., which in some contexts has been deliberately put into effect by recruitment agreements, see supra, para. 84. 1374 See the definition in the European Union in Article 1, para. 3, of Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 on the posting of workers in the framework of the provision of services, OJ 1997 L 18/1.

Chapter 3 – Countervailing State Measures for Asymmetric Private Relations

regarded as a domestic one in the foreign jurisdiction, and there is no consistent answer to whether it is covered by the legal concept of posting.¹³⁷⁵ A posting may be arranged for a definite or an indefinite period of time.¹³⁷⁶ The freedom to provide services in other Member States of the European Union and the progressive liberalization of trade in services under the GATS¹³⁷⁷ have considerably extended cross-border business opportunities for employers and thereby increased the practical significance of the posting of workers; however, posting “remains a relatively small phenomenon in the EU labour market.”¹³⁷⁸ It is noteworthy that in posting situations a labour relation which was entered into as an internal one may subsequently assume a cross-border character; when the period of posting ends, it may revert to an internal relation. Contrary to contract law in general, most labour law regulations neither address nor lock in the legal situation at the time the contract was made, instead referring to the changing circumstances during the lifetime of a contract for labour; this is a consequence of the relational character of employment.¹³⁷⁹ c) Modern trends in industrial organization: Outsourcing 653. In the context of posting, a particular phenomenon of more recent origin deserves mentioning, so-called outsourcing. Over the last decades, the deliberate structuring of the organization of a firm with a view to optimizing its business result has become a focus of managerial science and skill. “Make or buy ?” has become a central question discussed by economists in industrial organization.¹³⁸⁰ With regard to the various functions of the enterprise, 1375 See Article 1, para. 3 (b), of the Posting Directive 96/71/EC which requires that an employment relationship subsists between the undertaking making the posting and the employee; for the purposes of Article 8, para. 2, Rome I, it is, however, clearly spelt out in Recital 36 of the Rome I Regulation that “the conclusion of a new contract of employment with the original employer or an employer belonging to the same group should not preclude the employee from being regarded as carrying out his work in another country temporarily” with the effect that the contract keeps on being subject to the law governing the previous contract. 1376 Recitals 3 and 13 make clear that the Posted Workers Directive 96/71/EC contemplates the “temporary” performance of work in another EU Member State; but this does not imply that the duration of the posting must be fi xed in advance; see also Bogdan, p. 132. 1377 See supra, paras. 74 et seq. 1378 See the Explanatory Memorandum to the Proposal for a Directive of the European Parliament and of the Council on the enforcement of Directive 96/71/EC concerning the posting of workers in the framework of the provision of services, COM (2012) 131 final of 21 March 2012 at pp. 5-6 with further references and data about the extent of posting. 1379 See supra, para. 644. 1380 This discipline originates in the celebrated article of Ronald Coase, “The Nature of the Firm”, Economica NS 4 (1937), 386-405; the development in economics is traced

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industrial organization scholars and managers are investigating whether a certain function of the undertaking should be performed with the application of its own resources or should be transferred to another entity which could perform that function at lower cost. This includes the employment function. Thus, an undertaking in need of additional workforce will not necessarily offer new jobs on the market itself, but may transfer the task of searching, selecting and employing new workers to specialized agencies or to an affi liate which hires new staff for the whole group of companies; the management of what is nowadays called “human resources” has turned into a target of efficiency enhancing efforts. 654. Outsourcing strategies relating to the employment of staff appear particularly promising for undertakings engaged in inherently international activities. Where the prospective habitual working place of an employee will presumably change over the years and cannot be assigned to a single jurisdiction in advance, it may be beneficial for the undertaking, and perhaps also for the worker, to conclude the employment contract through an intermediary rooted in a single State to which the employment function is transferred. This may create certainty in matters of social security: the country where contributions have to be paid and benefits can be expected is clearly identified; it may also clarify the legal situation in other respects. Conversely, undertakings may abuse this strategy for cutting costs by establishing employment agencies in jurisdictions with low labour standards. The so-called manning companies in the shipping industry give evidence of such manipulations.¹³⁸¹ Regardless of how this strategy is evaluated, it gives rise to additional cross-border labour relations where it turns out, in hindsight, that the employee essentially carried out his or her work in the country of the factual or actual employer to whom he or she had been posted by the contractual employer. 3.

The Unilateral and Territorial Approach

655. It follows from the fierce dispute about “the social question” that labour regulations enacted as a result of political struggle are often highly valued and considered as part of the public policy of the respective country as soon as they have been published in the statutory code. Consequently, courts are unyielding in cross-border cases and enforce those regulations even when the links of a case with the forum State are weak and the persons involved are foreigners who do not share the values enshrined in the new act. As it was put by Simitis in the 1970s: “The state’s intention to steer the social and and summarized in hindsight by Oliver E. Williamson, “The Economics of Governance”, The American Economic Review 95 (2005), 1-18. 1381 See Wolfgang Wurmnest, “Maritime Employment Contracts in the Conflict of Laws”, in Jürgen Basedow, Ulrich Magnus and Rüdiger Wolfrum, eds., The Hamburg Lectures on Maritime Affairs 2009 & 2010, Berlin, 2012, pp. 113-136 at pp. 126-127.

Chapter 3 – Countervailing State Measures for Asymmetric Private Relations

economic process becomes manifest in employment law. No state is willing to imperil its steering intentions by tolerating, at a working place located in its territory rules that differ from its own rules.”¹³⁸² It will often take a long time until the political rigor in the forum State gives way to a more tolerant attitude vis-à-vis foreign laws and values in international cases. This observation can be made in several areas of the law, but in particular in international employment law. 656. Until fairly recently, the prevailing view has in fact advocated the unrestricted application of the labour law of the forum State either on a territorial basis when the working place has been in the country, or as law of direct application (lois d’application immédiate, lois de police, Eingriffsnormen or leggi di applicazione necessaria), or as part of the forum State’s public policy.¹³⁸³ The resulting conflicts approach was unilateral: domestic labour law was declared applicable whenever the workplace was located in the forum State and sometimes even in the case of work to be performed abroad, but no provision was made for the application of foreign labour law. This is unsurprising with regard to collective agreements: irrespective of the contractual or normative character¹³⁸⁴ of an industrial agreement, the parties intend to impose certain labour standards within a specified scope of application of that agreement; they are usually indifferent with regard to the rules governing outside that scope. This does not exclude the application, by a domestic court, of a “foreign” collective agreement in regards to work carried out in the forum State, but this still appears to be an essentially unexplored field.¹³⁸⁵ In legislation, an expression of the same unilateral and 1382 Spiros Simitis, “Internationales Arbeitsrecht – Standort und Perspektiven”, in Alexander Lüderitz and Jochen Schröder, eds., Internationales Privatrecht und Rechtsvergleichung im Ausgang des 20. Jahrhunderts – Bewahrung oder Wende ? Festschrift für Gerhard Kegel, Frankfurt am Main, 1977, pp. 153-186 at p. 156. 1383 See the survey and references in Franz Gamillscheg, “Labour Contracts”, IECL, Vol. 3, Chap. 28, Sect. 6; Herbert Kronke, Arbeitnehmerschutz, p. 71; Junker, pp. 73 et seq.; Malintoppi, Recueil des cours 205 (1989), pp. 350 et seq., starts his investigation into international employment law by delineating the domain of the lex fori. 1384 Collective agreements are concluded between representatives of the employee, usually a trade union, and an employer or an association of employers. In some countries their impact on the content of the individual employment contract is explained by the operation of rules on contract law and agency; in others State labour law bestows a binding effect on the collective agreement in respect of certain categories of employers and employees regardless of whether they want to be bound or not; the collective agreement may even take priority over deviating individual agreements, see the broad comparative treatise by Folke Schmidt and Alan Neal, “Collective Agreements and Collective Bargaining”, IECL, Vol. 15, Chap. 12, Sects. 49 et seq. and Sects. 53 et seq. 1385 See the detailed analysis by Abbo Junker, Internationales Arbeitsrecht im Konzern, Tübingen, 1992, pp. 408 et seq., and the rather cautious remarks by Gérard LyonCaen and Antoine Lyon-Caen, Droit social international et européen, 7th ed., Paris, 1991, Nos. 82 and 83 at pp. 60 et seq.; Gamillscheg, IECL, Vol. 3, Chap. 28, Sects. 40

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basically territorial approach can be found in numerous specific statutes. With regard to land-based labour, explicit unilateral rules on the application of the respective act to domestic work are, for example, contained in various provisions of the US Federal Labor Standards Act of 1938¹³⁸⁶ or of the Equal Pay Act of the United Kingdom.¹³⁸⁷ For the special sector of maritime labour, corresponding evidence could be offered in some statutes on the law of navigation, for example in Italy and France; in the special circumstances of the maritime environment these rules refer to the law of the Italian or French flag as indicating the habitual workplace of sailors.¹³⁸⁸ 657. A more comprehensive and almost all-embracing rule of the same type can still be found in the 2001 Labour Code of the Russian Federation. Article 11, paragraph 2 of this Code makes clear that “this Code, the laws and other normative legal acts containing the labour law norms shall be mandatory for application in the whole Russian Federation territory for all employers (legal entities or individuals) irrespective of their organizational and legal status and forms of ownership.”

In addition, the territorial application of the Code is stressed by paragraph 4 of the same Article, which reads:

et seq.; Ulla Liukkunen, The Role of Mandatory Rules in International Labour Law, Helsinki, 2004, pp. 120-122; Franzen, Arbeitsrecht-Blattei 920, paras. 301 et seq., for the scope of State law on collective agreements, and paras. 324 et seq., for the scope of a collective agreement itself; Etienne Pataut, “Régulation des rapports de travail et conflit de lois”, in Mathias Audit, Horatia Muir Watt and Etienne Pataut, eds., Conflits de lois et régulation économique, Paris, 2008, pp. 135-156 at pp. 147 et seq., enunciates the “insufficiency of the conflict of laws”. 1386 Fair Labor Standards Act of 1938, codified as amended in 29 USC §§ 201 et seq. The territorial scope of the Act is expressed in its definitions; while, for example, the minimum wage provision of 29 USC § 206 (a) applies to employees engaged in commerce and in the “production of goods for commerce”, the definition of 29 USC § 203 (j) makes clear that “production” only refers to activities “in any State”, thereby excluding foreign states in accordance with the defi nition in 29 USC § 203 (c). 1387 See Section 1 (1) of the Equal Pay Act, 1970, c. 41: “employed at an establishment in Great Britain”; Section 1 (11) makes clear that the law applicable to the contract is immaterial; see Plender and Wilderspin, Obligations, No. 11-060 at p. 322. Formerly, a rule excluding the application of the act to work performed abroad was laid down in the Employment Rights Act, 1996, c. 18; Sect. 196 was later repealed for its complex character, see Merrett, paras. 7-51 et seq. at pp. 244 et seq. 1388 See Article 9 of the Italian Codice della Navigazione of 1942 and Article 5 of the French Code du Travail Maritime of 1926, both cited by Wurmnest in Basedow, Magnus and Wolfrum, p. 126; see also Roger Jambu-Merlin, “Les gens de mer”, in René Rodière, ed., Traité général de droit maritime, Paris, 1978, No. 85, at p. 71. Both provisions are now superseded by Article 8 of the Rome I Regulation.

Chapter 3 – Countervailing State Measures for Asymmetric Private Relations “In the Russian Federation territory, the rules set by this Code, the laws, [and] other normative legal acts containing the labour law norms shall cover labour relations of foreign nationals, stateless persons, organizations established by them or with their participation, of employees at international organizations and foreign legal entities, unless otherwise provided for by a federal law or an international treaty of the Russian Federation.”¹³⁸⁹

658. It is noteworthy that these rules are contained in the Labour Code whereas the private international law of Russia laid down in the Civil Code does not explicitly refer to employment contracts, perhaps because labour law has traditionally been considered in Russia as systematically distinct from civil law.¹³⁹⁰ In the light of this normative situation, it is unlikely that the courts will apply to labour contracts the conflict rules on general contracts with their broad admission of party autonomy. While the cited provisions of the Labour Code leave little doubt about the extensive application of Russian labour law, the reference to the territorial application does not explicitly indicate which elements of the case must be located in the territory of the Russian Federation. Is the location of the court in Russia sufficient, even if all other elements of the case rather point to a foreign law ? Does the employer’s principal establishment in Russia suffice to render the Code applicable, even if the employee is working abroad ? Or does the territorial connection implicitly refer to the habitual working place in Russia ? These questions confirm the doubts about the so-called territorial application of laws that have been raised many times. The reference in a conflict rule to “territorial application” is rather meaningless unless the rule specifies the elements of the case that need to establish the territorial connection. 659. At the same time, the Russian provision gives evidence of what appears to be an excessive imposition of the lex fori: why should, for example, a labour relation between a Dutch undertaking operating a branch in St. Petersburg and a Dutch citizen posted to St. Petersburg by the Rotterdam headquarters of the company be regulated by the more than 400 non-derogable provisions of the Russian Labour Code ? This is the effect of Article 11, paragraph 4, which is not qualified by any additional requirements such as a minimum duration of the work in Russia or the like. As will be subsequently shown, this treatment of posted workers is not a unique feature of Russian law. It should finally be noted that the unilateral nature of the conflict rule is unsatisfactory where a dispute between a Russian employer and a Russian employee arising from work carried out abroad is litigated in a Russian court. In 1389 See the Labour Code of the Russian Federation of 31 December 2001 (Federal Law No. 197-FZ of 2001), English translation available at the website of the International Labour Organization: http://www.ilo.org/dyn/natlex. 1390 Employment contracts are addressed in neither Article 1211, para. 3, which contains a long list of specific contracts with corresponding conflict rules, nor – contrary to consumer contracts (Article 1212) – in a separate article.

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such a case, the application of Russian law may be appropriate, in particular if the worker had been posted by the employer to the foreign country. But it would be inappropriate where the labour relation had come into existence only within the foreign country. Article 11 of the Russian Labour Code is flawed because its authors were only concerned with ensuring a comprehensive scope of application to Russian law; they were not interested in finding an adequate conflict solution for the growing number of persons involved in cross-border labour relations. 4.

Steps Towards Bilateralism: United States

660. Reflection on choice of law in employment matters started only after World War II. § 196 of the American Restatement Second of 1971 still treated labour contracts together with contracts for independent services under the allembracing heading of “Contracts for the rendition of services”,¹³⁹¹ thereby implicitly rejecting the specific nature of labour and its particular role in the social system. The bilateral conflict rule of the Restatement Second contains three elements: (1) party autonomy; (2) designation of the law of the place of performance in the absence of choice; and (3) an escape clause in favor of the law of a State having a more significant relation. This more significant relation is assessed in light of the general choice-influencing factors of the Restatement, including the balancing of governmental interests of the jurisdictions involved.¹³⁹² In § 196, no trace of the largely mandatory character can be found that is characteristic of labour law. Apparently, the provision did not benefit from a great deal of significant judicial experience in employment conflicts cases.¹³⁹³ Among the cases reported under § 196 since the adoption of the Restatement, only a very small portion regards employment contracts, most of the cases relate to services of independent contractors, financial services, broker services, etc. The employment-related cases mainly deal either with claims for personal injury focusing on issues of tort law or with non-compete clauses in labour contracts giving rise to competition law considerations.¹³⁹⁴ Very few judgments concern contractual issues proper,

1391 Rest. Second, Conflict of Laws, § 196. 1392 See the list in § 6 of the Restatement Second, Confl ict of Laws. 1393 See Albert Ehrenzweig, A Treatise on the Conflict of Laws, St. Paul/Minn., 1962, § 205 at p. 524: “Conflict of laws problems have been rare in this field partly because of the close similarity between the laws of the several states, and partly because of the impact of arbitration … and federal legislation.” 1394 The author is indebted to Professor Symeon Symeonides for materials supporting this conclusion. For the non-compete covenants see Hay, Borchers and Symeonides, pp. 1115 et seq.

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in particular unlawful dismissal; as a result, whatever the reasoning of the courts, they often or even usually apply the le x fori.¹³⁹⁵ 661. Upon reviewing the relevant court opinions, it further becomes apparent that the labour contract matters which are regulated in the statutes of the forum States are not classified as contractual. Whether such a statute applies to a cross-border employment relation is considered as a matter of statutory construction, and this act of judicial interpretation will be undertaken regardless of the law otherwise applicable to the contract. In Sullivan v. Oracle Corp., plaintiff employees who had been domiciled in Arizona and Colorado but who had worked several days per year in California as traveling instructors for the defendant California employer claimed overtime pay granted by the California Labor Code for work lasting more than 8 hours per day and 40 hours per week, limited to the time they had spent in California.¹³⁹⁶ The Supreme Court of California addressed the issue whether the overtime pay provisions of the California Labor Code applied to workers domiciled outside the State as a matter of statutory construction.¹³⁹⁷ It explicitly stated that “the right to overtime under California law is unaffected by contract.”¹³⁹⁸ As a result of a governmental interest analysis, the Court upheld the claim. In a similar case, an Oregon employee worked for a North Carolina employer outside North Carolina under an employment contract governed, in accordance with a choice-of-law clause, by the law of North Carolina. In a lawsuit for infringement of the North Carolina Wage and Hour Act, the Court of Appeals of that State rejected the application of the Act since the contractual choice of the law of North Carolina “does not change the limits … of the North Carolina statutes thus applied.”¹³⁹⁹ This clear distinction between contractual issues and statutory interpretation heralds the concept of the overriding mandatory provisions implemented in European private international law.¹⁴⁰⁰

1395 Noteworthy is the construction of a tacit choice of the (Texas) law of the forum, where a US employee from Texas had been hired by a Delaware corporation to perform work in a plant in Mexico, Dailey v. Transitron Electronic Corp., 475 F. 2d 12 at 14 (5th Cir. 1973); in other cases the courts applied the lex fori as the law of the most significant relationship, Farris v. ITT Cannon, 834 F. Supp. 1260 at 1266 and 1267 (D. Colo. 1993), or as controlling where no sufficient claims to any single jurisdiction could be ascertained, Aiello v. United Airlines, Inc., 818 F. 2d 1196 at 1198 (5th Cir. 1987), or without giving any explicit reason, McKinney v. National Dairy Council, 491 F. Supp. 1108 at 1113, 1114 (D. Mass. 1980). 1396 Sullivan v. Oracle Corp., 254 P. 3rd 237 (Cal. 2011). 1397 Ibid., 254 P. 3rd 237 at pp. 240 et seq. 1398 Ibid., 254 P. 3rd 237 at p. 244. 1399 Sawyer v. Market America, Inc., 661 SE 2d 750 at 753 (NC Ct. App. 2008); see also Symeon Symeonides, “Choice of Law in the American Courts in 2008 – TwentySecond Annual Survey”, Am. J. Comp. L. 57 (2009), 269-329 at p. 305. 1400 See infra, paras. 677 et seq.

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Further Steps Towards Bilateralism: the European Model

a) Elements of the European model 662. Bilateral conflict rules for employment contracts were prepared by the seminal comparative investigation of Franz Gamillscheg in the late 1950s.¹⁴⁰¹ He came to the conclusion that there are a number of connecting factors which emerge from the case law of the various countries, permitting the formulation of a bilateral conflict rule focused on labour contracts.¹⁴⁰² Gamillscheg’s comparative enquiry was focused on labour contracts as a separate segment of services contracts. On the basis of his findings, the European Commission included special rules on employment contracts as early as 1972 in its proposal for what later became the Rome Convention.¹⁴⁰³ There are five elements of the early draft which have made their way first into Article 6 of the Rome Convention and finally into Article 8 Rome I. (1) Permission is granted to the parties to choose the law applicable to the employment contract. (2) This choice is limited not with regard to the eligible laws, but by the requirement of a comparison of the substantive protection afforded to the employee by the elected law, on the one side, with the law that would be applicable in the absence of choice on the basis of objective connecting factors, on the other; the provisions granting the most favourable treatment will be applied. (3) In the absence of a contractual choice of law, the employment contract is governed by the law of the habitual workplace, which is not affected by a period of temporary employment in another country. (4) Where no habitual workplace can be ascertained, the governing law is determined by the establishment of the employer through which the employee was engaged. (5) Both objective connections outlined above are not rigid, instead being subject to the operation of an escape clause where the contract is more closely connected with another country. b) Follow-up legislation outside the EU 663. Article 8 Rome I has added only slight changes to the predecessor rule of Article 6 of the Rome Convention. The latter provision has also inspired a number of legislatures outside the European Union which have adopted it in substance. In particular, this concerns Korea, Japan and Turkey.¹⁴⁰⁴ In 1401 Franz Gamillscheg, Internationales Arbeitsrecht, Berlin and Tübingen, 1959, in particular pp. 100 et seq. 1402 Ibid., pp. 172-175. 1403 See for the limitation of party autonomy Article 2, para. 3, and for the objective connection, Article 5 of the Preliminary Draft Convention on the Law Applicable to Contractual and Non-contractual Obligations of 1972, in Lando, von Hoff mann and Siehr, pp. 230 et seq.; as pointed out by Lando, ibid., p. 139, Article 5 of the Preliminary Draft corresponded to the existing case law in four out of the six initial Member States of the European Union. 1404 See § 28, paras. 1 and 2, of the Korean Law of 2001; Article 12 of the Japanese Law of 2006; and Article 27 of the Turkish Law of 2007.

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Switzerland, an orientation along the same model can be discerned, but the parties can choose only a limited number of laws: the law of the employee’s habitual residence or the law of the employer’s establishment, domicile or habitual residence. Since these laws are presumed to be closely related to the contract, the legislator did not provide for a substantive barrier to the choice that would have to be assessed by a comparison of the elected law with the law otherwise applicable. The objective connecting factors which are relevant in the absence of choice essentially correspond to the EU model, but there is no escape clause. 664. Three modern conflicts legislations have more clearly deviated from the European model. Both Tunisia and China have adopted objective connecting factors, giving priority to the habitual workplace over the establishment through which the employee was hired, but both countries have rejected party autonomy.¹⁴⁰⁵ Contrary to Tunisia, China has also rejected the idea of adjusting the conflicts analysis through the use of an escape clause.¹⁴⁰⁶ A surprising mix of bilateral and unilateral elements can be found in Ukraine. Article 52 of the 2005 law on private international law basically refers to the law of the place of performance of the labour contract and insofar is essentially in line with the EU designation of the law of the habitual workplace. But Ukraine neither allows party autonomy¹⁴⁰⁷ nor does it provide for a possible diversion – via an escape clause – to the law of a more closely connected State. Instead, Article 53 extends the application of Ukrainian law to labour relationships between Ukrainian employers and employees in respect of work in foreign countries, and Article 54 excludes the application of Ukrainian law to foreign employees working for foreign employers in Ukraine. Since the law applicable to the latter relations has not been designated at all, the Ukrainian conflict rule is incomplete.¹⁴⁰⁸ Moreover, the unilateral corrections of the bilateral rule have the effect of compelling courts to apply foreign employment law, which may cause long delays in an area of the law where quick decisions can be of the essence. c) Party autonomy 665. The differences between the jurisdictions following the European model and – for this purpose – also the American model, on the one side, and 1405 See for Tunisia Article 67 of the Law of 1998 and for China Article 43 of the Law of 2010. 1406 As pointed out by Weizuo Chen, YBPIL 12 (2010), 33, the principle of the closest connection enshrined in Article 2, para. 2, of the Chinese Law of 2010 is “a mere supplementary principle” and does not operate as an exception to the specific conflict rules. 1407 Anatoliy Dovgert, “Codification of Private International Law in Ukraine”, YBPIL 7 (2005), 131-159 at p. 153, suggests, however, that the parties may avail themselves of the general rules on party autonomy in contracts (Articles 31 and 43), although proposals made to this effect in the legislative proceedings were not adopted. 1408 Dovgert, YBPIL 7 (2005), 154.

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the legislation outlined in the previous paragraph, on the other, give rise to the question whether party autonomy is of any practical significance with regard to labour relations. The answer must of course take account of the narrow limits drawn by the European model: while the choice of the applicable law by the parties generally extends to the mandatory provisions of the deselected law,¹⁴⁰⁹ the protection of the employee (similar to that of the consumer¹⁴¹⁰) cannot fall short of the level prescribed by the law that would be applicable in the absence of choice. The stricter and more comprehensive the mandatory protection of the employee is under the latter law, the less significant becomes the choice of the law applicable to the employment contract. Where the mandatory regulation of labour contracts is particularly extensive, one might argue that the admission of party autonomy is just a summarising proxy for the agreement on some rather insignificant aspects of the employment relation within the framework of the law governing by virtue of objective connecting factors.¹⁴¹¹ 666. However, the latter view does not fully reflect Article 8 Rome I when the chosen law affords a better protection to the employee than the law applicable in the absence of choice; in that case, even a mandatory provision of the law applicable by virtue of objective connecting factors would give way to the corresponding provision of the elected law. Apart from these situations the main significance of party autonomy relates to default rules. Even in countries with a high level of non-derogable labour regulations, there are numerous aspects of a contractual relation which are governed by general principles of contract law, for example various issues relating to the formation of the contract; the employer’s duty to pay interest on overdue payments of wages; his right to claim damages for losses caused by the employee’s conduct; and fiduciary duties not specified by statutory regulation but flowing from general principles. Many of these and other rules are of a dispositive nature. In an era of growing workforce mobility, the parties involved have an interest in legal certainty relating to the applicable law which can be ensured by a clear selection of that law.¹⁴¹² The Chinese conflict rule does not take account of this objective; while the discretion granted to the judge with regard to the law applicable to posted workers¹⁴¹³ may alleviate certain rigours of the basic conflict rule, it does not provide legal certainty. 1409 See supra, para. 185. 1410 See supra, paras. 626 et seq. 1411 For this characterization of party autonomy in employment contracts see Rui Manuel Moura Ramos, Da lei aplicável ao contráto de trabalho internacional, Coimbra, 1991, p. 437. 1412 Moura Ramos, p. 463. 1413 See Article 43, 2nd sentence, of the Law of 2010: “Labour dispatch may be governed by the law of the dispatching place” (emphasis added); the provision was allegedly added in order to allow Chinese courts to apply the lex fori in what was thought to be the most frequent type of posting, namely the posting by a Chinese company of an employee to a foreign subsidiary.

Chapter 3 – Countervailing State Measures for Asymmetric Private Relations

d) Objective connecting factors: habitual workplace 667. In the absence of choice, the European model primarily refers to the law of the habitual workplace or, where such a place cannot be ascertained, to the law of the employer’s establishment through which the employee was engaged. Thus the habitual workplace takes priority over the employer’s hiring establishment. The law of the habitual workplace is not only significant as a default solution in the absence of a choice of the applicable law; it also establishes minimum standards which must not be undercut by the elected law when a choice has been made. In Article 6, paragraph 2 of the Rome Convention, the law of the habitual workplace is understood as “the law of the country in which the employee habitually carries out his work in performance of the contract”. This formula is not suited to cover all labour relations which, although assigning an unambiguous work base to the employee, from the onset provide for work to be performed at changing locations in different countries; examples here are provided by the flying personnel of many airlines, the staff of some auditing and consulting firms, and certain engineers of construction companies. In order to adequately supplement the employee’s protection by the law of the habitual workplace for these groups of workers¹⁴¹⁴ and to reduce the scope of the subsidiary connection of the contract to the hiring establishment of the employer, Article 8, paragraph 2 now refers to “the law of the country in which or, failing that, from which the employee habitually carries out his work in performance of the contract”.¹⁴¹⁵ The prioritization of the habitual workplace over the subsidiary connecting factor of the employer’s hiring establishment also emerges from the fact that temporary employment in another country is declared irrelevant. 668. The courts of both the Member States and the European Union have further elaborated on this hierarchy of the connecting factors, first with regard to the special rules on jurisdiction in employment matters under Articles 18-21 (now: Articles 20 – 23 of the recast version) of the Brussels I Regulation¹⁴¹⁶, 1414 See Peter Mankowski, “Der Vorschlag für die Rom I-Verordnung”, IPRax (2006), 101113 at p. 108; Paul Lagarde, “Remarques sur la proposition de règlement de la Commission européenne sur la loi applicable aux obligations contractuelles (Rome I)”, Rev. crit. dr. int. pr. 95 (2006), 331-349 at p. 343; Ubertazzi, p. 94; Wolfgang Wurmnest, “Das neue Internationale Arbeitsvertragsrecht der Rom I-Verordnung”, EuZA 2 (2009), 481-499 at p. 495. Under Article 6 of the Rome Convention, the employment contracts of workers involved in international transport operations have been considered as being governed by the law of the employer’s hiring establishment, see Gérard Lyon-Caen and Antoine Lyon-Caen, No. 32, at p. 27. 1415 Emphasis added. 1416 See the report by Schlosser in Hess, Pfeiffer and Schlosser, paras. 306-314 at pp. 85-88; with regard to the interpretation of the rules on jurisdiction by the European Court of Justice, it has been pointed out that the ECJ construes a habitual residence wherever this is possible to avoid the connection to the employer’s establishment, see the analysis and approval by Peter Mankowski and Oliver Knöfel, “On the Road Again oder: Wo arbeitet ein Fernfahrer ? Neues vom europäischen internationalen

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and more recently in respect of choice of law under the Rome Convention. In its first decision on the Rome Convention, this instrument still being applicable to employment contracts concluded up to December 2009, the Court of Justice had to decide on the law applicable to an employee’s protection against unfair dismissal. In that case, a truck driver domiciled in Germany had been hired by a Luxembourg company, a subsidiary of a Danish undertaking engaged in the transport of flowers and other plants from Denmark to destinations situated mostly in Germany, but also in other European countries. The trucks used for that purpose were stationed in Germany and registered in Luxembourg. When a restructuring of the employer’s group was announced, the employees set up – in Germany – a works council to which the employee in question was elected as an alternate member. Shortly thereafter his employment contract was terminated by unilateral notice of the employer. Although the labour contract provided for the application of the laws of Luxembourg, he sought an order for the payment of damages alleging that the mandatory rules of German law were applicable to the dispute under Article 6 of the Rome Convention.¹⁴¹⁷ 669. The European Court of Justice stressed the need to interpret Article 6 of the Rome Convention in accordance with its previous case law on the Brussels Convention.¹⁴¹⁸ Therefore, reference had to be made “to the place from which the employee mainly carries out his obligations towards his employer … or to the place in which he has established the effective centre of his working activities … or, in the absence of an office, to the place in which the employee carries out the majority of his work.¹⁴¹⁹ … In so far as the objective of Article 6 of the Rome Convention is to guarantee adequate protection for the employee …, compliance with the employment protection rules provided for by the law of [the country of the habitual workplace] must, so far as is possible, be guaranteed.”¹⁴²⁰

Arbeitsvertragsrecht (Rechtssache Koelzsch)”, EuZA (2011), 521-536 at p. 526; on a similar note, Abbo Junker, “Neues zum internationalen Arbeitsrecht”, EuZW (2012), 41-42; in France, Gaudemet-Tallon, Nos. 297-298 at pp. 304-308, explains the development of the case law and the various stages preceding the current text of Articles 18-21 (now 20-23) of the Brussels I Regulation as a product of the concerns over the protection of employees. 1417 ECJ, 15 March 2011, Case C-29/10 (Koelzsch v. Luxembourg), [2011] ECR I-1595; the facts were more complicated than reported supra since the questions submitted to the European Court of Justice were raised in a second series of proceedings brought against the Grand Duchy of Luxembourg by the employee after the dismissal of his first action; in the second proceedings he claimed compensation from the state for the misapplication of EU law. 1418 Ibid., para. 33. 1419 Ibid., para. 39. 1420 Ibid., para. 42.

Chapter 3 – Countervailing State Measures for Asymmetric Private Relations

With a particular reference to Article 8, Rome I, the Court pointed out that the weaker parties to contracts must be protected by conflict-of-law-rules that are more favourable to them and that consequently “a broad interpretation to the connecting criterion in Article 6 (2) (a) of the Rome Convention” must be given.¹⁴²¹ With regard to the mobile nature of work in the international transport sector, the judgment concludes that “the referring court must … take account of all the factors which characterize the activity of the employee. It must, in particular, determine in which State is situated the place from which the employee carries out his transport tasks, receives instructions concerning his tasks and organises his work, and the place where his work tools are situated. It must also determine the places where the transport is principally carried out, where the goods are unloaded and the place to which the employee returns after completion of his tasks”.¹⁴²²

670. The judgment enunciates the prioritization, as between the two connecting factors laid down in Article 6 of the Rome Convention and Article 8 Rome I, of the habitual workplace. The prioritization is put into effect by an interpretation of the latter concept which does not stop with a finding that the employee’s work was carried out in several States and that therefore no habitual workplace can be identified. Rather, the court advocates an overall assessment which will usually sort out one of the various workplaces as the most significant; this will be deemed the habitual workplace. In light of this decision, it is not easy to envision employees who completely lack a habitual workplace; consequently, the second connecting factor, i.e. the employer’s hiring establishment, will hardly ever become relevant. This has been affirmed in a second judgment where the court was asked for a preliminary ruling on this second connecting factor, namely the place of business through which the employee was engaged. Before answering the question of the referring court, the Court of Justice made roughly 20 so-called “preliminary observations”, explaining and confirming, without being asked, the significance of the habitual workplace as a prioritized connecting factor.¹⁴²³ e) Overall assessment of the habitual workplace or a cascade connection ? 671. In the light of the model effect which Article 6 of the Rome Convention has on conflict rules adopted outside the European Union, it is not unlikely that this case law will carry some repercussions in those third-State jurisdictions as well. But this should not occur without some critical reflection. First, the employer’s hiring establishment must have some remaining significance; an 1421 Ibid., para. 47. 1422 Ibid., paras. 48 and 49. 1423 ECJ, 15 December 2011, Case C-384/10 (Voogsgeerd v. Navimer SA), [2011] ECR I-0000, not yet reported.

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interpretation of the habitual workplace that covers all imaginable labour relations and does not leave any space to the subsidiary connection is not consistent with the intention of the legislature, which clearly felt the need for a second and subsidiary connecting factor. However, the overall assessment of the habitual workplace and the seven relevant factors contemplated by the Court of Justice do not appear ever to lead to a situation where no habitual workplace can be found. Since the weight assigned to the various factors has not been specified by the Court and therefore remains uncertain, the formula of the overall assessment will always permit a willing court to identify a habitual workplace, thereby entirely depriving the second connecting factor of its practical significance. 672. Second, the overall assessment of the habitual workplace conceals the fact that some of the seven factors listed by the Court of Justice are susceptible of being manipulated by the employer; this is, for the example, the case with the place from which the employee receives instructions and where his work tools are situated, for example where the data of the company is stored or the server is located. Bestowing an uncertain relative weight on such factors is in contrast with the clear cascade connection established in Article 6 of the Rome Convention and Article 8, Rome I: by according only a subsidiary significance to the employer’s hiring establishment, i.e. a connecting factor open to the employer’s deliberate arrangements, the European legislature has clearly indicated its intention to grant leeway for manipulations only by way of exception. The overall assessment of the habitual workplace as advocated by the Court now reinstates the factors mentioned above which are amenable to being manipulated by the employer at the highest level of the conflicts analysis, namely as elements of the determination of the habitual workplace. This is not in line with the systematic structure and spirit of Article 6 of the Rome Convention and Article 8 Rome I. 673. A third criticism addresses the relation between the overall assessment of the habitual workplace and the escape clause now contained in Article 8 paragraph 4 of the Rome I Regulation: conflicts legislation employs escape clauses in order to attenuate the rigidity of other conflict rules which apply as a matter of priority. Thus, the assumption of the European legislature has clearly been that both connecting factors, i.e. the habitual workplace and the employer’s hiring establishment, are not sufficiently flexible to allow for adequate solutions in all cases. When the habitual workplace is, however, assessed, by an overall analysis as contemplated in the Koelzsch opinion, there is no need for further flexibility. The existence of the escape clause therefore speaks against such an overall assessment. It requires the courts to interpret the habitual workplace either in the light of a single precise criterion or a ranking of criteria or combinations of criteria. A development of the case law in this direction remains possible.

Chapter 3 – Countervailing State Measures for Asymmetric Private Relations

f) The escape clause and maritime labour 674. As pointed out earlier, the Koelzsch judgment may have reduced the whole conflict rule applicable to labour contracts in the absence of a choice of law to a single element, namely the habitual workplace. If the case law actually embarks in this direction and the habitual workplace is inferred from a variety of factors having an uncertain relative weight, the escape clause will become completely redundant. It is submitted that this would not only be contrary to the legislature’s intentions but also detrimental to legal certainty. This can be shown with regard to maritime labour, which has traditionally been an important sector for the operation of conflict rules on international employment relations. The habitual workplace of a seafarer on board a vessel is a mobile one: the ship may be located in the territorial water of State A or State B or outside territorial waters on the High Seas. In order to preclude the applicable law from changing during a voyage with every movement of the vessel, there has always been a broad consensus that the employment contract of a sailor should be governed by the law of the flag State. This is in line with the flag State jurisdiction enshrined by the United Nations Convention on the Law of the Sea, which entails in any event a responsibility of the flag State for, inter alia, social matters and all public law regulations in this context.¹⁴²⁴ Numerous jurisdictions including European countries such as France and Italy provided for the application of the law of the flag State to employment contracts before the Rome Convention took effect.¹⁴²⁵ 675. The designation of the law of the flag State has the advantage of clarity and stability. On the other hand, there may be a closer connection of the employment contract with another country. Consider, for example, a British citizen domiciled in Britain who worked as a cashier for a German employer on a ferry sailing under the German flag between a Dutch and an English port; the salary was calculated in accordance with an English collective agreement and paid out in pounds sterling. When the employee was fired and invoked the protection granted by German law against unfair dismissal, the Federal Labour Court of Germany held that the employment contract was more closely connected with Britain than with the flag State of Germany; it availed itself of the escape clause to avoid German law.¹⁴²⁶ Moreover, open registers and flags of convenience are well known instruments of shipowners for reducing costs caused by all kinds of legal rules: taxation, social security, labour law, etc.¹⁴²⁷ Thus, the flag as a connecting factor is susceptible 1424 See the detailed regulation in Article 94, UNCLOS. 1425 See supra footnote 1388. 1426 BAG, 24 August 1989, IPRspr. (1989), No. 72; see the comments by Ulrich Magnus, “Englisches Kündigungsrecht auf deutschem Schiff – Probleme des internationalen Seearbeitsrechts”, IPRax (1991), 382-386 at pp. 383-385; see also the report in English by Liukkunen, pp. 151-153. 1427 See the comprehensive analysis by Jürgen Basedow, “Billigflaggen, Zweitregister und Kollisionsrecht in der deutschen Schiff fahrtspolitik”, BerDtGesVR 31 (1990), 75-120.

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to manipulation. Although a flag of convenience is not necessarily a completely meaningless connection, it may be less significant than other links present in the given case. Illustrative in this regard, a German labour court once held that the German nationality and habitual residence of a seafarer and the German nationality of the shipowner, taken together, provided for a closer connection of the employment contract with Germany than the Cypriot flag which the shipowner had deliberately elected for the vessel.¹⁴²⁸ 676. It is with analogous situations in mind that the escape clause in Article 6, Rome Convention and Article 8, para 4, Rome I is needed.¹⁴²⁹ It permits an adjustment of the conflicts analysis to the particular circumstances without entirely sacrificing legal certainty. The application of the escape clause results by necessity from a case-by-case analysis. It thereby reduces without destroying the basic clarity afforded by the objective connecting factors set forth in Article 6 of the Rome Convention and Article 8 Rome I; these connecting factors remain binding as legal presumptions which are rebuttable in exceptional cases. By contrast, the overall assessment of the habitual workplace advocated by the European Court of Justice eliminates the operation of rule and exception and thereby diminishes legal certainty. 6.

Overriding Mandatory Provisions

a) The room left by Article 8 Rome I 677. In the European model, all non-derogable provisions of the law of the habitual workplace apply in the sense of setting minimum standards irrespective of the law otherwise governing the employment contract.¹⁴³⁰ Since the overriding mandatory provisions encompassed by Article 7 of the Rome Convention and Article 9 Rome I usually refer to the workplace in designating their own scope of application, there is little practical need nor room for the special reservation in favour of overriding mandatory provisions. This is particularly true when litigation takes place in the country of the habitual workplace. Under the rules on jurisdiction laid down in Articles 19 and 20 (now: Articles 21 and 22 of the recast version) of Brussels I, this will generally – albeit not always – be the case. Here, the law applicable as the law of the habitual workplace under Article 8, paragraph 2 Rome I, the overriding mandatory provisions of the law of that country and the lex fori will be identical; thus, the provisions of the law of the habitual workplace will undoubtedly be enforced by the court.

1428 LAG, Baden-Württemberg, 17 July 1980, RIW (1981), 272 = IPRspr. (1980), No. 51. 1429 See already Herbert Kronke, “Das Arbeitsrecht im Gesetzentwurf zur Neuregelung des internationalen Privatrechts”, Der Betrieb (1984), 404-406 at pp. 404-405; Wurmnest in Basedow, Magnus and Wolfrum, p. 127; Basedow, BerDtGesVR 31 (1990), 84. 1430 See supra, paras. 662 and 667.

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678. More interesting from a conflict-of-laws perspective are other situations. The first arises where the actual workplace is temporarily outside the country of the habitual workplace, in particular when the worker is posted to that other country; see below section 7. The second concerns a dispute initiated in a court outside the country of the habitual workplace. Assume in the case of the truck driver and work council member Koelzsch that the courts of Luxembourg had identified Germany as the habitual workplace;¹⁴³¹ would the courts of Luxembourg have applied the German rules protecting against unfair dismissal ? And, provided that Danish rules granted even better protection, would they also have given effect to the law of Denmark, i.e. the country of origin of the carriage operations ? The third situation relates to a dispute in the country of the habitual workplace regarding claims arising from the overriding mandatory provisions of another country which is closely connected to the case. Assume, for example, a German worker employed by a US export company in eastern Germany – a zone of low salaries – paying him a remuneration of 5 Euros per hour. Assume further that he would be entitled, as being engaged in “commerce”, to a minimum salary of US7.25 (about 5.50 Euros) per hour under the US Fair Labor Standards Act,¹⁴³² whereas the German law applicable as the law of the habitual workplace before 2015 did not generally provide for minimum wages. Would a German labour court nevertheless uphold the employee’s action for the minimum wages under US law ? b) Lex fori, lex contractus and the law of third States 679. The answers to these questions are given by Article 7 of the Rome Convention and Article 9 Rome I. According to their country of origin, three types of provisions have to be distinguished: those of the lex fori, those of the lex contractus, and those of third legal systems. Article 7 and Article 9 are identical with regard to the overriding mandatory provisions of the lex fori which will prevail over the law otherwise applicable to the employment contract. What remains to be assessed in this case is the nature rules and principles must have to constitute overriding mandatory provisions, and it must also be ascertained whether the pending case is covered by their respective scope of application. This recalls the statutory construction employed by US courts.¹⁴³³ With regard to mandatory provisions of the law governing the 1431 See supra, para. 668. 1432 See 29 USC § 206 (a) (1) (C) granting this minimum remuneration to an employee “engaged in commerce”, which means, according to the defi nition in 20 USC § 203 (b), “Trade, commerce, transportation, transmission or communication among the several States or between any State and any place outside thereof ” (emphasis added). As opposed to the definition of “production” in the same Act, see supra footnote 1386, the definition of commerce suggests that the actual workplace of the employee is immaterial as long as he is engaged in the foreign trade of the United States. 1433 See supra, para. 661.

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contract, i.e. the lex contractus under Article 8 Rome I, it also bears emphasis that the court is not vested with any discretion. As pointed out above, it is immaterial whether these precepts are overriding mandatory provisions as defined in Article 9, paragraph 1 Rome I or otherwise non-excludable; in the latter case, they set the minimum standards and must in this sense prevail over the parties’ choice of another applicable law in accordance with Article 8 paras. 2 and 3 Rome I. 680. Particularly delicate is the status of overriding mandatory provisions of third States whose law is neither the lex fori nor the law governing the contract as the law of the habitual workplace. According to Article 7, paragraph 1 of the Rome Convention, “effect may be given” to such mandatory rules provided that (1) there is a close connection between the situation and the foreign country, and (2) those rules must be applied, under the law of that country, whatever law governs the contract otherwise. The criteria for the exercise of the court’s discretion (“may”) are unclear. But it would appear that in the example of the worker employed by a US export company in eastern Germany, the court might grant the claim in accordance with the US minimum wage legislation if it considers that the work for a US export company creates a sufficiently “close” connection with the United States for the purposes of Article 7, paragraph 1 of the Rome Convention. The situation is different under the successor rule of Article 9, paragraph 3 Rome I. Since the new provision only relates to the law of the country of performance of the worker’s contractual obligation, an application of the US Fair Labor Standards Act to work performed in Germany would be excluded. 681. It follows that with regard to individual employment contracts, the significance of Article 9, paragraph 3 is considerably reduced. The laws of the country of performance of the labour contract are in most cases those of the habitual workplace and have in any event to be respected under Article 8, paragraph 2 Rome I. While it is true that the broader wording of Article 7, paragraph 1 of the Rome Convention allows giving effect to third-State labour regulations, it is unlikely that the courts, for example in the eastern German hypothetical, would make use of that possibility. Where a foreign State extends the scope of its regulations on work hours or minimum wages beyond its own territory, courts in foreign countries will hardly consider this as legitimate and will decline to recognize a “close” relation for the purposes of Article 7 of the Rome Convention.¹⁴³⁴ More generally, it appears unlikely that courts will give effect to third-State labour regulations in respect of work performed outside the third State.¹⁴³⁵ 1434 See with regard to work hours Martiny in Reithmann and Martiny, para. 4910, at p. 1454; Lyon-Caen and Lyon-Caen, No. 36, at p. 29. 1435 Merrett, para. 7.39, at p. 238, referring to Lando and Nielsen, Com. Mkt. L. Rev. 45 (2008), 1722, who point out that there are no published court decisions applying Article 7, para. 1, of the Rome Convention; the numerous judgments on overriding mandatory provisions in labour contracts cited by Franzen, Arbeitsrecht-Blattei

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c) Definition of overriding mandatory provisions 682. Contrary to the Rome Convention, Article 9, paragraph 1 Rome I contains a definition of overriding mandatory provisions. They are described as “… provisions the respect for which is regarded as crucial by the country for safeguarding its public interests, such as its political, social or economic organization 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.”

This formula can essentially be traced back to the case law of the European Court of Justice on the freedom to provide services under what is now Article 56 TFEU, in particular to the Arblade opinion.¹⁴³⁶ It has been common ground for many years that the host State where the services provided by a citizen of another Member State are received is not allowed to enforce its complete national legal order. Where that enforcement amounts to a restriction of the freedom to provide services, there must be “overriding reasons relating to the public interest” to justify the restriction in question.¹⁴³⁷ In particular, the Court of Justice in Arblade has acknowledged the social protection of workers and their right to minimum wages as an overriding reason relating to the public interest.¹⁴³⁸ While the referring Belgian court had articulated, in its preliminary questions, the reservation of public-order legislation in Article 3 of the Belgian Civil Code, the Court of Justice summarized and explained this concept of ordre public as referring to “… national provisions compliance with which has been deemed to be so crucial for the protection of the political, social or economic order in the Member State concerned as to require compliance therewith by all persons present on the national territory of that Member State and all legal relationships within that State.”¹⁴³⁹

The wording of Article 9 paragraph 1 Rome I reflects the core elements of this consideration of the Court’s opinion. 683. It is the confinement to the public interest which has given rise to much debate in private international law ever since. The reference is clearly intended to distinguish the concept of overriding mandatory provisions as employed in Article 9, paragraph 1 from the concept of non-derogable or non-exclud-

1436 1437 1438 1439

920, paras. 139 et seq., exclusively deal with overriding mandatory provisions of the German lex fori. ECJ, 23 November 1999, Joined Cases C-369/96 and C-376/96 (Arblade and Leloup), [1999] ECR I-8498. Ibid., cons. 34. Ibid., cons. 36 and 42. Ibid., cons. 30.

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able provisions employed in other provisions of the Rome I Regulation.¹⁴⁴⁰ The latter concept is clearly wider and embraces the former. It is in line with this distinction that, when subjecting the “ferry” case reported above to British labour law, the German Federal Labour Court did not enforce the German law against unfair dismissal as overriding mandatory law.¹⁴⁴¹ The German law was thought to exclusively protect the private interests of the employee. On the other hand, the European Court of Justice has explicitly acknowledged in the Arblade opinion that the host State may enforce its national rules on minimum wages as overriding provisions relating to the public interest in transactions covered by the freedom to provide services.¹⁴⁴² Laws fi xing minimum wages concern a crucial element of every employment contract, namely the price of labour. They are primarily intended to protect the interests of the employee, being the weaker contracting party. If a Member State, according to the Court of Justice, is nevertheless permitted to enforce its minimum wage legislation as safeguarding its public interest, it follows that it is not possible to categorically exclude all rules relating to contract law from the concept of overriding mandatory provisions.¹⁴⁴³ From the same opinion of the Court it may also be inferred that the concept cannot be limited to those provisions which are mandatory in both directions, i.e. which can be derogated to the detriment of neither the employer nor the employee.¹⁴⁴⁴ Since minimum wage legislation always allows for an agreement on a higher salary, it is only “half-mandatory”; nevertheless the Court permitted Belgium to enforce that legislation as relating to the public interest. 1440 See Article 3, paras. 3 and 4, relating to contracts in general, Article 6 in respect of consumer contracts, and Article 8 with regard to employment contracts; see the detailed discussion in Max Planck Institute for Foreign Private and Private International Law, “Comments on the European Commission’s Green Paper on the Conversion of the Rome Convention of 1980 on the Law Applicable to Contractual Obligations into a Community Instrument and Its Modernization”, RabelsZ 68 (2004), 1-118 at pp. 69-77, distinguishing the “internally mandatory provisions” from the more restricted group of the “internationally mandatory provisions” along the lines of the Arblade opinion; see also Ulla Liukkunen, Cross-border Services and Choice of Law – A Comparative Study of the European Approach, Frankfurt am Main, 2006, pp. 76-80. 1441 BAG, 24 August 1989, IPRspr. (1989), No. 72 at pp. 151-154; see the case report supra in para. 675 and the comments by Magnus, IPRax (1991), 385-386. 1442 See supra footnote 1438. 1443 Some implied support for this proposition can now be found in the Unamar opinion of the ECJ, 17 October 2013, case C-184/12 (United Antwerp Maritime Agencies (Unamar) NV v. Navigation Maritime Bulgare), nyr, para. 50; see also Wulf-Henning Roth, “Eingriffsnormen im internationalen Versicherungsrecht nach Unamar,“ in Manfred Wandt, Peter Reiff, Dirk Looschelders and Walter Bayer, eds., Versicherungsrecht, Haftungs- und Schadensrecht – Festschrift für Egon Lorenz zum 80. Geburtstag, Karlsruhe 2014, pp. 421-442 at p. 435. 1444 In this sense, Junker, p. 290.

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d) Overriding mandatory provisions and the European Court of Justice 684. It is difficult to draw a line between national provisions which may be acknowledged as relating to the public interest and those which are not and are simply meant to balance the interests of private parties. It will be up to the Court of Justice to draw that line when national courts submit questions for preliminary rulings in accordance with Article 267 TFEU. What can be suggested here is an approach rather than a clear yardstick. The point of departure is our previous observation that the definition of Article 9 paragraph 3 builds upon the case law of the European Court of Justice relating to the basic freedoms and in particular to the freedom to provide services as ensured by the Treaty. From that case law a four-pronged test emerges:¹⁴⁴⁵ (1) Is the activity in question covered by the freedom invoked ? (2) Does the relevant national provision constitute a restriction of that freedom ? (3) Is that provision intended to safeguard the public interest (or to fulfill an imperative requirement of the general interest, as it is sometimes called) ? (4) Is the restriction of the freedom proportionate ? A national restriction is lawful only if questions (2) to (4) are answered in the affirmative. 685. It is submitted that this test can also serve as a guideline when the Court of Justice is called upon to decide whether specific provisions of a Member State should be acknowledged as overriding mandatory provisions for the purposes of Article 9 Rome I. Here, the restriction by national provisions does not affect a basic freedom, but the operation of the bilateral conflict rules as enshrined, in respect of labour law, in Article 8 Rome I. The bilateral conflict rules serve the primary objective of the whole Rome I Regulation, which is a predictability and uniformity of outcome irrespective of the Member State of litigation. The goal is laid down in an instrument of secondary Union law,¹⁴⁴⁶ but it shares the rank of primary law since, according to Article 81 paragraph 2(c) TFEU, bilateral conflict rules are – alongside the law of procedure – the only means available under the Treaty to build up, with regard to civil law, the “area of justice” which the Union is to constitute according to Article 61 TFEU. Realization of this goal of primary Union law is undermined by the unilateral enforcement of overriding mandatory provisions by the Member States. What case law on the basic freedoms identifies as the justification of a restriction, is in private international law the 1445 This simplified summary results from what has been called the process of convergence of the Court’s jurisprudence on the five freedoms granted by the Treaty, see Peter Behrens, “Die Konvergenz der wirtschaftlichen Freiheiten im europäischen Gemeinschaftsrecht”, EuR (1992), 145-162; for a short survey see also Norbert Reich, Understanding EU Law, 2nd ed., Antwerp, 2005, pp. 98-99. 1446 This objective is laid down in Recital 6 of the Rome I Regulation: “The proper functioning of the Internal Market creates a need, in order to improve the predictability of the outcome of litigation, certainty as to the law applicable and the free movement of judgments, for the conflict-of-law rules in the Member States to designate the same national law irrespective of the country of the court in which an action is brought.”

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definition of the overriding mandatory provision under Article 9 paragraph 3 Rome I: it is the delineation of the respective spheres of operation of Member State law and political design on the one side, and Union law on the other. 686. While it is up to the Member States and their courts to identify, in a first step, those of their provisions which they consider as relating to their public interest, the Court of Justice will have to oversee those national provisions and court rulings in a second step. A test to be employed in this review is the principle of proportionality:¹⁴⁴⁷ under that principle the overriding mandatory provisions identified by the Member States must be suited and indispensable for the attainment of their objectives. Moreover, the practice of the Court insinuates that they must have a sufficient weight to justify the restriction they represent for the operation of the unified conflict rules of the Union. So far, the Court of Justice has not had the opportunity to express its views on overriding mandatory provisions in the context of EU private international law. But it is submitted that the approach outlined above would be in line with its previous case law on restrictions of fundamental freedoms enshrined in the Treaty. e) Outlook 687. As a result of such review, a gradual widening of the area of labour law covered by bilateral conflict rules can be expected: wherever the Court of Justice rejects the claim of a Member State that a certain legal provision has an overriding effect, this would leave the case to the operation of the bilateral conflict rules of Article 8 Rome I. In practice, this would mean that foreign labour law would receive a more visible place in national court practice and that the widespread unilateral and territorial approach to labour law would give way to a comparison of employment laws. In the long run this might also pave the way for a gradual approximation of national labour laws in the Member States. It goes without saying, however, that this perspective does not exist in the relations between non-Member States or between nonMember States and Member States of the European Union; here, tolerance can only grow by unilateral decisions of the respective courts. 7.

Posted Workers

a) The tension between social protection and economic efficiency 688. Where employees are temporarily posted to perform their obligations in a foreign country, the actual workplace will usually diverge from the habitual workplace, giving rise to difficult conflict-of-laws issues. It has already been pointed out above that the practical significance of posting has grown as 1447 On the use of this principle as a limit to Member State actions, see Anthony Arnull and Alan Dashwood et al., Wyatt and Dashwood’s European Union Law, 5th ed., London, 2006, pp. 110-112 and 242-244; Reich, pp. 45-46.

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the cross-border trade in services has been liberalized.¹⁴⁴⁸ The posting of workers appears to be a concomitant of the open society. In light of the still prevailing unilateral interest and approach taken by national legislatures and trade unions, this observation points to a serious problem: can the posting of workers from low-salary and low-labour-standard countries to more prosperous States be used as a tool to circumvent the latters’ labour regulations ? Or, from the standpoint of low-salary countries and their workforce, can their employees and service providers avail themselves of the comparative advantage they are able to offer to service recipients in States with high labour costs ? Put in legal terms, the question arises as to how the national regulations of the respective labour markets can be weighed against the liberalization of the trade in services enshrined in the GATS and, much more distinctly, in the European Treaty ? 689. The dilemma is encapsulated in the facts underlying the Laval opinion of the European Court of Justice. Laval un Partneri, a company incorporated under the law of Latvia and having its registered office in Riga, had between May and December 2004 posted approximately 35 employees to work on construction sites in Sweden. A Swedish builders’ union requested Laval to adhere to a collective agreement which would have entailed Laval’s obligation to pay considerably higher wages to the Latvian workers than they earned under the Latvian collective agreement governing their employment contracts; in addition, Laval would have incurred some pecuniary duties vis-à-vis the union. The cost advantage that Laval, as compared with local builders, could offer to the Swedish customer would likely have been reduced to next to nothing had it acquiesced. When Laval refused the request, the union began an industrial action by preventing the delivery of goods onto the site, placing pickets and prohibiting Latvian workers and vehicles from entering the site. Police refused assistance explaining that the collective action was lawful under Swedish law.¹⁴⁴⁹ b) Article 8 Rome I and the Posted Workers Directive of the EU 690. If the law applicable to the employment contract of Laval’s workers were to be determined in accordance with Article 8 Rome I, it is safe to assume that Latvian law would govern, either as the law agreed by the parties or as the law of the habitual workplace; that conflict rule explicitly establishes that the temporary relocation of the actual workplace to Sweden is not deemed to have changed the habitual workplace, with the latter being the 1448 See supra, paras. paras. 652-654. 1449 ECJ, 18 December 2007, Case C-341/05 (Laval un Partneri v. Svenska Byggnadsarbetareförbundet), [2007] ECR I-11767. The significance of this opinion from the perspective of EU law is highlighted by Catherine Barnard, “Viking and Laval: An introduction”, Cam. YB Eur. Leg. Stud. 10 (2007-2008), 463-492 at pp. 474 et seq. Further papers on several aspects of the case by Mia Rönnmar, Alan Dashwood, Tonia Novitz, Silvana Sciarra and Simon Deakin can be found in the same publication.

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relevant connecting factor under the first sentence of Article 8 paragraph 2 Rome I.¹⁴⁵⁰ Consequently, as long as the conflicts analysis adheres to the bilateral approach of Article 8 Rome I, the host State cannot enforce its own social standards which are more favourable to the worker than those of the latter’s country of origin where the habitual workplace is situated. In the absence of any specific rules, the host State must therefore have recourse to the rather vague precepts of Article 9 Rome I and its own overriding mandatory provisions, or to the public policy reservation of Article 21 Rome I if it seeks to have its social standards respected within its territory. 691. However, a specific act of the EU addresses the matter: to avoid both “social dumping” occasioned by imported cheap labour and “unfair competition” between the posted workers and the workers of the host State,¹⁴⁵¹ the bilateral approach has been supplemented or corrected by the EU Posting of Workers Directive, which accords the status of overriding mandatory provisions to certain labour regulations of the host State.¹⁴⁵² While the Directive primarily aims at employers established in other Member States which avail themselves of the freedom to provide services, it also affects third-State undertakings which may not be given a more favourable treatment than employers from other Member States, Article 1 paragraph 4. The Directive is thus intended to create the same uniform minimum standards for all employees working in a Member State, irrespective of either the country of their employer or their own country of origin.¹⁴⁵³ At the same time, it is meant to establish a level playing field for all undertakings offering services within a given Member State. But since the minimum standards laid down in the several Member States are not the same, there is no level playing field for the Union as a whole. 692. Article 3, paragraph 1 of the Directive puts the host States under an obligation to guarantee that workers posted to their territory from other Member States carry out their work on the same terms and conditions of employment as domestic workers, “whatever the law applicable to the employment relationship.” The wording resembles the definition of the overriding mandatory provisions in Article 9, paragraph 1 Rome I. Without aiming at a harmonization of substantive law, the Directive leaves it to the individual Member States to select the subjects of mandatory labour regulation and to establish the level of protection for each of those subjects. The Directive produces its effects only where mandatory national labour regulations cover one of the subjects listed in Article 3 paragraph 1. The host State’s regula1450 See Article 8, para. 2, 2nd sentence, Rome I. 1451 Both terms have been employed in the Laval opinion of the Court of Justice, see supra footnote 1448, paras. 75 and 103. 1452 Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services, OJ 1997 L 18/1; for the legal concept of posting, see supra, para. 652. 1453 See Francq, pp. 371-373.

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tions on these matters are to be enforced against undertakings established in other Member States which post their workers to the former Member State; vis-à-vis such enforcement measures, the foreign employer cannot invoke the freedom to provide services ensured by the Treaty. Because of the most-favoured-nation clause of Article 1 paragraph 4, employers from third States cannot expect a more favourable treatment. 693. The regulations listed in Article 3 paragraph 1 which can produce such an effect erga omnes comprise rules on: maximum work periods and minimum rest periods; minimum paid annual holidays; minimum rates of pay including overtime rates; the conditions on the hiring-out of workers; health, safety and hygiene at work; protection of pregnant women or women who have recently given birth as well as of children and young people; equal treatment of men and women and other provisions on non-discrimination. However, the host State law is imposed and the freedom to provide services restricted only where such national rules are laid down either by law, regulation or administrative provision, or, in certain branches of the construction industry, by collective agreements or arbitration awards which have been declared universally applicable. The Laval opinion has made clear that collective agreements lacking such a declaration of universal applicability within the meaning of Article 3, paragraph 8 of the Directive do not qualify as rules binding on posted workers; and neither do State regulations on matters not listed above.¹⁴⁵⁴ Thus, the Directive explains the political pressure now felt by the Governments in several Member States to replace industrial agreements by State regulation or to declare such agreements universally applicable. c) The Posted Workers Directive as overriding mandatory provisions 694. Article 3, paragraph 1 of the Directive is not permissive, instead obligating the Member States to enforce the binding provisions of their laws relating to the specified subjects as against employers who post workers to their countries regardless of the law otherwise governing the employment contract. The provisions of the Directive – or rather the implementing provisions adopted by the Member States – are therefore overriding mandatory provisions within the meaning of Article 9, paragraph 1 Rome I.¹⁴⁵⁵ For 1454 ECJ, 18 December 2007, Case C-341/05 (Laval un Partneri v. Svenska Byggnadsarbetareförbundet), [2007] ECR I-11767, paras. 80 and 84; in a different context (award of public contracts), also ECJ, 3 April 2008, Case C-346/06 (Rüffert v. Land Niedersachsen), [2008] ECR I-1989, cons. 33, rejecting also the application of Article 3, para. 7, of the Directive to “simple” collective agreements; see also Louise Merrett, “Posted Workers in Europe from a Private International Law Perspective”, Cam. YB Eur. Leg. Stud. 13 (2010-2011), 219-244 at pp. 229-230. 1455 See Franzen in Calliess, Rome I, Article 8, paras. 9 and 58; Merrett, Cam. YB Eur. Leg. Stud. 13 (2010-2011), 239-243 at p. 242; Martiny in Reithmann and Martiny, No. 4835, at p. 1426, referring to Recital 34 of the Rome I Regulation which explicitly refers to “the application of the overriding mandatory provisions of the country to

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the authorities and courts of the host State they are overriding mandatory provisions of their own law for the purposes of Article 9, paragraph 2 Rome I. While this provision only makes a reservation for the overriding mandatory provisions of the forum without establishing any scope rule for them, Article 3, paragraph 1 of the Directive establishes the principle of the territorial application of provisions on the listed subjects with regard to work carried out in the host State. Put in other words, the host State may repeal any of its mandatory labour regulations with effect for both domestic and posted workers, but it may not maintain a mandatory regulation in respect of domestic employment contracts while deregulating the same matter for posted workers; on this point one encounters a difference between the general regime of overriding mandatory provisions under Article 9 paragraph 2 Rome I and the Directive. 695. These provisions are not binding on the courts in any other Member State, in particular in the country where the workers are posted from. Assuming that a dispute concerning the employment relations in the Laval case arises in the courts of Latvia (which is also the country of the habitual workplace within the meaning of Article 8, paragraph 2 Rome I), the Swedish provisions in question could be considered as overriding mandatory provisions of the law of a third country within the meaning of Article 9, paragraph 3 Rome I; consequently, they may be given effect by the Latvian courts, but there is no obligation. This could, for example, become relevant where the employment contract provides for a duty of the posted workers to refund part of their higher wages paid under Swedish law to their employer once they are back in Latvia.¹⁴⁵⁶ Given the interest of low-salary countries such as Latvia to export their cheap labour, it is unlikely that the Latvian courts would make use of Article 9, paragraph 3 in this context. The ascertainment of the inherently divergent interests of the posting State and the host State allows for two observations: first, it explains the continuous debate over perfecting the Posted Workers Directive by both means of a duty of the Member States to cooperate as well as a specification of what temporary as opposed to permanent posting indicates for the purposes of the Directive.¹⁴⁵⁷ Second, it sheds light on the difference between the conflict rules of the Rome I Regulation and the provisions of the Posted Workers Directive: while the former pursue the objective of the uniformity of outcome irrewhich a worker is posted in accordance with Directive 91/76/EC …”; in respect of the predecessor provision of Article 7 of the 1980 Rome Convention see in the same sense Arbeidshof te Brussel, 13 July 2011, Rechtskundig Weekblad, 2012-2013, 834. 1456 Such a contractual practice is reported in French literature, see Pataut in Audit, Muir Watt and Pataut, p. 145. 1457 See the Proposal for a Directive of the European Parliament and of the Council on the enforcement of Directive 96/71/EC concerning the posting of workers in the framework of the provision of services, COM (2012) 131 final of 21 March 2012, with an account of that debate at pp. 6-9.

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spective of the place of litigation, the latter are not really conflict rules; they are, rather, simply means of justifying those restrictions on the freedom to provide services which result from the enforcement of mandatory labour law regulations in the host State. Section 4: Conclusion 696. This chapter was intended to deal with disparities in information and market power or, in traditional terms of civil-law scholarship, with the protection of the “weaker party” in private relations having a cross-border dimension. The political determination of individual States to offset such disparities by legislative or regulatory intervention gives rise to particular difficulties in private international law since the efforts of an individual State implementing such protective rules are primarily directed at the internal transactions of this individual country; States usually do not care about divergent laws of other States on corresponding matters that give rise to conflicts of laws. It emerges from those conflicts that the traditional objective of private international law to attain a uniformity of outcome irrespective of the place of litigation – and thereby achieve legal certainty for private actors in international transactions – cannot be reached if the courts of every country exclusively aim at compliance with their own protective laws. On the other hand, the private law measures adopted in pursuance of a certain social and economic policy need some protection against private arrangements that would circumvent those measures and deprive them of their intended effect. Hence the dilemma of modern private international law: it is difficult to achieve simultaneously uniformity of outcome and the protection of the weaker party by national legislation. 697. In two areas of the law we have enquired into legislation conceived to reconcile these contradictory policy aims: consumer protection and employment law. The overall impression is that the national interests of States are enforced with much more resolve in international employment law than in international consumer law. This is probably due to the fact that consumer legislation is still rather fragmentary, covering only single and isolated issues of consumer contracts; conversely, mandatory legislation on employment is much more comprehensive in many countries, thus leaving less room for the operation of general principles of international contract law. That consumer legislation, as compared with employment law, is a rather small body of rules can be explained by the difference in influence of the respective interest groups. Speaking in political terms, it is fair to say that trade unions in most countries are much stronger than consumer associations; while the former are sustained by the dues of their members (and sometimes by contributions of employers), the latter often depend on State subsidies. The diverse political influence reflects the disparity of this economic basis. 698. The superior power of the individual protective State in international employment law as compared to international consumer law can be ascertained

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with regard to several points: (1) with regard to consumer contracts, the modern approach adopted by the majority of legislative acts is bilateral, not unilateral; conflicts statutes are not only directed at enforcing the consumer protection of the lex fori, they also provide information about a foreign law that the national courts will eventually apply under those certain circumstances when they have jurisdiction. While there is also some progress in the direction of bilateral conflict rules in employment law, the unilateral tradition appears to be much stronger and still thriving in some countries. (2) Where bilateral conflict rules have been adopted, there is a growing trend in both areas of law to acknowledge – at least as a starting point – party autonomy, subject to the mandatory minimum standards of the law that would be applicable in the absence of choice; given the broad scope of mandatory employment law in many countries, choice of law has obviously a much narrower effect on labour markets than it has on consumer markets. (3) The connecting factors determining the applicable law in the absence of choice are in both areas designed to protect the reliance of the weaker party, if any, on the application of a law that has a proximate connection with the facts of the consumer contract or the labour contract, i.e. a connection that the consumer or employee could reasonably be expected to be aware of. In consumer law, this relation of proximity has until recently been confined to three narrowly described situations under the Rome Convention. By contrast, the habitual workplace has always been a rather flexible connecting factor in employment law permitting a rather comprehensive enforcement of the protective provisions of the labour law of that country. The more recent developments give evidence of an extension of these connecting factors in both areas of law. (4) While consumer conflicts law leaves only little room for the additional application of overriding mandatory provisions, their role is much greater in employment law, a kind of aftermath of the strong unilateralist approach noted above in item (1); contrary to the harmonizing policies of the European Union, the overriding mandatory character of certain national provisions of labour law has even been established by apposite EU legislation with regard to posted workers.

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Imperative Norms: Protection of Foundational Principles

699. The State actions discussed in chapter 3 above are intended to counteract the disparity of information and market power that can be ascertained in certain markets and that is apt to raise doubts concerning the efficiency of contracts made in the respective sectors; legislatures pursue the objective of preserving freedom of contract as much as possible by imposing mandatory law in a confined fashion. There are also other motivations for State intervention of a much more comprehensive kind. In particular, this is the case where States and the societies living in those States consider certain values and legal institutions as foundational to the very existence of the legal system. There are numerous examples; some of them relate to the economy and to societal cohabitation, but there are also those which concern aspects of culture. They are considered as essential elements of the identity of the respective society. While they may appear as stable or even inalterable, they are bound to change over time, although perhaps more slowly. When it comes to their significance for international private relations, people within a State and the State’s agents, in particular its courts, will usually take a unilateral approach: all they are interested in is the effectiveness and the scope of their own regulations. They rarely look abroad for corresponding rules in other countries which may pursue the same objectives. Section 1 will provide a survey of some of those rules. In private international law these rules and principles are usually conceptualized as forming part of the national public policy (or public order – ordre public) or as overriding mandatory provisions, which makes clear that they trump a foreign law that would otherwise be applicable. We shall employ the overarching concept of imperative norms here. Where they are affected, the tolerance inherent in private international law reaches its limits. Section 2 will discuss the difficulties in identifying such rules and principles and in reconciling them with the basic bilateral approach of the conflict rules. The unilateral approach that comes to the fore in sections 1 and 2 appears to pay little heed to the policies pursued by other States. But the enforcement of a country’s own basic values and principles does not necessarily exclude respect for corresponding values and principles of other States as long as the foundations of the forum State are not affected. Accordingly, there are now cautious attempts to move

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ahead to what may appear as an opening of States towards the imperative norms of foreign countries, as some examples will show in Section 3. Section 1: Foundational Principles – a Survey 1.

Collective Goods

700. Some goods and services are characterized by the non-exclusivity and nonrivalry of consumption: once they are produced for single individuals, access by others can be precluded only at high costs or not at all, and additional consumption of the same good does not reduce the value of the use by pre-existing consumers. Examples are public safety, clean air, internet communication, competition, currency, and the reliability of both financial markets and the legal system. These goods are called collective goods, common goods or public goods.¹⁴⁵⁸ Because of their non-exclusive nature, there will be free riders who will gain the benefits from their use without having paid for it; consequently, private actors cannot expect any return from an investment in the production of such goods and, due to a lack of incentive, will not make corresponding investments. It follows that public actors have to step in and compensate for the private underproduction. The public utility of collective goods is reflected by their public production. State intervention in numerous sectors can thus be explained with regard to its occurrence as such. The form and intensity of that intervention are however usually a result of the political process. 701. The reference to the political process points to the territorial limitations of laws and regulations serving the production of collective goods. It is true that the demand for several of them has a universal character; examples are the stability of the climate as a foundation of life on this planet or a reliable currency as the basis of trade. However, the production of those goods is by necessity confined to the territory of a given jurisdiction where the political process is anchored. As a consequence, collective goods are mostly created at the national level or sometimes at the regional level, and they have to be hedged against the risks flowing from their exposure to the dangers inherent in private international relations. Where, for example, a national currency needs protection – which is less frequently the case in times of free movement of capital and floating exchange rates – the States in need will often enforce their currency regulations as overriding mandatory provisions, in particular for payments due within their territorial limits.¹⁴⁵⁹ In 1458 Cooter and Ulen, pp. 46-47 and pp. 107-110; Daniel Cole, “New Forms of Private Property: Property Rights in Environmental Goods”, in Boudewijn Bouckaert, ed., Property Law and Economics – Encylopedia of Law and Economics, 2nd ed., Cheltenham, 2010, pp. 225-269 at pp. 229-231. 1459 See the general survey by Caroline Kleiner, “Currency”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Pri-

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many cases, the collective good is intrinsically national, as for example the protection of the national cultural heritage. It goes without saying that this protection can only be put into effect by the legal regulations of the respective State and that these regulations will be enforced regardless of private arrangements.¹⁴⁶⁰ This is usually a matter of export controls under public law. The situation is similar to the one discussed above in respect of trade embargoes;¹⁴⁶¹ however, while the latter are an instrument of foreign policy, trade restrictions on art objects of national significance pursue an internal policy objective. For private international law, only marginal aspects of such collective goods become relevant: since the pertinent legislation usually provides for public enforcement, their significance in private law disputes does not come to the fore very frequently, and if so, it will often occur in foreign countries where the courts then will have to decide whether to give effect to foreign overriding mandatory laws or to foreign public policy.¹⁴⁶² 2.

Essentials of the Social Model

a) The amalgam of public interest and protection of the weaker party 702. A closer look into State practice reveals that the concept of collective goods or public goods cannot explain all claims to a direct and unconditional enforcement of State laws. As shown in the context of employment law above, numerous statutes enacted by the US Congress and also in single States of the United States explicitly regulate their territorial scope of application;¹⁴⁶³ the respective statutes on maximum hours of work and minimum wages are clearly meant to compensate for disparities between employers and employees, not to serve a collective or public good; yet, their application is held to be independent of the proper law of the contract. On the other hand, we have observed that mandatory consumer protection law is essentially designed to protect the weaker party and can hardly be said to serve collective vate Law, Vol. 1, Oxford, 2012, pp. 438-442 at p. 440; also in German under the heading “Währung” in Basedow Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. II, Tübingen, 2009, pp. 1741-1745 at p. 1743; for a broad discussion see id., La monnaie dans les relations privées internationales, Paris, 2010, Nos. 348 et seq. at pp. 308 et seq., in particular No. 350 at pp. 309-310 for France and No. 357 at pp. 316-318 for Germany and England. 1460 Kurt Siehr, “Cultural Property”, in Jürgen Basedow, Klaus Hopt and Reinhard Zimmermann, eds., Max Planck Encyclopedia of European Private Law, Vol. 1, Oxford, 2012, pp. 434-438; also available in German under the heading “Kulturgüter” in Basedow, Hopt and Zimmermann, eds., Handwörterbuch des Europäischen Privatrechts, Vol. II, Tübingen, 2009, pp. 993-998; id., International Art Trade and the Law, Recueil des cours 243 (1993), 9-292. 1461 See supra, paras. 564 et seq. 1462 For the trade in protected art objects, see very clearly Siehr, Recueil des cours 243 (1993), pp. 183 et seq. 1463 See supra, paras. 656, 661 and 678.

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or public goods; consequently, it is left to the law governing the contract unless the consumer is entirely “passive”.¹⁴⁶⁴ An appreciation in the sense of a dual purpose may be appropriate with regard to national schemes in respect of workers’ co-determination. While they strengthen the position of individual employees, they are also intended to establish democratic values in labour relations and thereby pertain to the public good. A domestic branch established by a foreign company is therefore considered as being subject to the domestic regulations on workers’ councils.¹⁴⁶⁵ While in France this solution is considered as flowing from an overriding mandatory provision, it is regarded as the result of a special conflict rule dealing with institutions of collective labour law in Germany;¹⁴⁶⁶ the result, however, is the same. 703. These examples give clear evidence of the amalgamated purposes of many mandatory rules in the fields of consumer protection and employment law. It is difficult indeed to segregate the public-good component from the protection of the weaker party. The explanation given in Western countries and particularly in the European Union often refers to the “social model” of the post-industrial State and society which is composed of two elements: institutions serving the collective or public good and appropriate State regulation for the protection of the vulnerable. The relative proportion of each in the policies underlying State legislation may differ. But even where no collective goods can be claimed to be furthered and the protection of the weaker party clearly dominates, the provision in question may still override private arrangements and bilateral conflict rules. b) The policy-mix and the principle of territorial application 704. A conspicuous example is the 2002 regulation of copyright licence agreements in Germany. As amended, the Copyright Act does not only ensure an “appropriate remuneration” to the author for each utilization of the work, this being characterized as an inalienable minimum standard protecting

1464 See supra, paras. 636-640. 1465 See for France the pertinent decision of the State Council in the case of the Compagnie internationale des wagons-lits, a company incorporated under Belgian law which, however, was held to be subject, in respect of its French branches, to the French regulations on employees’ co-determination bodies, Conseil d’Etat, 29 June 1973, Rev. crit. dr. int. pr. 63 (1974), 344 (conclusions Questiaux) and 350; see also Dominique Bureau and Horatia Muir Watt, Droit international privé, Vol. 1, Paris, 2007, p. 559. 1466 For France see the previous footnote, for Germany the judgments of the Federal Labour Court, BAG, 21 October 1980, NJW (1981), 1975 = IPRspr. (1980), No. 52; 30 April 1987, NJW (1987), 2766; Rolf Birk, “Auslandsbeziehungen und Betriebsverfassungsgesetz”, in Festschrift für Schnorr von Carolsfeld, Cologne, 1972, pp. 61-88 at pp. 68-70; Cornelia Agel-Pahlke, Der internationale Geltungsbereich des Betriebsverfassungsgesetzes, Frankfurt am Main, 1988, 19-24; Franzen, Arbeitsrecht-Blattei 920, para. 185; Martiny in Reithmann and Martiny, para. 4952 at p. 1469.

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the author.¹⁴⁶⁷ It is also explicitly stated in § 32 b of the Act that this provision and some other rules “… are of mandatory application 1. if German law had been applicable to the licence agreement in the absence of a choice of law or 2. to the extent that the object of the agreement consists of relevant acts of utilisation within the territory where this statute is effective.”¹⁴⁶⁸

Since both cases outlined in the provision are alternatives, it follows that the second situation only deals with licence agreements which would not be subject to German law under the objective connecting factors listed in Article 4 of the Rome I Regulation; otherwise the case would be covered by the first alternative. Put in other words, even where the licence agreement does not have a sufficiently close connection with Germany to justify the application of German law under Article 4 Rome I, the German legislature wants to ensure an adequate remuneration to an author provided that his or her work has been utilized in a relevant manner within Germany. This will even apply to a licence contract between a foreign author (not only a so-called Convention Author entitled to inland treatment under the Berne Convention) and a foreign publisher in respect of the licenced copyright in Germany. The command of a territorial application prevails although the provisions in question clearly serve the protection of the author – being considered as the weaker party – and can hardly claim to serve a public or collective good. 705. A final example for legal provisions which are regarded as essentials of a European “social model” is provided by the European Court of Justice regarding the application of the Commercial Agents Directive.¹⁴⁶⁹ The Directive establishes a number of mandatory minimum standards for contracts between self-employed commercial agents and their principals. In particular, Article 17 of the Directive requires that after termination of the agency contract, the commercial agent be indemnified or compensated; the postcontractual payment may amount to considerable sums as high as the remuneration earned in one or even two years. In the case before the Court of Justice, a principal from California had appointed an English company as its 1467 See § 32, paras. 1 and 3, of the German Copyright Act as amended; see the comments on the detail of the Regulation in Schack, Urheber- und Urhebervertragsrecht, paras. 965 et seq. at pp. 490 et seq. and Adolf Dietz, “Amendment of the German Copyright Law in Order to Strengthen the Contractual Position of Authors and Performers”, IIC 33 (2002), 828-845 with a translation of the relevant provisions; see also Haimo Schack, “International Mandatory Rules in Copyright Licensing Agreements”, in Jürgen Basedow, Josef Drexl, Annette Kur and Axel Metzger, eds., Intellectual Property in the Conflict of Laws, Tübingen, 2005, pp. 107-117. 1468 Author’s translation. 1469 Council Directive 86/653/EEC of 18 December 1986 on the co-ordination of the laws of the Member States relating to self-employed commercial agents, OJ 1986 L 382/17.

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commercial agent in the United Kingdom subject to a contract governed by the law of California, which did not provide for post-contractual payments to commercial agents. After the contract was terminated, the British agent instituted proceedings in England and claimed compensation for damage suffered as a result of the termination of its relations with the principal in accordance with the regulations the United Kingdom had adopted for implementation of the Directive. Upon a referral by the Court of Appeal, the European Court of Justice held that Articles 17 to 19 of the Directive are of a mandatory nature because of their aim in protecting the commercial agent after termination of the contract and ensuring the operation of undistorted competition in the Internal Market.¹⁴⁷⁰ The Court concluded that “the purpose served by the provisions in question requires that they be applied where the situation is closely connected with the Community, in particular where the commercial agent carries on his activity in the territory of a Member State, irrespective of the law by which the parties intended the contract to be governed.”¹⁴⁷¹

Here again, the mix between the safeguarding of competition as a collective good and the protection of the weaker party clearly comes to the fore. 3.

Ethical Foundations

a) Personal status and public policy 706. The examples given so far relate to the field of financial matters, where courts and legislators have felt, due to the long-standing admission of party autonomy, a strong need to draw limits on the freedom of contract. But the determination of States to enforce their own laws within the territorial limits of their jurisdiction is not confined to commercial transactions and monetary matters. Such provisions can be found in other areas of the law, too, where the roots can be traced back to the moral and ethical foundations of prevailing views in a society. As has been pointed out earlier, both the personal sphere and the relation between the sexes as regulated in the law of personal status and family law have always been characterized by a high degree of intransigence within the respective legislatures, see above, paras 379 et seq. Consequently, courts confronted with foreign law in matters of personal status frequently invoke the “ordre public” or public policy of the forum when the foreign law appears repugnant to fundamental principles of the legal order of the forum State. 707. Up to the second half of the twentieth century, family law and in particular the law of marriage has been the main field of enforcement of public policy 1470 ECJ, 9 November 2000, Case C-381/98 (Ingmar v. Eaton Leonard Technologies), [2000] ECR I-9305, cons. 21-24. 1471 Ibid., cons. 25.

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in many Western countries.¹⁴⁷² Marriage and divorce were subject, at least in part, to the cumulative application of the spouses’ national law and the lex fori in the “old” Hague Conventions.¹⁴⁷³ Where the law of the forum still governs, as it does in common law jurisdictions, recourse to public policy is wholly unnecessary to command respect for the basic principles of the lex fori.¹⁴⁷⁴ This is different in countries prepared to apply a foreign law, e.g. the law of the foreign spouses’ nationality. But here, too, monogamy and the indissolubility of marriage have been principles of major interest and rigorous enforcement; the former principle still subsists entirely, the latter has been softened, but remains effective in the form of a review of State courts and a number of obstacles decreed by law against certain divorce applications. Consequently, most Western States reject polygamy even where Islamic law basically governs the marriage and refuse to celebrate a second marriage on their territories as long as the first marriage is still undissolved. Likewise, they will generally consider as invalid the repudiation of a wife declared by her husband in the national territory of the respective country.¹⁴⁷⁵ A new phenotype of intransigence in family matters is the rejection, in many jurisdictions, of same-sex registered partnerships and marriages; the so-called defense of marriage legislation in the United States has already been mentioned.¹⁴⁷⁶

1472 In 1931 Leo Raape published a very large commentary on German private international law with numerous comparative references; the examples given for the operation of the then-Article 30 of the Introductory Law of the Civil Code of 1896, reserving the protection of the ordre public, almost exclusively refer to the law of personal status, in particular to the law of marriage, see Leo Raape in Staudinger, Kommentar zum Bürgerlichen Gesetzbuch und dem Einführungsgesetz, Vol. VI/2, 9th ed., Munich, 1931, pp. 807-811 and pp. 818-819. 1473 See Article 2 of the Hague Marriage Convention of 1902 and Article 1 of the Divorce Convention of 1902. 1474 This explains the rather short discussion of public policy in Anglo-Saxon treatises on private international law, see for the United States Hay, Borchers and Symeonides, paras. 3.15 and 3.16 at pp. 168-171; for Australia Nygh, Nos. 18.35-18.54 at pp. 376-380; a bit longer Cheshire, North and Fawcett, pp. 139-150 for England. 1475 See Kalthoum Meziou, Ali Mezghani and Souhayma Ben Achour, eds., Polygamie et répudiation dans les relations internationales, Tunis, 2006; see in particular the report on French law by Hugues Fulchiron, “Polygamie et répudiation en France, entre ouverture et prohibition”, ibid., pp. 69-92, and the report on German law by Nadjma Yassari, “La réception de la polygamie et de la répudiation par le juge allemand”, ibid., pp. 93-110; see also Article 10 of the Rome III Regulation which commands the application of the lex fori to divorce proceedings if the law applicable according to the general choice-of-law provisions of the Regulation “does not grant one of the spouses equal access to divorce or legal separation on grounds of their sex”; this applies to repudiation under Islamic law. 1476 See supra, para. 381 at footnote 737.

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b) Surrogate motherhood 708. In recent years, legislation in many countries has tackled issues arising from the progress of medical and scientific research. An early example concerns surrogate motherhood. The surrogate mother and a couple trying in vain to produce offspring enter into an agreement according to which the surrogate mother will give up all rights to the child and recognize the couple as parents of the child. Surrogacy may result either from the insemination of the husband’s sperm into an egg of the surrogate mother who will become the genetic mother of the child, or from the implantation of a fertilized ovum originating from a woman different from the one giving birth to the child, generally the wife of the pair unable to conceive a child (in vitro fertilization). While this treatment has been praised by infertile couples as a path leading to the fulfi llment of their wish for a child, the prevailing view in many societies rejects surrogacy as an interference with Creation and as a device for the commercialization of the human body.¹⁴⁷⁷ The solutions provided from a comparative law perspective differ widely.¹⁴⁷⁸ While some countries, such as France, explicitly invalidate surrogacy agreements and declare that prohibition as pertaining to public policy,¹⁴⁷⁹ others uphold the respective agreements subjecting them to more or less strict conditions, to state supervision or to a procedure to be followed by the parties involved. Some countries will also provide for the consequences concerning the status of the child, in particular for its kinship relations with the surrogate mother and/or the parents who conceived the fertilized egg.¹⁴⁸⁰ 709. The legal divergence has obviously attracted infertile spouses from restrictive countries to the more permissive States. With a clearly derisive tone, 1477 See the telling title chosen by Iris Leibowitz-Dori, “Womb for Rent: The Future of International Trade in Surrogacy”, Minnesota Journal of Global Trade 6 (1997), 329354. 1478 Françoise Monéger, ed., Gestation pour autrui: Surrogate Motherhood, Paris, 2011, with 21 national reports; see also Caroline Lindsay-Poulsen, “Surrogacy: The Quest for Legal Recognition”, Irish Law Times, 2012, 12-16 with a short comparative survey at p. 12. 1479 See Articles 16-7 and 16-9 of the French Civil Code: “Toute convention portant sur la procréation ou la gestation pour le compte d’autrui est nulle.” And Article 16-9: “Les dispositions du présent chapitre sont d’ordre public.” 1480 See Françoise Monéger, “Rapport de synthèse”, in Monéger, pp. 9-25 at pp. 11-19; a legal order not included in the book edited by Monéger is that of Ukraine; the consequences for fi liation flowing from surrogate motherhood are regulated in Article 123 of the Family Code of Ukraine (Vidomosti verkhovnoi rady – VVR – 2002, Nos. 21-22, p. 135, English translation available at the website of the Foreign Ministry of Ukraine: http://www.mfa.gov.ua/data/upload/publication/usa/en/7148/family_ kideks_engl.pdf. Article 123, paras. 2 and 3, provide: “2. If an ovum conceived by the spouses is implanted to another woman, the spouses shall be the parents of the child. 3. Whenever an ovum conceived by the husband with another woman is implanted to his wife, the child is considered to be affi liated to the spouses.”

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this practice has been designated as “international trade in surrogacy” or as “procreative tourism”, inter alia by a French scholar and justice at the Cour de cassation.¹⁴⁸¹ The unfavourable assessment emerging from this designation set the stage for a series of judgments of the French Cour de cassation of April 2011. In all the cases French couples had concluded surrogacy agreements in the United States which were valid under the laws of either Minnesota or California. The children were registered in the United States as children of the French couples. When these couples applied for an analogous registration in the French registers of civil status their applications were rejected at all instances and finally by the Cour de cassation because of a violation of essential principles of French law, in this case the “principle of unavailability (indisponibilité) of civil status” for private arrangements.¹⁴⁸² 710. It is not the purpose of the present paragraph to discuss these decisions in depth, but it should be noted that the court explicitly stated that the women who gave birth to the children were and will be considered as mothers in France, although they obviously have no intention to care for the children. Another consequence of the judgments is that the children in question have different parents in France and in the United States, where the registrations put into effect in the two States (i.e. Minnesota and California) presumably have to be recognized nation-wide under the Full Faith and Credit Clause of the United States Constitution.¹⁴⁸³ Finally, the consequences for the legal position of the children, e.g. for their citizenship, their right of immigration into France, and for their relations to their would-be French parents (particularly maintenance obligations and rights of succession), are far from clear. Numerous difficulties can be predicted.¹⁴⁸⁴ Would, for example, the French Republic pay social security benefits for the maintenance of the child if the spouses, not being regarded as affi liated to the child, refuse to support it ? The clarification of such issues is deferred for future litigation. In some cases, the indeterminate status of the persons caught between the divergent laws may be overcome by adoption; but adoption proceedings are timeconsuming and, due to numerous administrative controls, of an uncertain outcome. It is not unlikely that, at the end of the day, the child will have to 1481 See Monéger, p. 19, for the latter designation and supra footnote 1477 for the former. 1482 Cass. civ. 1ère, 6 April 2011 (No. 369 – 09-66.486), Gaz. Pal. (2011), Rec., p. 1181; on the same day, judgments Nos. 370 (10-19.053) and 371 (09-17.130) were handed down; for a more recent contrary opinion see Cour d’appel Rennes, 21 February 2012, with annotation by Astrid Marais, JCP, éd. gén., 2012, 593. 1483 See Article IV, para. 1, of the United States Constitution. 1484 For an interesting comparative assessment see Daniel Gruenbaum, “Foreign Surrogate Motherhood: Mater Semper Certa Erat”, Am. J. Comp. L. 60 (2012), 475-505; a survey from a British perspective is given by Katarina Trimmings and Paul Beaumont, “International Surrogacy Arrangements: An Urgent Need for Legal Regulation at the International Level”, Journ. Priv. Int. L. 7 (2011), 627-647 at pp. 630-633 referring to the High Court decision in the matter X & Y (Foreign Surrogacy), [2008] EWHC 3030.

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pay the price for the protection of the French ordre public. From this perspective, a contrary decision by the Austrian Constitutional Court appears to be more in line with the well-being and best interests of the child; the Court refused to enforce the prohibition, under a specific Austrian statute, of surrogate motherhood as part of the Austrian public policy.¹⁴⁸⁵ Hopefully, the treatment of the subject by the Hague Conference will clarify the costs and benefits of a treatment of the matter that is strictly confined to the perspective of a single State and its public policy.¹⁴⁸⁶ c) Other progress of medical and scientific research 711. The example of surrogacy points again to the widespread trend in the practice of States to consider their own recent legislation resulting from intense political debate as absolutely imperative regardless of the costs it may generate for the persons involved. The progress of medical and scientific research that is subsidized by substantial funds in all modern societies gives rise to social changes which apparently raise different concerns and trigger new legislation across the globe. While some countries try to accommodate these changes, others, including those which have given their support to these developments, try to preserve the social or economic status quo by means of legislation and adjudication. What has become visible in the case of surrogacy can also be expected in the future in other areas where the advancement of research gives rise to social transformation. 712. For example, the progress made in genetic diagnosis might lead to such tensions. The growing transparency of the human genome is not only beneficial for medical treatment, it also raises the question to what extent its results may be used as predictive information relevant for long-term relationships such as employment or insurance. Before concluding a contract, employers and insurers have an understandable interest in the disclosure of genetic tests concerning their employees and policyholders, while the latter will often consider this data as private. With regard to insurance in general and health and life insurance in particular, a considerable volume of legislative activity restricting or prohibiting the use of genetic data can be observed in more recent years.¹⁴⁸⁷ However, the relevant statutes usually do 1485 Austrian Verfassungsgerichtshof 14 December 2011, Recht der Medizin 2012, 104 at p. 107 with an annotation by Erwin Bernat. 1486 The Hague Conference has included surrogacy in its work programme. The Permanent Bureau has submitted a Preliminary Document, No. 11 of March 2011, to the Council. The Document is entitled “Private international law issues surrounding the status of children, including issues arising from international surrogacy arrangements” and is available on the website: http://www.hcch.network in progressgeneral affairs. See also Trimmings and Beaumont, Journ. Priv. Int. L. 7 (2011), 633 et seq. 1487 See the short remarks by Spiros Simitis, “Legal Limitations on Genetic Research and the Commercialisation of Its Results”, in Katharina Boele-Woelki and Sjef van Erp, eds. General Reports of the XVIIth Congress of the International Academy of

Chapter 4 – Imperative Norms : Protection of Foundational Principles

not deal with their spatial scope of application.¹⁴⁸⁸ Is it to be classified as a matter of contract law ? In the European Union the law applicable to insurance contracts is determined by Article 7 Rome I. Does it follow that a court in a Member State with restrictive legislation will be prepared to apply a more permissive foreign law on the matter ? This appears improbable. Once cross-border life and health insurance occurs more frequently than it does at present, it is not unlikely that in the absence of harmonization the courts in some States will try to enforce their own restrictive legislation also in this area. The trend might continue with further new areas of the law such as biotechnology law or data protection law; the clear divergence between European and US standards has already given rise to discussions on these issues at the diplomatic level. 4.

Conclusion

713. Legal analysis usually focuses on the formal properties of imperative laws, on their own scope and on their relation to general conflict rules; these aspects will be discussed in the next section. This section was meant to provide a survey of what lawmakers and courts in the various States consider as imperative norms, and to explain why they regard these norms as imperative. In the latter respect, the result is disappointing. There does not appear to be a consistent theoretical explanation of the reasons leading to the assumption that a rule or principle commands its own application irrespective of any choice-of-law rules. The collective-goods approach is consistent but not sufficient to provide the explanation sought for the whole variety of rules actually acknowledged as imperative. In considering the purportedly imperative rules emerging from State practice, one may assign them to thematic clusters, as was attempted here; but such grouping cannot replace a theoretical explanation. 714. Two observations suggest that a satisfactory theoretical explanation is unlikely to even exist. First, the imperative character of a norm is apparently Comparative Law, Utrecht, 2077, pp. 17-30 at pp. 29- 30, and the broader comparative investigation by the Max Planck Institute for Comparative and Private International Law, see “Genomanalyse und Privatversicherung, Stellungnahme des Max-Planck-Instituts für ausländisches und internationales Privatrecht”, RabelsZ 66 (2002), 116-39 at pp. 118-129, which is however outdated in part; for France see Florence Bellivier, Laurence Brunet, Marie-Angèle Hermitte, Cathérine LabrusseRiou and Christine Noiville, “Les limitations légales de la recherche génétique et de la commercialisation de ses résultats: Le droit français”, Rev. int. dr. comp. (2006), 275-318 at pp. 295-296; for Sweden see the Lag on genetisk integritet of 18 May 2006, SFS 2006:351, 2 § of Chapter 2; for Germany see § 18, Gendiagnostikgesetz of 31 July 2009, BGBl. 2009, I-2529. 1488 See however § 10147 (c) of the California Insurance Code which restricts the respective prohibitions to insurers licensed to transact life-assurance or disability income insurance “in this state”.

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subject to change over time:¹⁴⁸⁹ when applying liberal divorce laws of foreign countries, the practice of courts has become more and more lenient as the principle of the basic indissolubility of marriage has vanished in their own law. Second, it may even occur that the opposite of a rule once considered as imperative becomes a fundamental principle whose application is now considered as imperative although foreign law would govern otherwise. It should be recalled that in the middle of the nineteenth century Savigny indicated as among the very few “statutes of a strict and positive, mandatory nature”, the restrictions on the acquisition of property by Jews, thus rules of a clearly discriminatory character.¹⁴⁹⁰ In our present society, numerous forms of discrimination are explicitly banned by the law, and some of the pertinent conflict rules explicitly exclude the application of a foreign law that is not in accord with the principle of equal treatment.¹⁴⁹¹ Thus, the general approval, at a given point in time, of a principle as foundational is often not more than the result of a limited perception of change that occurred in legal history, a mere snapshot of the then-existing law. The changing and “positive” nature of imperative rules has to be accepted; it is the result of altering public views and political discourse. What this means for the legal assessment will have to be discussed in the next section. Section 2: The Legal Framework of Unilateral Adjudication – Imperative Norms 1.

Public Policy and Overriding Mandatory Provisions

a) Positive and negative public policy 715. The traditional conceptual vehicle for the unilateral enforcement of imperative norms has been the ordre public or public policy. In scholarly writings, two doctrinal comprehensions can be distinguished, the positive and the negative understanding.¹⁴⁹² In its positive function, public policy embraces all legal rules of the forum State, whose application is not conditioned by the operation of bilateral conflict rules referring to the law of the forum State; rather, these rules, because of their foundational significance for the legal order of the forum State, require application in all cases or in accordance with an apposite unilateral conflict rule. Thus, public policy in its positive sense establishes connecting factors for the application of the law of the forum State; it thereby adopts a position alongside the bilateral conflict rules. It is equivalent to them, confined however to a unilateral determination of the scope of the lex fori. 1489 See Bureau and Muir Watt, No. 467, at p. 463: “What was shocking yesterday is not necessarily shocking today …” (Author’s translation). 1490 Savigny, pp. 36-37 (§ 49). 1491 See for example Article 10 of the Rome III Regulation, cited supra footnote 1475. 1492 Lagarde, IECL, Vol. 3, Chap. 11, Sect. 2.

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716. The negative understanding considers public policy as a correction of the result brought about by the operation of a bilateral conflict rule. Thus, it presupposes the latter and gives rise to a four-step analysis: first, the application of the bilateral conflict rule which refers to the law of a foreign State; second, the assessment of the foreign law and its significance for the decision of the pending case; third, the comparison of the foreign law and its results with a hypothetical decision taken, upon the facts of the case, under the law of the forum State for the purpose of identifying a potential divergence; fourth, an evaluation whether the fundamental character of the divergence compels the rejection of the foreign law. The negative version of public policy has been codified in most of the modern statutes on private international law.¹⁴⁹³ It is incomplete in the sense that it does not indicate the legal rules which fill the gap accruing from the operation of public policy. In practice, the difference between the two versions is less important than it might be presumed since courts which reject foreign rules as violative of public policy will often apply the law of the forum State instead. b) Lois de police and overriding mandatory provisions 717. Alongside the reservation of public policy in Article 6, the French Civil Code contains as was already present in its initial version, a specific rule providing for the territorial application of the “lois de police et de sûreté,” see Article 3 paragraph 1. For the present reader this term is apt to provoke misapprehension since our understanding of “police” is reduced to the preservation of public safety by a department of the executive. However, at the time the French Civil Code was drafted and discussed, the understanding of police was much wider and related to public administration or even the organization of public life, an understanding which also corresponded to its historical roots in the Greek word of politeia.¹⁴⁹⁴ The unilateral French conflict 1493 See for the European Union Articles 21, Rome I, 26, Rome II, and 12, Rome III; the wording of these rules can be traced back to numerous post-World War II Hague Conventions, see for example Article 7 of the Convention on the Conflicts of Laws relating to the Form of Testamentary Dispositions, done on 5 October 1961, in Hague Conference on Private International Law, ed., Collection of Conventions 19512009, The Hague, 2009, p. 52; Article 17 of the Convention on the Law Applicable to Agency, done on 14 March 1978, ibid., p. 268; similar provisions can be found in national codifications outside the European Union, for example in Switzerland in Article 17 of the Law of 1987; in Ukraine in Article 12 of the Law of 2005; in Venezuela in Article 8 of the Law of 1998; and in the People’s Republic of China in Article 5 of the Law of 2010. 1494 See Phocion Francescakis, “Quelques précisions sur les ‘lois d’application immédiate’ et leurs rapports avec les règles de conflit de lois”, Rev. crit. dr. int. pr. 55 (1966), 1-18, see in particular footnote 1 at p. 13; for the historical transformation of the concept of police see Michael Stolleis, ed., Policey im Europa der frühen Neuzeit, Frankfurt am Main, 1996, with numerous national reports; for France see in particular Bernard Durand, La notion de police en France du XVIième au XVIIIième

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rule has inspired numerous provisions in European¹⁴⁹⁵ and international¹⁴⁹⁶ instruments as well as national codifications.¹⁴⁹⁷ While Article 3, paragraph 1 of the Civil Code affirmatively orders the territorial application of the “lois de police”, the latter provisions only reserve the application of what are now called overriding mandatory provisions of the lex fori provided that they claim application irrespective of the law otherwise applicable. Thus, the precise delineation of their respective scope of application is left to those other provisions. At the same time, some modern texts have expressed a limited willingness of the various legislatures to give effect to the overriding mandatory provisions of a law that forms part of neither the lex fori nor the lex causae.¹⁴⁹⁸ But by giving effect to foreign mandatory provisions, these rules do not implement the State’s own political objectives; therefore, these precepts will be discussed separately, see below Section 3. 2.

The Concepts Distinguished

a) According to the subject 718. What is the relation between public policy in its positive function and overriding mandatory provisions, and in what respect may they be distinguished ? A first possible distinction might pertain to the areas of law siècle, pp. 163-212, especially pp. 163-171; at p. 165 the author criticizes as exaggerated the famous jurisconsult Domat who, in the late eighteenth century, wrote that police “has a common foundation with the order of God” and that “true religion and good police are always united”. 1495 See Article 7, para. 2, of the Rome Convention which has been replaced in most Member States by Article 9, para. 2, Rome I; see also Article 16, Rome II. 1496 See Article 16, para. 1, of the Convention on the Law Applicable to Trusts and on Their Recognition, done on 1 July 1985, in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, p. 330; Article 17 of the Convention on the Law Applicable to Contracts for the International Sale of Goods, done on 22 December 1986, ibid., p. 344; Article 11, para. 2, of the Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary, done on 5 July 2006, ibid., p. 454. 1497 See for example Article 18 of the Swiss Law of 1987; § 7 of the Korean Law of 2001; Article 6 of the Turkish Law of 2007; Article 38 of the Law of Tunisia of 1998; Article 14, para. 1, of the Law of Ukraine of 2005; Article 10 of the Law of Venezuela of 1998. It is noteworthy that Article 4 of the 2010 Law of the People’s Republic of China orders all mandatory rules of Chinese law involving foreign elements to be applied directly; although the wording does not confi ne this reservation to laws which have to be applied irrespective of the law otherwise applicable and therefore suggests an enforcement of all mandatory laws, Chinese commentators consider Article 4 as referring to overriding mandatory provisions, see Weizuo Chen, YBPIL 12 (2010), 36; Ruiting Qin, “Eingriffsnormen im Recht der Volksrepublik China und das neue chinesische IPR-Gesetz”, IPRax (2011), 603-609 at p. 604. 1498 See in respect of embargoes the discussion supra in paras. 583 et seq. with the text of Article 9, para. 3, Rome I, being cited in para. 584.

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covered: it is noteworthy that reservations in favour of the forum State’s overriding mandatory provisions can only be found in instruments relating to commercial law, particularly contract law and the law of secured transactions.¹⁴⁹⁹ On the other hand, the law of personal status appears to be the domain of the public policy reservation. The Hague Conventions on matters of family law or succession and the Rome III Regulation of the European Union on divorce, while all containing a general public policy reservation, do not deal with overriding mandatory provisions. Are these provisions then characteristic of commercial law exclusively ? This assumption is difficult to reconcile with the national codifications of private international law. Where they give priority to overriding mandatory provisions, they do not contain such a limitation of the subject matter and regulate the issue in the respective general parts which are basically applicable to all areas.¹⁵⁰⁰ b) According to the general or specific style of regulation 719. A second distinction could be inferred from the designation of the ordre public as a general order of the State or society or of an area of the law, whereas the legislative reference to overriding mandatory provisions might suggest that only specific rules and regulations are intended to be given priority over the general conflict rules. But this criterion does not hold true in all cases either, as can be seen in the case of competition law. The German Act against Restrictions of Competition deals in a very comprehensive way with the administrative procedure of public enforcement and with the substantive law of competition, including sanctions such as fines and remedies under private law. The whole Act (and not only single provisions) applies in accordance with the effects doctrine;¹⁵⁰¹ despite this all-embracing nature, competition law has traditionally been regarded as a prime example of overriding mandatory provisions.¹⁵⁰² Thus, even a comprehensive regulation of a whole area of the law may qualify as overriding mandatory provisions. On the other hand, the general reservation of ordre public appears to gradually disintegrate into a number of more specific reservations in more recent private international law statutes;¹⁵⁰³ they explicitly ensure certain rights such 1499 See the instruments cited supra footnotes 1495 and 1496. 1500 See supra footnote 1497. 1501 See § 130, para. 2, of the German Act against Restraints of Competition, cited supra footnote .226. 1502 See the report of Giuliano and Lagarde on the Rome Convention, OJ 1980 C 282/1 – 50 at p. 28, left column. 1503 For the German reform of 1986 this has been enunciated, for example, by Kropholler, pp. 259-260; for the Belgian code of 2004 in an analogous sense Rigaux and Fallon, para. 7.54 at p. 325; for the Swiss Law of 1987 see Vischer in Heini, Keller, Siehr, Vischer and Volken, Art. 17, paras. 25-27 at pp. 16-17; a similar specification can also be ascertained in the Rome III Regulation of the European Union: the right to divorce and the right of equal access to divorce is the object of a special public policy provision in Article 10, and Article 13 permits Member States which reject divorce

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as the right to divorce or the exclusive power of State registries to celebrate a marriage in a given country. In this respect a convergence of public policy and overriding mandatory provisions can be ascertained. c) According to the scope of application 720. A third basis for a distinction could be the existence or absence of text elements in a provision indicating its territorial scope of application. But again, this is a doubtful distinction. Overriding mandatory provisions do not necessarily contain an explicit regulation of their own scope, see below paragraph 722 et seq. In this respect they are similar to public policy reservations, which usually do not make reference to a territorial or personal connection of the case with the forum State, referring exclusively to the discrepancy between the substantive solutions of the foreign law applicable in accordance with the conflict rules of the forum and the substantive principles of the lex fori. This does not mean, however, that such a territorial or personal connection of the pending case with the legal order of the forum is irrelevant; where no connection exists, the court will often apply the foreign law, in particular where an incidental question is at issue, although from an abstract perspective the foreign law may be incompatible with the basic principles of the law of the forum State. 721. Assume, for example, that a Moroccan husband habitually residing in Morocco together with his two Moroccan wives owns a bank account in Paris and dies in Morocco, where he has spent his whole life; a French court called upon to decide on the claims of each of the two widows to the bank account is unlikely to base its decision on the invalidity, arising from a violation of the French ordre public, of the second, polygamous marriage. Or suppose that an Egyptian husband living with his Egyptian wife in Egypt has divorced her by unilateral talaq in that country before moving to Europe, where some years later he wants to remarry with another woman; would the registry of civil status refuse to celebrate the marriage because the repudiation of the first wife cannot be recognized and the first marriage must consequently be regarded as subsisting in Europe, thereby rendering the second marriage a forbidden polygamous union ?¹⁵⁰⁴ Both hypothetical cases point to the need to maintain even the principle of indissolubility of marriage as part of their ordre public. See also the comparative observations by Lagarde, IECL, Vol. 3, Chap. 11, Sects. 29 et seq. 1504 Article 57, § 2, of the Belgian Code of 2004 which explicitly deals with the recognition of a unilateral repudiation establishes five conditions: (1) Public registration of the divorce in the foreign State; (2) no spouse was a national of a State rejecting repudiation; (3) no spouse was habitually resident in such a State; (4) the former wife has accepted the divorce; (5) none of the general grounds for non-recognition of foreign judgments applies. It should be noted that the requirement of the wife’s acceptance will lead to the perpetuation of failed marriages which may also be detrimental to third persons in Belgium. For example, maintenance creditors living in Belgium may receive less support because of the subsisting maintenance obligation arising

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for some loose but tangible connection of the facts with the forum State to justify the latter’s objection against the foreign law. The link subsequently established by the action brought in a court of that State is generally not in itself sufficient. Otherwise, the public policy reservation would be a permanent expression of chauvinistic reprobation and perhaps even disdain by one legal order for certain legal institutions and the underlying culture of other countries; this would be incompatible with the basis of the international community and could, at most, be accepted in the case of an infringement of human rights.¹⁵⁰⁵ Absent a meaningful connection of the family relations in question with Europe, no violation of the ordre public of the respective European country can be ascertained.¹⁵⁰⁶ Thus, public policy should not be conceived of as a body of principles having worldwide application irrespective of any connection with the forum State; it is subject to some territorial and/or personal limitations. The intensity of the links required differs in respect of the various areas of the law and principles in question. The specific link needed is not even known in all cases and has to be discovered over time. It is against this backdrop that the public policy reservation has been designated as the “still undiscovered and unfinished part of private international law.”¹⁵⁰⁷ Overriding mandatory provisions equipped with their own

from the previous marriage which has to be taken into account when the amount of support owed to the Belgian maintenance creditors is established. To the extent that the amount of social security payments in Belgium depends on the civil status of the recipient, the non-recognition of the Egyptian talaq might also engender losses for the Belgian social security system. 1505 See infra, paras. 732 et seq. 1506 The doctrinal debate on the matter is still going on in France, but there is jurisprudence confirming the importance of some territorial or personal connection of the case with France, see Bureau and Muir Watt, Nos. 462-463, at pp. 460-461 with further references; see also Lagarde, IECL, Vol. 3, Chap. 11, Sect. 3, at p. 5 referring to the German antecedents of this requirement of a so-called Inlandsbeziehung. For Germany it is sufficient to refer to Christian von Bar and Peter Mankowski, Internationales Privatrecht, Vol. 1, 2nd ed., Munich, 2003, paras. 263 and 264 at p. 717. A telling example is furnished by a judgment of the Federal Tax Court, Bundesfinanzhof, 6 December 1985, IPRspr. (1985), No. 61: a Moroccan husband lived with his second Moroccan wife in Germany, while his first wife lived in Morocco together with three children; while the tax authority and the lower court had refused the husband tax privileges reserved for married people because of the violation of German public policy by, and the consequential invalidity of, the second marriage in Germany, the Federal Tax Court granted those privileges, pointing to the fact that while the validity of the marriage had to be decided under the pertinent rules of civil law including private international law, i.e. by the law of Morocco, the husband was living in Germany with a single spouse only which could not violate the German ordre public. 1507 Franz Kahn, “Die Lehre vom ordre public (Prohibitivgesetze)”, in id., Abhandlungen zum Internationalen Privatrecht, Munich, 1928, pp. 161-246 at p. 251.

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scope rule might then be regarded as results of a discovery and as spin-offs of the general public policy reservation. d) According to the written or unwritten nature 722. A fourth possible distinction draws from the assumption that, contrary to the concept of overriding mandatory provisions, the ordre public might encompass, alongside the written precepts laid down in statutes and case law, also unwritten principles of a foundational importance for the respective legal system. From a historical perspective, this assumption accurately reflects the gradual densification of legal orders occasioned by the growth of judge-made law and the progressive increase in legislation. Initially, many principles were indeed unwritten and it was only their infringement by foreign law which made lawyers aware of them. But at the present stage of legal development of many legal systems there is hardly any principle left which cannot be traced back to some legislative act or upper court decision; in this sense, nearly all of them are rooted in written law. Since the codification movement has laid claim to large parts of public international law, even most of the universally recognized principles which some States consider as part of their own public policy¹⁵⁰⁸ are no longer unwritten. Thus, in the sophisticated legal orders of the present, the public policy reservation, where referring to unwritten principles, is often rather a pretext for a court that does not wish to apply the foreign law designated by the pertinent conflict rule. As a consequence, the traditional distinction of ordre public and overriding mandatory provisions becomes dubious and is fading away; in reality, both serve the same goal of unilaterally imposing certain values and principles of the forum State.¹⁵⁰⁹ 1508 See for example in Italy the assessment (which at closer analysis is not more than an obiter dictum) by Cass. sezioni unite, 8 January 1981, No. 189, Riv. dir. int. priv. proc. 17 (1981), 787 at p. 790, referring to numerous international conventions and declarations of international bodies that allegedly form part of the Italian “ordine pubblico internazionale”. See also Ballarino, p. 306; Erik Jayme, Methoden der Konkretisierung des ordre public im Internationalen Privatrecht, Heidelberg, 1989, pp. 5153, referring to the judgment of the German Federal Court, BGH, 22 June 1972, NJW (1972), 1575 at p. 1576: the court struck down a marine insurance contract governed by German law as void for violation of good morals under § 138 of the Civil Code, invoking a UNESCO Convention for the protection of national cultural heritage which however had not yet been ratified by Germany. The court explicitly referred to the necessity for all States to protect universal standards recognized by the international community; it would likely have reached the same result with the same arguments specifying the content of German public policy if the contract had been governed by foreign law. 1509 Already Francescakis, Rev. crit. dr. int. pr. 55 (1966), 4, noted: “Il y a donc quelque chose de foncièrement commun dans la solution, écrite, de l’article 3, alinéa 1er, du Code civil, et la solution, jurisprudentielle, qui s’appuie sur la notion de lois d’ordre public.” In a similar sense see Rigaux and Fallon, No. 7.42 at p. 313, who observe a “phénomène de symbiose”; Jayme, Methoden der Konkretisierung, pp. 28 et seq.;

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3.

Identification of Overriding Provisions and Principles

a) Explicit scope rules 723. When it comes to the application of imperative norms of the lex fori, a court is of course bound by explicit legislation. There are numerous statutes which determine their own scope by apposite rules. Article 3, paragraph 1 of the French Civil Code,¹⁵¹⁰ the scope rule of the German Act against Restrictions of Competition,¹⁵¹¹ and the definitions of the US Fair Labor Standards Act¹⁵¹² may be recalled in this context. Even where such an explicit scope rule exists, it may sometimes need clarification: the reference to the application of the lois de police to all persons living in the territory as laid down in Article 3 paragraph 1 of the French Civil Code leaves plenty of doubt as to which elements of a complex fact situation must be located in the territory. Moreover, it may also be doubtful whether such an explicit scope rule supersedes, as an overriding mandatory provision, the pertinent conflict rules or whether it is subject to their operation. An example is provided by the German provisions of the Commercial Code in respect of commercial agents which implement the European Directive on the matter.¹⁵¹³ While the application of these rules governing a specific type of contract is basically subject to the general rules of international contract law, § 92 c provides a specific scope rule governing their mandatory character: “1. If the activity of the commercial agent under his contract with the principal is not to be carried out within the territory of the European Union or the other contracting states of the Convention on the European Economic Area, then all provisions of this chapter may be modified by agreement.”

One could have interpreted this provision e contrario in the sense that all provisions of the chapter are mandatory where the commercial agent carries out his or her profession within the European Union (or within Germany, as the provision referred only to the exercise of the profession outside Germany up to the implementation of the Directive). From a perspective of statutory construction as espoused by US courts,¹⁵¹⁴ this would even have been an obvious solution.

1510 1511 1512 1513 1514

Kegel and Schurig, p. 516, who consider overriding mandatory provisions and the positive version of public policy as being one and the same. Article 11 of the Draft Hague Principles on Choice of Law in International Contracts, supra at footnote 375, deals with both in one and the same provision. See supra, para. 717. See supra footnote 226. See supra footnote 1386. See supra footnote footnotes 337 and 1468; in Germany the Directive has been implemented in §§ 84-92 c of the Commercial Code. See supra, para. 661.

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724. However, the Federal Court took a different view: according to a judgment from the 1960s, § 92 c is conditional upon the application of German law as the proper law of the contract; it thus permits German principals to select German law as the law governing the contract, on the one side, and to derogate from its minimum standards, on the other, when they employ a commercial agent outside the EU. For commercial agents carrying out their profession in Germany, it followed that they were not protected by the binding rules of the Commercial Code if they had agreed that their contract with a foreign principal was subject to foreign law.¹⁵¹⁵ As reported above, the European Court of Justice overruled this case law in its Ingmar decision, stating that the exercise of the agent’s activities within the Union entails the mandatory application of the Directive.¹⁵¹⁶ It is true that the two judgments did not deal with the same text. But each of the two courts could have more easily attained the opposite result of what they actually decided. The absence of a scope rule in the European Directive could have induced the Court of Justice to subject the application of the Directive – or rather, of the implementing provisions of Member State law – to the operation of conflict rules, while the explicit scope rule of the German Commercial Code somehow suggested that the legislature had intended to delineate the scope of the agency provisions independent of choice-of-law rules. Whatever the correct result may be, it can be concluded that even the existence of a scope rule does not unambiguously indicate an imperative provision. But it may be considered as a strong indicator and confer a rebuttable presumption of the overriding character of the respective provisions.¹⁵¹⁷ b) The scope in the absence of scope rules 725. The classification of principles and rules as imperative norms is even more complicated in the absence of any explicit scope rule. Courts might nevertheless bestow an imperative character on certain rules and principles of their own legal order as a result of an overall assessment of these provisions in comparison with the foreign law otherwise applicable. Regardless of whether the analysis aims at the specification of public policy or at the assessment of the overriding character of a mandatory provision, several questions will have to be answered.¹⁵¹⁸ (1) What is the purpose of the foreign law in question, and is there a corresponding purpose underlying domestic law ? (2) What and how essential is the purpose of the corresponding domestic rules ? (3) Is the foreign law or its domestic counterpart more modern 1515 BGH, 30 January 1961, IPRspr. (1960/61), No. 39 b. 1516 See supra, para. 705. 1517 In this sense Junker, pp. 291-292, providing further examples from German employment law. 1518 With regard to public policy, Jayme, Methoden der Konkretisierung, pp. 41-47, has identified five steps of the analysis; see also Lagarde, IECL, Vol. 3, Chap. 11, Sects. 52 et seq.

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in light of the comparative development of the respective area of the law ? (4) How close is the personal or spatial link of the facts of the pending case with the legal sphere of the forum State ? Where the overriding character of a mandatory provision of the lex fori is at issue, strictly speaking only the purpose of this provision and the relative proximity between the case and the forum State have to be investigated.¹⁵¹⁹ But in the absence of an explicit scope rule, the relative weight that a mandatory law of the forum State has in comparison with the purpose of the foreign law will always play a significant role. When determining this relative weight, the judge will usually take into account whether the respective provisions of the lex causae and the lex fori are outdated or the spearhead of the comparative legal development in the area. 726. The questions listed above which help to specify single stages of the enquiry recall the so-called choice-influencing factors espoused by the governmental interest analysis in the United States.¹⁵²⁰ Yet, there is a clear difference: while the American Restatement Second makes use of those factors within the considerations establishing the basic conflict rule for the designation of the applicable law, their role is much more confined in the present context. In fact, they only serve to determine whether an exception from the law otherwise applicable should be made. In both contexts, however, the list elucidates the inherently political character of the court’s task. This character has already been ascertained in the context of section 1 above, where the search for a consistent theoretical explanation of the practice of courts and legislatures remained futile.¹⁵²¹ It is fostered by the absence of legal guidelines for the determination of the purpose of a statute. Moreover, political considerations also play a role in the assessment of the minimum connection a fact situation must have with the forum State to justify the assumption that the intended effect of a statute or principle of the lex fori will be curtailed or at least affected by the application of foreign law and the nonapplication of the lex fori law or principle to the pending case.

1519 See the specific reference to the purpose of the mandatory provisions of the lex fori in Article 18 of the Swiss Law of 1987 and in § 7 of the Korean Law of 2001; even more clearly, Article 6 of the Turkish Law of 2007 refers to both the purpose and the scope of the Turkish mandatory law. 1520 See Rest. Second, Conflict of Laws, § 6, para. 2; this provision does not refer to the relation between the facts of the case and the States involved; but it emerges from the comments that the intensity of this relation is relevant for the interest of the State in having its law applied. On the ambiguity between the quest for the law of the “most significant relationship” pursued by many provisions of the Restatement Second, and the governmental interests analysis see Hay, Borchers and Symeonides, pp. 64-65. 1521 See supra, paras. 713-714.

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c) The political character of the task 727. The borderline between law and politics is not very clear. But the less guidelines the law provides for a decision the more it can be said to be subject to political considerations. Both points mentioned above – the purpose and the prediction of effects of a statute – leave wide margins of discretion to the judge. The purpose of a law (or the governmental interest in its application) is usually not exhaustively explained by the legislative materials drafted at the time of its enactment. Numerous are the statutes whose purposes have changed or, rather, have been reinterpreted over time. For example, the Great Depression ensuing in the years following 1929 triggered the adoption of a wide array of regulatory laws in many countries; some of them restricted competition in the field of transport. While these laws, according to the policies prevailing at the time of their adoption, were meant to protect the railroad companies and small trucking firms from fierce competition in shrinking markets, they were said to serve road safety or the protection of the environment 50 years later when deregulation was in the air. Sometimes, the change of purpose resulting from the interpretation of statutes entails consequences for their scope of application. Even where the initial purpose of a law does not change, it is very often unclear whether its application to cross-border cases or out-of-State cases furthers its achievement, and how close the relation between the case and the forum State has to be in order to be relevant for the achievement of that purpose. 728. When deciding on these and other points, courts can avail themselves of a certain discretion; instead of legal precepts, their decisions will be much more influenced by a societal consensus or major currents in public opinion. In this sense, on these matters the task of the courts is a political one; they have to fill the gap left by politicians and the legislature. In performing this task, they should, however, also be aware of the fundamental disturbance that the operation of public policy and overriding mandatory provisions generates for the operation of private international law and the expectations of the private actors who rely on its confl ict rules. This disturbance is growing as frontiers become more permeable; it is particularly strong in open societies and should be avoided or reduced wherever possible. d) Review in federal entities 729. Under the conditions of a federal organization where at least some powers are vested in a central body, the need for a coordination of the decentralized units has always been very clearly perceived. Thus, the American Restatement Second on the Conflict of Laws elaborated under the auspices of the American Law Institute, an institution committed to legal certainty in a multi-jurisdictional country, lists among the choice-influencing factors those considerations which rather tend to restrict the unilateral enforcement of a State’s local policy, namely “the needs of the interstate and international systems, … the protection of justified expectations, … certainty,

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predictability and uniformity of result, …”.¹⁵²² The effort made for the restriction of a unilateral enforcement of local policies is further underpinned by the explicit reference to “constitutional restrictions” which limit courts in following statutory directives of their own States on choice of law.¹⁵²³ It should, however, be noted that the US Supreme Court has largely abandoned its former attempts to draw limits on the expansive unilateral determination of the scope of State laws;¹⁵²⁴ scrutiny is now reduced to a review in respect of any arbitrariness or fundamental unfairness of the choice.¹⁵²⁵ The constitutional restrictions of the choice-of-law process have therefore largely vanished in the United States. 730. In the European Union, some judgments indicate that the European Court of Justice is principally willing to make use of (i) the basic freedoms ensured by the EU Treaty, (ii) Union citizenship and perhaps, in the future, (iii) the Charter of Fundamental Rights in order to subject an excessive application of national law to a supranational review. A line of cases restricting the application of Member State law with regard to the foreign incorporation and other international activities of commercial companies has been reported above.¹⁵²⁶ With regard to the family names of children the Court also highlighted the tensions that may arise between the law of individual Member States and the rights flowing from citizenship in the European Union.¹⁵²⁷ This case law could provide a model for the review of overly expansive enforcement, by Member States, of their public policy and overriding mandatory provisions. It has been argued above in the context of employment law that the Court of Justice, in accordance with a long line of decisions on matters of economic regulation by Member States, should make use of the principle of proportionality in this context.¹⁵²⁸ e) Self-containment outside federal entities 731. Outside federal entities, such a supranational judicial review is unrealistic. There is currently no court that would have jurisdiction to carry out that task. It is up to the national courts to practice self-containment. The national courts are called upon to take into account the need of individuals for legal certainty, a notion which is exposed to much greater risks in open societies than it ever was in the closed societies of the past. Consistent with what has been outlined above,¹⁵²⁹ they should avail themselves of the 1522 Rest. Second, Confl ict of Laws, § 6, para. 2 (a), (d) and (f). 1523 Rest. Second, Conflict of Laws, § 6, para. 1. 1524 Allstate Insurance Co. v. Hague, 449 US 302 (1981); affirmed by Franchise Tax Board v. Hyatt, 538 US 488 at 490 (2003). 1525 Ibid., at pp. 312-313. 1526 See supra, paras. 519 et seq. 1527 ECJ, 2 October 2003, Case C-148/02 (García Avello v. Belgian State), [2003] ECR I-11613; 14 October 2008, Case C-353/06 (Grunkin and Paul), [2008] ECR I-7639. 1528 See supra, paras. 684 et seq. 1529 See supra, para. 725.

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insights furnished by comparative law to avoid a premature invocation of either the ordre public or overriding mandatory provisions. Three enquiries should be made by the courts in particular: (1) Does the result generated by the application of foreign law substantially differ from the one flowing from the lex fori ? (2) Does the international trend emerging from a comparative investigation of legal developments provide support to the foreign lex causae or to the lex fori ? (3) Is an international consensus emerging from the rulemaking activities of the various bodies of the international community ? 4.

International Standards: Human Rights and Fundamental Rights

a) Human rights and the conflict of laws 732. Throughout the last 40 or 50 years, fundamental rights and human rights have gained a particular significance as overriding legal provisions in many countries and in all areas of the law. It is usual to distinguish fundamental rights flowing from national constitutions as opposed to human rights, the latter being laid down in the non-binding Universal Declaration of Human Rights¹⁵³⁰ as well as several binding regional conventions, particularly the European Convention for the Protection of Human Rights and Fundamental Freedoms.¹⁵³¹ Fundamental rights and human rights have much in common: just like the fundamental rights of national constitutions, human rights while being conceived of in a global perspective, are not universally recognized; there are important countries which do not bestow any binding force on them. Where fundamental rights or human rights are in force, one or the other will usually take priority over the rest of the national legal system. This may be put into effect by a ranking within the legal system or by the priority granted to international conventions, including those on human rights, over the domestic law. Both fundamental and human rights were originally intended to protect the individual against abuses of State power, mainly as exercized by the executive branch but also by the courts. With regard to private law, this explains their particular significance in civil procedure, including the areas of jurisdiction and the recognition of foreign judgments.¹⁵³² But since basic rights and human rights encapsulate essential

1530 See supra footnote 442. 1531 See supra footnotes 154 and 160. 1532 Patrick Kinsch, “Droits de l’homme, droits fondamentaux et droit international privé”, Recueil des cours 318 (2005), 9-331 at pp. 37-110; J. J.Fawcett, “The Impact of Article 6 (1) of the ECHR on Private International Law”, Journ. Priv. Int. L. 56 (2007), 1-48 at pp. 6-20; see also the symposium “Europäische Menschenrechtskonvention und Europäisches Privatrecht”, RabelsZ 63 (1999), 409-748, with contributions from Jürgen Basedow, Julia Iliopoulos-Strangas, Gerhard Dannemann, Thomas Giegerich, Georg Nolte, Rainer Kulms, Th ilo Marauhn, Matthias Hartwig, Achim Bröthel, Wolfgang Peukert, Reinhard Ellger; the national reports by Frédérique Ferrand (France), Gerard-René de Groot (Netherlands), Walter Pintens (Belgium) and

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values of a society, they also produce some effect in private law relations and may also become relevant for the selection of the applicable law. 733. With regard to choice of law, basic rights and human rights can have a dual impact. First, the conflict rules of the forum may be challenged for an infringement of those rights. For example, the traditional designation of the law of the husband’s citizenship to matrimonial matters in the case of couples of mixed nationality¹⁵³³ has been declared discriminatory and unconstitutional in Germany;¹⁵³⁴ that opinion gave rise to new legislation on private international law in 1986 which replaced the old conflict rule with a cascade of connections strictly respecting the equal treatment of the sexes.¹⁵³⁵ But this is just an example of conflicts between laws of a different rank within one and the same legal system; it is not part of the current enquiry.¹⁵³⁶ 734. What matters in the present context is the second application: the role of basic rights and human rights as written evidence of the fundamental values of society which do not admit the application of divergent foreign laws. In a recent comparative investigation, Kinsch has very ably shown that the courts in a number of countries have always made use of the public policy reservation in order to defend basic rights and human rights; they did that even in countries where fundamental rights were not codified.¹⁵³⁷ Put in other words, the codification of basic rights at the national level is tantamount to a specification of public policy for certain areas of the law. In a similar vein, the ratification by such a country of an international convention on human rights has in a certain sense the effect of specifying the ordre public of that State by the international standards laid down in that instrument. In this sense, the explicit recognition of such values in a constitution, bill of rights or international convention is essentially of a declaratory nature.

1533 1534

1535 1536 1537

Marianne Roth (Austria) as well as the report by Peukert discuss the impact of the Human Rights Convention on issues of procedure. This solution did not only prevail in Germany but also in the “old” Hague Conventions, see Article 5 of the Effects of Marriage Convention of 1905. See German Constitutional Court, BVerfG, 22 February 1983, BVerfGE 63, 181 = IPRspr. (1983), No. 56: Infringement of Article 3, para. 2, of the Fundamental Law (Grundgesetz), see from an even earlier date, the celebrated Spaniards opinion of 4 May 1971, BVerfGE 31, 58 = IPRspr. (1971), No. 39. For a similar discrimination on grounds of gender the European Court of Human Rights rebuked a Swiss conflict rule in ECHR, 9 November 2010, Case 664/06 (Losonci Rose and Rose v. Switzerland); see Patrick Kinsch, “Private International Law Topics before the Court of Human Rights”, YBPIL 13 (2011), 37-49 at p. 41. Gesetz zur Neuregelung des internationalen Privatrechts of 25 July 1986, BGBl. 1986, I-1142 amending the Introductory Law of the Civil Code. See for a comparative discussion Patrick Kinsch, Recueil des cours 318 (2005), pp. 110-163. See Kinsch, Recueil des cours 318 (2005), pp. 171-192, referring in particular to the French jurisprudence of the Th ird Republic (1875-1940) at pp. 173 et seq.

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b) Connections with the forum State 735. It does not necessarily follow that the minimum link between the facts of a case with the forum State that is required for the operation of public policy is also needed for the enforcement of basic rights and human rights as against a foreign lex causae. The fundamental significance of those rights certainly favours a very broad and perhaps entirely unrestricted protection even in the absence of a connection with the forum State.¹⁵³⁸ Yet, even in this context, it must be acknowledged that certain legal situations may have been created and finalized in a foreign country where the fundamental right in question is not respected by the local law. Even in the case of human rights it would be unrealistic and euphemistic to assume their worldwide acceptance; conflicts may arise at this level, too. Thus, even the enforcement of basic rights and human rights vis-à-vis the application of a foreign law cannot be advocated without any exception, and the consequences of such an enforcement should be mitigated.¹⁵³⁹ Here again, the specification of the link between the facts of the case and the forum State in terms of both a local and personal connection as well as a relevant timeframe is an extremely complex matter and should be left to a case-by-case analysis. 736. For the outcome of that case-by-case analysis some considerations should be taken into account. It may be relevant whether the alleged infringement concerns a principal issue of the case or an incidental question; in the latter case, the respect for or the application of foreign law affects the principal issue, in particular the status of the persons involved to a much lesser degree. It also matters whether the relevant issue has already been the object of some kind of legal determination in a foreign country. Another relevant consideration should be the common or exceptional character of the foreign legal rule which is claimed to infringe a human right; this might require a comparative and perhaps also a historical investigation by the court. The more a foreign law deviates from the standards espoused in the respective part of the world at the time in question, the less is the need for a connection with the forum State in order to justify the invocation of human rights as a component of public policy. As compared with this cautious enquiry, an abstract specification in the statute (“This law forms part of public policy”) or, even more so, an order of unrestricted application to all cases brought to

1538 See the analysis of the case law of the European Court on Human Rights by Kinsch, Recueil des cours 318 (2005), pp. 231-237; see also Trevor Hartley, “Mandatory Rules in International Contracts: The Common Law Approach”, Recueil des cours 266 (1998), 337-426 at pp. 350-351, and Cheshire, North and Fawcett, p. 145, both referring to the rejection by an English court of the Nazi legislation discriminating against Jews, Oppenheimer v. Cattermole, [1976] AC 249 (HL). For a similar decision in the United States see David v. Veitscher Magnesitwerke Actien Gesellschaft, 35 A. 2d 346 (Pa. 1944). 1539 Kinsch, Recueil des cours 318 (2005), pp. 247 and 254-258.

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domestic courts irrespective of any connection with the forum State is likely to do more harm than good. 737. This assessment can be illustrated by two provisions dealing with repudiation. Repudiation is one of the clearest examples of an unequal treatment of men and women; under the laws of Islamic tradition it is only available to the husband, not to the wife. Pursuant to Article 57 § 2 of the Belgian Code of 2004, the recognition, in Belgium, of the talaq executed in another country requires, inter alia, that the wife has accepted the unilateral divorce;¹⁵⁴⁰ going even further, Article 10 Rome III, without any qualifications, prohibits the application of a foreign law that grants unequal access to divorce for men and women (Rome III being effective in Belgium). Assume that a Moroccan husband has divorced his Moroccan wife, both having lived in Morocco for the whole time of their marriage; assume further that the divorce has been registered in Morocco; and that some years later the husband moves to Belgium where he wants to marry another woman: in the absence of any Moroccan State legislation requiring a divorced wife to express her opinion on the talaq, it is unlikely that her acceptance, if any, can be proven. If she stays in Morocco she may not even answer to a request sent to her by a Belgian court and concerning her acceptance of the talaq. Consequently, the divorce will not be recognized in Belgium, and the husband, in order to remarry, must first commence divorce proceedings against his first wife in a Belgian court which, under Article 10 Rome III, will not apply the (Islamic) law of Morocco because of its discriminatory character, but Belgian law – an absurd result since the marriage in question never had any link with Belgium. In a world with open frontiers, it is perhaps more realistic to assume that the husband will marry his second wife without difficulties in Morocco and afterwards return to Belgium to live there with his second wife. But will the Belgian State recognize the second marriage when, for example, subsequent disputes arise about the parental responsibility for the children of this second union, or when tax, social security or maintenance issues surface, or later in matters of succession ? The categorical rejection of the repudiation may have widespread and unforeseen effects over many years. It is based on a claim of the worldwide effect of values which are our own, but which are not universal; it creates more problems for the future than it solves for the past. 5.

Conclusion

738. This section has investigated the two major types of imperative norms that help to enforce basic principles and regulatory policies of the forum State in cases having a cross-border or out-of-State dimension: public policy and overriding mandatory provisions. We have noticed that both are converging in several respects. We have therefore suggested the term of imperative 1540 See the several cumulative conditions of recognition supra footnote 1504.

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norms as a common designation for them. They leave the judge with a wide discretion. To the extent that public policy remains unspecified and mandatory provisions lack precise scope rules, courts actually perform a political function in determining whether the imperative norms of the forum State are affected by the facts of a pending case and whether they are opposed to the decision of the case under foreign law. After a period of growing tolerance subsequent to World War II, there is now a new and increasingly discernible trend in Western societies to impose their own values and principles, sometimes in the guise of fundamental or human rights claiming universal respect. This new conservatism may be a response of Western societies to the fears aroused by effective globalization and the changes enabled by medical and scientific progress. In open societies it is unlikely, however, that such efforts have any prospects of long-term success. While sweeping court decisions rejecting, for example, repudiation or surrogate motherhood may affirm, by their publication, certain values in a given European society, they will certainly not terminate the practice of repudiation in Islamic countries nor will they stop infertile couples from recourse to surrogacy agreements to fulfil their wish for a child. Thus, such unqualified rejections only postpone the problems they are intended to resolve. A more responsible approach would require the courts to develop fine-tuned solutions with regard to the territorial and personal reach of their forum’s values; that would be more adjusted to the unrestricted mobility in a world of open societies. Section 3: Respect for Foreign Imperative Norms 1.

Introduction: Respecting Foreign Values

739. Imperative norms of the forum State are troublemakers in private international relations. This is due to the existence of concurrent jurisdiction in most areas. Where it is impossible to make a safe prediction as to which courts may deal with a legal relation in the future, the private parties involved have to contemplate litigation in a variety of countries, and the courts in each of them are under a duty to enforce their own imperative norms. Exclusive jurisdiction, which would dispose of this problem, is a rather exceptional occurrence. It is recognized in few areas, and the efforts to extend it to other sectors have failed.¹⁵⁴¹ Not even the attempt to establish a universal regime for exclusive choice-of-court agreements has been successful; the pertinent Hague Convention of 2005 has not taken effect so far.¹⁵⁴² Arbitration agreements are a solution in some areas, in particular 1541 See already supra, paras.12 et seq. 1542 Convention on Choice of Court Agreements, concluded on 30 June 2005, in Hague Conference on Private International Law, ed., Collection of Conventions 1951-2009, The Hague, 2009, pp. 477 et seq.; the Convention has only been ratified by Mexico,

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in commercial transactions, but not in all sectors. It follows that in their international relations many private actors must take into account potential litigation in the courts of two or more countries which may, through their imperative norms, thwart the parties’ attempt to structure a reliable legal framework for those relations. 740. For the sake of legal certainty, the impact of imperative norms on international private relations should therefore be reduced. This can be done in several ways: (1) by a harmonization of substantive law which is, however, not very realistic in many areas; (2) by a “degradation” of imperative norms to the quality of simple mandatory rules and principles which may be avoided by an apposite choice of the applicable law; (3) by a contraction of the geographical or personal scope of application of the imperative norms in cross-border relations; (4) and by the basic willingness of States to give effect to corresponding imperative rules and principles of law of a foreign country connected to the facts of the pending case. Methods (2) and (3) require perseverance; in the short run they will be unsuccessful because of the political emphasis that the society of the forum State usually lays upon the enforcement of its respective imperative norms. It is the latter method (4) which deserves some closer attention in the present context for two reasons: where courts begin to tolerate foreign imperative norms, they notice that those norms may be similar to the corresponding norms of their own law, which then appear less unique and perhaps less imperative. Moreover, there is some evidence for a trend in this direction in the more recent development of private international law. It can be ascertained in several fields where judicial and legislative State practice gives expression to a certain respect for foreign imperative norms, leading to what at first sight may appear as a bilateral conflict rule. Pertinent observations can be made in the field of currency regulations, with regard to the protection of national cultural heritage, and in antitrust or competition law. 2.

The Protection of Foreign Currencies

a) Currency in private international law 741. For private relations, currency is just one element of a monetary obligation: the debtor has to pay not only at the right place and at the right time, but also the right amount in the right currency in order to discharge its obligation. It is basically up to the law governing the respective obligation (lex causae) to determine the details of performance including the correct currency; this could be the proper law of the contract in the case of a contractual obligation, the proper law of a tort in the case of a debt arising from tort, the law applicable to a maintenance obligation, etc. Problems arise if payment has to be effected in a country where the law does not permit the debtor to whereas both the European Union and the United States have not proceeded beyond signature.

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pay in the currency due under the lex causae, i.e. where it instead allows or even requires payment in the local currency of the place of payment or where some other regulations such as the prohibition of gold clauses is in force. Over time a certain consent has emerged that also such laws of the lex loci executionis should be taken into account;¹⁵⁴³ this is underpinned in the European Union by Article 9 paragraph 3 Rome I. The rules of both the lex causae and the lex loci executionis are meant to balance the private interests of the parties involved and are not relevant in the present context. But regulations of a different type that are potentially adopted by a third country come into play where the State which has created the currency in question issues regulations, typically of a variety restricting the exchange of this currency against others. From World War I onwards such regulations have increasingly been promulgated.¹⁵⁴⁴ They are part of the lex monetae and aim to foreclose capital flight, to stabilize the external value of the currency and, thereby, to stabilize the currency itself as a collective good of the State and its economy.¹⁵⁴⁵ 742. Under the contemporary conditions of an essentially free movement of capital,¹⁵⁴⁶ currency restrictions have lost much of their significance. But they used to be much more important in former times and they still exist in many countries. Where they claim to cover a given fact situation, currency regulations of the lex fori will always be applied by the courts. But would the courts of a State also protect the currency of a foreign country by giving effect to the latter’s currency regulations ? The answers given between World Wars I and II were neither uniform nor unambiguous. While currency regulations of the law governing the contract (lex causae) were usually respected, the impact of regulations issued by other countries, in particular the State of the place of payment (lex loci executionis) or the home State of the currency (lex monetae), remained unclear. The difficult issues arising in transnational cases from the co-existence of different currency regulations will not be discussed here in detail. As pointed out above, they are often related to the balance of interests as between private parties, in particular to the assignment of certain currency risks – such as inflation – to one of them. The present enquiry focuses on the efforts made by States to protect their own currency by apposite exchange regulations. Such efforts do not focus on the rights of individual debtors and creditors, but on safeguards for the 1543 For English law see Hartley, Recueil des cours 266 (1997), 421-422, referring to Ralli Bros v. Compañia Naviera Sota y Aznar, [1920] 2 KB 287 (CA); for Germany see Arthur Nussbaum, Deutsches Internationales Privatrecht, Tübingen, 1932, pp. 240 and 245-246; but see the very cautious statement by Georges van Hecke, “Currency”, IECL, Vol. 3, Chap. 36, Sects. 16-17 (completed in 1970). 1544 For the history of currency exchange regulations see Hugo Hahn, “German Foreign Exchange Control: Rise and Demise”, International Lawyer 23 (1989), 873-890. 1545 For the concept of collective goods see supra, paras. 700 et seq.700 1546 See supra, paras.77 et seq., 79 et seq.

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currency as an economic institution of the respective countries. Of course, these States are interested in an effective enforcement of these regulations not only by domestic courts, but if possible by the courts of other countries, too. b) The IMF Agreement 743. As part of the economic order designed for the time after World War II, the international community adopted the Agreement on the International Monetary Fund and the Agreement on the World Bank at Bretton Woods, New Hampshire in 1945.¹⁵⁴⁷ In view of the uncertainties prevailing in the interwar period and the State interests in the stabilization of currencies outlined above, the IMF Agreement contains, among others, a peculiar rule on the effects to be given to foreign currency exchange regulations. Article VIII (2) (b) has the following wording: “Exchange contracts which involve the currency of any member and which are contrary to the exchange control regulations of any member maintained or imposed consistently with this agreement shall be unenforceable in the territories of any member.”

744. This provision has given rise to long discussions over a number of issues: what are “exchange contracts” ? In which circumstances do they “involve the currency of any member ?” What are the characteristics of exchange control regulations “maintained or imposed consistently with this agreement”, i.e. the IMF Agreement ? And is their “unenforceable” character a matter of substantive law or procedure ? These and several other issues have been the object of numerous court decisions and scholarly writings.¹⁵⁴⁸ What matters in the present context is the requirement that member State courts soften their reluctant attitude towards foreign currency exchange regulations. The requirement has a dual significance: first, courts in IMF member States are no longer permitted to reject such regulations as being contrary to their own public policy.¹⁵⁴⁹ Second and more importantly, the provision puts member 1547 Bretton Woods Agreements: Articles of Agreement of the International Monetary Fund, signed at Washington on 27 December 1945, 2 UNTS 39; the Agreement is in force for more than 130 States. 1548 The most comprehensive publications on the matter were authored by Joseph Gold, The Fund Agreement in the Courts, Vols. 1-3, Washington, 1962, 1982 and 1986; for a more succinct analysis see Kleiner, Nos. 429-436 at pp. 373-379 with further references; Hartley, Recueil des cours 266 (1997), 422-425 with reference to several English decisions; Werner Ebke, Internationales Devisenrecht, Heidelberg, 1990, pp. 170 et seq. 1549 Kleiner, No. 434 at p. 376; see however with further references Ebke, p. 182, who does not entirely exclude the invocation of public policy and interprets Article VIII (2) (b) only as a basic duty of Member States to recognize exchange regulations adopted by other Member States.

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State courts under an obligation to take currency exchange regulations of other IMF member States into consideration; there is, however, no uniform view as to whether this has to be done ex officio.¹⁵⁵⁰ Given the worldwide acceptance of the IMF Agreement, the respect for foreign currency regulations nowadays appears to be a settled matter. In theory, the impact of the exchange regulations of non-member States of the IMF is still an issue, and discussions about whether it is those regulations in force at the place of payment or those at the debtor’s domicile that should be respected alongside those of the lex causae will continue. But their practical significance has substantially decreased; under Article VIII (2)(b) of the Fund Agreement, the courts have to give effect to the currency exchange regulations of all member States, irrespective of their specific connection with the pending case. 745. The insecurity of the interwar period relating to the application of foreign exchange regulations was mainly due to the fact that those regulations were either considered as foreign public law unsusceptible of being applied in domestic courts anyway, or that their application was regarded as repugnant to the public policy of the forum.¹⁵⁵¹ Both arguments are difficult to maintain at a time when States have committed themselves to give effect to the currency regulations of about 130 other States without any public policy reservation apparently being permitted. Thus, Article VIII (2)(b) has a far-reaching impact beyond its own scope of application. Does it therefore amount to a bilateral conflict rule in the area of exchange regulations ? This would be both inaccurate and exaggerated. Since the IMF Agreement does not deal with the application of the currency exchange regulations of the forum State, an essential element of a bilateral conflict rule is missing: the lex fori and foreign law are not put on an equal footing. The provision has a unilateral character – however, not for the lex fori, but for foreign currency exchange regulations. In numerous member States which espouse the dualist conception of public international law and municipal law,¹⁵⁵² courts have to comply with the regulations of the lex fori even if they are not consistent with the IMF Agreement, whereas foreign regulations which exceed the limits imposed by the IMF Agreement are not binding on the court. A closer look would reveal further differences. But what matters in the present context is the basic willingness of States to grant effect to foreign imperative norms and to restrict their own principles, even those pertaining to public 1550 See Ebke, pp. 276 et seq., who juxtaposes the practice of the German Federal Court to apply Article VIII (2) (b) ex officio to that of the courts of common law jurisdictions which require that the defendant invokes the infringement of the provision, an interpretation which Ebke favours, see pp. 293 et seq.; Thode in Reithmann and Martiny, para. 701 at p. 438; Kleiner, Nos. 435-436 at pp. 377-379. 1551 Van Hecke, IECL, Vol. 3, Chap. 36, Sect. 17 with further references. 1552 On the monist and dualist conception see Brownlie, pp. 31 et seq., and the national reports edited by Shelton.

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policy. Article VIII (2)(b) provides an example of a system of double unilateralism: the unilateral conflict rules contained in the exchange regulations of the lex fori are supplemented by another conflict rule for foreign exchange regulations. 3.

The Protection of Foreign Cultural Objects

a) Cultural property, other tangibles and specific legislation 746. Cultural objects are a special category of movable or immovable tangibles. To date there is no universally accepted definition of what the “cultural” character of an object means. This is due to the wide and rather contourless understanding of culture, which in social sciences has been said to “consist of patterns, explicit and implicit, of and for behaviour acquired and transmitted by symbols, constituting the distinctive achievement of human groups, including their embodiments in artefacts;”¹⁵⁵³

What can be inferred from this definition is that cultural objects are artefacts which somehow embody ideas and values that are distinctive for human groups. But who decides whether they are distinctive ? Is it up to the group itself or to outsiders ? And at what point in time must this decision be taken, before or after a claim to those cultural objects is made by the group ? And what are the preconditions for the entitlement of a human group to make such a claim ? Is this right confined to States, or may such claims also be made by ethnic, linguistic or religious minorities within a State ? The existence of multicultural States is undeniable, in particular in the countries of immigration in the Western hemisphere or in Australia and Oceania. Thus, there are great difficulties in defining the concepts of culture and cultural objects; at present, they appear insurmountable. 747. The concept of cultural object or cultural good employed in legal texts is narrower than what might be perceived as reasonable from a social science perspective. The UNESCO Convention of 1970 defines the term “cultural property” as property which is “specifically designated by each State as being of importance for archeology, prehistory, history, literature, art or science” and which belongs to one of 11 categories listed in Article 1.¹⁵⁵⁴ This 1553 See R. P. A. Shweder, “Culture: Contemporary Views”, in N. J. Smelser and P. B. Baltes, eds., International Encyclopedia of the Social & Behavioral Sciences, Vol. 5, Amsterdam/New York, 2001, pp. 3151 et seq. at p. 3152, citing A. L. Kroeber and C. Kluckhohn, Culture: A Critical Review of Concepts and Definitions, Cambridge, Mass. 1952, p. 357; this definition is referred to as “classic“ by John Bell, “De la culture”, in Pierre Legrand, ed., Comparer les droits, résolument, Paris, 2009, pp. 247278 at p. 248. 1554 Convention on the Means of Prohibiting and Preventing the Iillicit Import, Export and Transfer of Ownership of Cultural Property, done at Paris on 14 November 1970, 823 UNTS 231. The Convention is in force for more than 110 countries.

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definition is State-centred: Only States can designate property as cultural property. In substance, this exclusive right of States has been maintained by the Institut de droit international, which defined works of art in a resolution of 1991 in the following way:¹⁵⁵⁵ “A ‘work of art’ is a work which is identified as belonging to the cultural heritage of a country by registration, classification or by any relevant internationally accepted method of publicity.”

A similar reference to national measures and to lists of categories can be found in European instruments.¹⁵⁵⁶ The 1995 UNIDROIT Convention equally adheres to the requirement that the protected objects must belong to one of the categories listed in the annex. However, the application of that Convention does not depend on a direct or indirect designation, by a contracting State, of certain property as being cultural property.¹⁵⁵⁷ But similar to the texts mentioned above, the UNIDROIT Convention makes reference to the importance of the objects in question for archeology, prehistory, history, literature, art or science and thereby indicates that the nature of cultural property is determined by its significance for public values and goes beyond its material value or its utility value. It is this importance for a collective, whether an ethnic or religious group, a country or the whole of humanity which distinguishes cultural property from other assets. 748. The public interest attached to cultural property, although not necessarily connected to a specific country, has induced legislation at the national and international levels aimed at a certain immobilization of cultural property. Neither the free trade principles of the GATT nor those of the European treaties apply.¹⁵⁵⁸ Instead, numerous countries have enacted national statutes designed to identify property belonging to the national cultural heritage and to restrict the exportation of such property; while these laws by and large pursue the same objective, their black-letter rules differ consid-

1555 The international sale of works of art from the angle of the protection of the cultural heritage, Institut de droit international, Annuaire, Vol. 64, t. II – Session de Basle, 1991, Paris, 1991, pp. 402 et seq., also printed in Erik Jayme, Nationales Kunstwerk und internationales Privatrecht – Vorträge, Aufsätze, Gutachten, Heidelberg, 1999, pp. 155-157. 1556 See Article 1, para. 1, of Council Directive 93/7/EEC of 15 March 1993 on the return of cultural objects unlawfully removed from the territory of a Member State, OJ 1993 L 74/74; Article 1 Council Regulation (EC) No 116/2009 of 18 December 2008 on the export of cultural goods (codified version), OJ 2009 L 39/1. 1557 See Article 2 of the UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects, done at Rome on 24 June 1995, 2421 UNTS 457. 1558 See Article XX, GATT, supra footnote 1203; see also Article 36, TFEU.

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erably.¹⁵⁵⁹ The European and international instruments cited above¹⁵⁶⁰ have been adopted to ensure compliance with these laws outside the authoring country by establishing rules on cooperation and restitution; but they also affect private international law. b) Conflict rules: from lex situs to lex originis 749. The illicit trade in cultural property occurs in basically two forms: either the owner of the cultural property infringes the export restrictions of his country by selling the property to a foreign purchaser; or in the alternative, the property is stolen from the original owner and exported by the thieves or subsequent possessors. In both cases the property will often end up abroad in the hands of a purchaser who claims to have acquired the title to the property bona fide. In accordance with the basic conflict rule governing the acquisition of in rem rights, bona fide purchase, whether by contract or by acquisitive prescription, is governed by the lex situs.¹⁵⁶¹ Where this refers to the time of acquisition, i.e. to the law of the situs after exportation, illicit cross-border trade in cultural property would lead to a change of the applicable law; the law of the previous location which aims at a restriction of export would lose its effect precisely by the cross-border carriage which it is intended to prevent. Consequently, the infringer of those laws could relocate the cultural property to a country with a law that is particularly generous for bona fide purchasers. Put in other words, there is an outright contradiction between the policy objectives pursued by export restrictions on cultural property and the lex situs rule.¹⁵⁶² This contradiction is particularly pronounced in countries which aim at the protection of their own cultural property by apposite regulation, but which permit the bona fide acquisition of property illegally exported from other countries under the post-exportation lex situs. Critics have accurately pointed out that the application of the situs rule facilitates the “laundering of stolen art.”¹⁵⁶³ 750. Where litigation concerning the title to illegally exported property takes place in the country of exportation, the courts will not hesitate to strike down the foreign law designated by the new location of the objects in question if that law somehow perpetuates the unlawful state created by the illicit 1559 See for example the survey over some European legislation by Erik Jayme, “Kulturgüterschutz in ausgewählten europäischen Ländern”, ZvglRWiss 95 (1996), 158169, in particular pp. 167-171; Siehr, Recueil des cours 243 (1993), 163-182, with a report on export controls, import controls and controls of movement. 1560 See supra footnote 1556. 1561 See supra paras. 330-333. 1562 See Paul Lagarde, “La restitution internationale des biens culturels en dehors de la Convention de l’UNESCO de 1970 et de la Convention d’UNIDROIT de 1995”, Unif. L. Rev. (2006), 83-91, who correctly denounces the defective character of the national rules on the conflict of laws in this area. 1563 Wojciech Kowalski, “Restitution of Works of Art Pursuant to Private and Public International Law”, Recueil des cours 288 (2001), 9-244 at pp. 221-222.

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export; to this end they will likely invoke the public policy of the forum. But litigation on such issues usually takes place in the country where the goods were carried to in breach of the export restrictions. In such cases, the courts of that country are referred by the lex situs rule to the law of the forum State where the alleged bona fide purchase has taken place; the only way to respect the foreign legislation enacted for the protection of cultural property would be to characterize those rules as the overriding mandatory provisions of a foreign country that may be given effect under conflict rules such as Article 9, paragraph 3 Rome I. However, there is little evidence of jurisprudence which has actually embarked on that path.¹⁵⁶⁴ Usually, courts decline to take account of the foreign export restrictions which are considered as forming part of public law. The rejection of the foreign restrictions is even more obvious where the import State, such as the United Kingdom (home to Sotheby’s and Christies’), plays an important role as a trading place for cultural objects. 751. The international instruments mentioned above¹⁵⁶⁵ do not explicitly obligate the States to give effect to foreign export restrictions. According to their basic principle, illegally exported cultural objects are to be returned to the country of origin. The UNIDROIT Convention deals with the restitution of both stolen cultural objects (in Articles 3 and 4) and illegally exported cultural objects (in Articles 5-7). Both concepts presuppose the application of a certain national law with regard to ownership issues in the case of stolen objects and in respect of the legality of export. While there is no explicit conflict rule in the UNIDROIT Convention, it would be reasonable to assume that only the law of the country of origin (lex originis) of the cultural object can apply to these issues.¹⁵⁶⁶ In a similar vein, the European instruments abstain from establishing a conflict rule referring to the law of the country of origin; Article 12 of Directive 93/7 simply points out that ownership of the cultural object after return is to be governed by the law of the Member State requesting restitution. The obligation to return the illegally exported cultural property appears to be stronger, however, than any explicit reference to the law of the country of origin. 752. As to private international law, there are initial signs of a movement in the pertinent conflict rules towards the lex originis. The 1991 resolution of the Institut de droit international has in fact recommended the following rule: “The transfer of ownership of works of art belonging to the cultural heritage of the country of origin shall be governed by the law of that country. 1564 See the survey by Siehr, Recueil des cours 243 (1993), 183-189. An exception is sometimes made where the cultural property in question was owned, before its illegal export, by the foreign State, see pp. 184 and 189-190. 1565 See supra, para. 747. 1566 In the case of excavated cultural property, Article 3, para. 2, even explicitly refers to the law of the State where the excavation took place.

Chapter 4 – Imperative Norms : Protection of Foundational Principles The provisions of the law of the country of origin governing the export of works of art shall apply.”¹⁵⁶⁷

Among the more recent statutes on private international law, it is only Article 90 of the Belgian Code of 2004 which partially follows this recommendation. It subjects the claim for restitution, at the choice of the State of origin, to the law of the country of origin or to the lex situs. But the Belgian law also takes into account the interests of a bona fide purchaser. For the protection of the bona fide possessor, it is explicitly established that he may invoke the law of the country where the cultural object is located at the time the claim for return is made. While the UNIDROIT Convention limits the protection of the bona fide possessor to a claim for reimbursement of his expenses,¹⁵⁶⁸ the Belgian rule may thus end up in granting him the title to the goods in question. c) Conclusion 753. To sum up these observations, a growing deference to foreign legislation designed to protect national cultural heritage can be ascertained. But the legal vehicles for that deference differ. There are instances of an explicit conflict rule providing for the – direct – application of the lex originis instead of the lex situs, even with regard to the issue of bona fide acquisition of title. However, the bona fide purchaser may still invoke the lex situs as a more favourable alternative; Belgian law has been cited as an example of such an ambivalent conflict rule. Much more common is the – indirect – respect for foreign legislation on cultural property which is evidenced by the obligation to return cultural objects to the State of origin; this regulatory model has been adopted at the universal level by the 1995 UNIDROIT Convention and at the regional level by Directive 93/7 of the European Union. It must be noted, however, that these instruments only deal with the claims for restitution brought by the State of origin; the respective provisions do not apply in private litigation where no obligation to indirectly respect the foreign legislation on cultural property applies. In such other situations, a third legal tool may however help: under Article 9, paragraph 3 Rome I as well as under analogous provisions of some recent private international law statutes, courts may give effect to those overriding mandatory provisions of foreign countries which require application irrespective of the law otherwise applicable to the case on the condition that there is a close connection of the facts of the case with the foreign State in question. While this permission is

1567 See Articles 2 and 3 of the Resolution adopted at the Session of Basel in 1991, supra footnote 1555. 1568 See Articles 4 and 6 of the 1995 UNIDROIT Convention: “payment of fair reasonable compensation”.

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restricted to contractual obligations in the case of the Rome I Regulation, it is of general purview in the case of other national legislation.¹⁵⁶⁹ 754. The effect of these provisions is essentially confined to litigation conducted post factum and directed towards the restitution of cultural property. For the fight against illicit trade in cultural property, the preventive measures universally prescribed by the 1970 UNESCO Convention appear to be more significant. In particular, transparency in the trade of cultural property is increased by, first, the requirement of an export certificate issued by the State of origin with a number of subsequent obligations imposed on export and import operations and, second, by the duties of cooperation between the authorities of contracting States. This has repercussions even in noncontracting States: the wider the dissemination of information on the protected status of a cultural object, the less likely its sale in a public auction anywhere in the world. The reverse side is, however, an increase of organized theft and robbery on behalf of, and commissioned by, specific “customers” who want to expand their private collections. But in the present context the growing respect for foreign legislation intended to protect national cultural heritage can be considered as a successful example of the due regard for foreign imperative norms. 4.

The Protection of Competition on Foreign Markets

a) The development of competition law 755. A third area which gives evidence of an enhanced tolerance vis-à-vis foreign imperative norms concerns the protection of competition and the fight against anti-competitive conduct. Similar to currency and cultural property, the protection of competition by means of legislation is of a rather recent origin. The first pertinent statute, the US Sherman Act of 1890,¹⁵⁷⁰ remained the sole effective legislative effort until the end of World War II. In the aftermath of the war, the victorious powers and, in particular, the United States insisted that Germany and Japan adopt their own competition laws, which in the case of Germany was supported by a broad movement in politics and the so-called ordoliberal school in economics and jurisprudence. When the European Economic Community was established in 1958 by a treaty that included directly applicable prohibitions of cartels and abuses of dominant positions, the six Member States – apart from Germany – had not yet enacted comparable rules in their domestic laws. However, curbing economic power by competition protected through the rule of law became a success story over the years, and more and more Member States of the European Union adopted similar legislation. A comparative investigation completed 1569 See for Switzerland Article 19 of the Law of 1987, for Poland Article 8, para. 2, of the Law of 2011 and for Ukraine Article 14, para. 2, of the Law of 2005. 1570 An Act to protect trade and commerce against unlawful restraints and monopolies (Sherman Antitrust Act), 26 Stat. 209 (1890), 15 USC §§ 1-7.

Chapter 4 – Imperative Norms : Protection of Foundational Principles

in the early 1990s listed already more than 40 countries worldwide adhering to the idea of unrestricted competition.¹⁵⁷¹ The collapse of the socialist systems has contributed to a further acceleration of this development; at present, the International Competition Network that was established by national competition authorities shortly after the turn of the millenium includes about 100 jurisdictions across the globe.¹⁵⁷² The numerous statutes differ widely with regard to the conduct prohibited, the enforcement mechanisms and the sanctions. 756. All statutes provide for a so-called public enforcement of competition law by a competition authority with ample powers of administrative intervention, in particular for the declaration of certain conduct as illegal, for the issue of cease-and-desist orders and for the imposition of fines on undertakings. Some of the statutes also address consequences of anti-competitive conduct in private law. Thus, the US Clayton Act of 1914 grants treble damages to the victims of anti-competitive behaviour.¹⁵⁷³ In the European Union, agreements prohibited pursuant to Article 101 TFEU are explicitly declared to be automatically void by its paragraph 2; and the European Court of Justice has held that the full effectiveness of the prohibition of cartels under the Treaty “would be put at risk if it were not open to any individual to claim damages for loss caused to him by a contract or by conduct liable to restrict or distort competition.”¹⁵⁷⁴ The German Act against Restrictions of Competition equally lays down specific rules dealing with private claims for injunctions or compensation of losses sustained.¹⁵⁷⁵ In other countries, the liability of undertakings for the infringement of competition law follows from general principles of either the law of torts or contract law.¹⁵⁷⁶

1571 See Ivo Schwartz and Jürgen Basedow, “Restrictions on Competition”, IECL, Vol. 3, Chap. 35 (completed 1992), pp. 134-139 with a list of statutory material existing at the time. 1572 See the website of the International Competition Network: http://www.internationalcompetitionnetwork.org. 1573 See § 4 of the Clayton Antitrust Act, 38 Stat. 730, 15 USC, § 15 as amended. 1574 ECJ, 20 September 2001, Case C-453/99 (Courage Ltd. v. Bernard Crehan), [2001] ECR I-6314, cons. 26. 1575 See § 33 of the German Act against Restraints of Competition, cited supra footnote 226. 1576 In August 2004, Denis Waelbroeck, Donald Slayter and Gil Even-Shoshan prepared, on behalf of the law fi rm Ashurst, a comparative report entitled “Study on the Conditions of Claims for Damages in Case of Infringement of EC Competition Rules” for the European Commission; see http://ec.europa.eu/competition/antitrust/actionsdamages/comparative_report_clean_en.pdf; see also National Reports for the United States (Hannah Buxbaum), Germany (Wulf-Henning Roth), France (Laurence Idot) and Italy (Carlo Castronovo) in Jürgen Basedow, ed., Private Enforcement of EC Competition Law, The Hague, 2007.

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b) The effects doctrine as a unilateral conflict rule 757. The conflict rules of competition law have been perceptibly influenced by the perspective prevailing in the public enforcement of the respective statutes.¹⁵⁷⁷ Authorities are established for the good of their own country, and their mission is not to serve the public interest of other States; consequently, they apply only their own law and in principle do not take into account the laws of other States. This is also true of competition authorities. It would follow that these authorities limit the application of their own competition law to acts committed within the territory of their State, the so-called subjective or strict territoriality principle. However, the object of the enforcement activities – markets and competition – cannot be confined to a national territory; if competition lessens due to anticompetitive agreements concluded anywhere in the world, repercussions on domestic markets may often be perceived even if they are not intended by the undertakings involved. Nonetheless the reduction of a competitive pressure on a foreign market usually affects all customers, both foreign and domestic, and the latter will have to pay the resulting higher prices along with the former. 758. Consequently, competition authorities, first in the United States and later in Europe, claimed the right to enforce their respective competition laws in respect of conduct engaged in by foreigners abroad, provided that some – direct, foreseeable and substantial – detrimental effect on competition in the domestic market could be ascertained. This claim, encapsulated in the so-called effects doctrine, was upheld first in the United States, in the Alcoa case of 1945;¹⁵⁷⁸ some years later in the explicit statutory scope rule of the German Act against Restrictions of Competition;¹⁵⁷⁹ thereafter also in numerous national competition laws of other countries;¹⁵⁸⁰ and – in the guise of the implementation doctrine – also by the European Court of Justice.¹⁵⁸¹ It initially aroused diplomatic protest, particularly by the Government of 1577 For a comprehensive comparative survey of the development of the law in this field until the early 1990s see Schwartz and Basedow, IECL, Vol. 3, Chap. 35, Sects. 34 et seq., distinguishing five regulatory models: (1) subjective territoriality; (2) objective territoriality; (3) pseudo-territoriality; (4) the effects doctrine; and (5) the balancing approach. For the French version of that study see Jürgen Basedow, “Souveraineté territoriale et globalisation des marchés”, Recueil des cours 264 (1997), 9-177 at pp. 67 et seq. 1578 U.S. v. Aluminium Company of America, 148 F. 2d 416 (2nd Cir. 1945), later confirmed in Hartford Fire Insurance Co. v. California, 509 US 764 (1993). 1579 See the wording cited supra footnote 226. 1580 See the survey in Schwartz and Basedow, IECL, Vol. 3, Chap. 35, Sects. 61-73. 1581 ECJ, 27 September 1988, Case 89/85 (Åhlström Osakeyhtiö v. Commission – “Wood Pulp”), [1988] ECR 5193, cons. 17 et seq., referring to the place of implementation in the European Union. More recently the General Court has explicitly approved the effects doctrine as a basis of EU jurisdiction for the application of the merger control regulation and of Article 102 TFEU, see the judgment of 12 June 2014, Case T-286/09 (Intel v. Commission), [2014] ECR II-000 not yet reported, cons. 224.

Chapter 4 – Imperative Norms : Protection of Foundational Principles

the United Kingdom, since the “extra-territorial” application of US antitrust laws was alleged to infringe principles of public international law.¹⁵⁸² Over the years, however, the effects doctrine has been endorsed in substance by so many countries, including the United Kingdom,¹⁵⁸³ that it should at present be considered as being accepted with the consent of the international community.¹⁵⁸⁴ c) Growing respect for foreign competition law 759. The effects doctrine or implementation doctrine that nowadays prevails in most jurisdictions has developed as a unilateral conflict rule. Competition authorities and courts seized in review proceedings have asserted only that the competition law of the lex fori applies to foreign conduct affecting competition in the domestic market. For many years judicial practice had offered little evidence of foreign competition law unfolding some effect in domestic proceedings dealing with behaviour that somehow affected competition in a foreign market. A few judgments contemplated the impact that prohibitions of exclusive dealership clauses found in the competition law of a foreign State might have on contracts which were governed either by the law of that State or by the law of the forum.¹⁵⁸⁵ But in no case was the foreign prohibition actually enforced. It was, for instance, explicitly rejected as being part of public law by an Italian court in the interwar period.¹⁵⁸⁶ After World War II the wind changed; courts appeared to consider the application of prohibitions imposed by foreign competition law possible in principle, but they declined taking that step in the pending cases because the market of the foreign State was not affected¹⁵⁸⁷ or, when it was affected, because the categorical and unrestricted prohibition of exclusive dealership clauses in the law of that State (Tunisia) was regarded as too exceptional to be given 1582 See “Note No. 196 of the British Embassy at Washington to the United States Department of State (27 July 1978)”, Brit. YBIL 49 (1978), 390. 1583 See Section 2 (1) and (3) of the Competition Act, 1998, c. 41, which refers to the implementation of an anticompetitive agreement in the United Kingdom; while this rule is said to fall short of the effects doctrine by Richard Wish, Competition Law, 5th ed., London, 2003, p. 441, the practical differences between the implementation doctrine and the effects doctrine are tiny. 1584 See Baetge, p. 298, who posits an international recognition of the effects doctrine as a matter of customary international law; on a similar note Jürgen Basedow, “Antitrust or Competition Law, International”, in Rüdiger Wolfrum, ed., Max Planck Encyclopedia of Public International Law (2010), Nos. 12-16. 1585 See the reference in Schwartz and Basedow, IECL, Vol. 3, Chap. 35, Sect. 105, with short summaries of the cases referred to infra in the next two footnotes. 1586 Tribunale di Milano, 12 March 1927, Monitore dei Tribunali 1927, 631 at p. 635; the headnote is reproduced in a French translation in Clunet 55 (1928), 213. 1587 See for Austria the judgment of the Supreme Court OGH, 21 May 1968, SZ 41, No. 62 at p. 201; for Germany LG Freiburg 6 December 1966, IPRspr. (1966/67), No. 34a at p. 116.

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effect under Article 7 paragraph 1 of the Rome Convention (now: Article 9 paragraph 3 Rome I).¹⁵⁸⁸ Nevertheless, European courts nowadays seem fundamentally prepared to respect foreign competition law as a defense in contractual disputes; the absolute barrier calling for the non-application of foreign public law is no longer maintained. 760. An analogous statement cannot thus far be made for the United States. US courts have traditionally extended their antitrust jurisdiction through a wide interpretation of the effects doctrine. Consequently, they could exclusively rely on the enforcement of US antitrust laws since transnational business activities will almost invariably produce some slight effect on American markets. Prohibitions of certain contractual arrangements as laid down in foreign competition law were, therefore, simply irrelevant in contractual disputes in American civil courts. The same can be said for damages claims brought by undertakings suffering losses as a result of anticompetitive conduct such as a cartel of suppliers. The US antitrust laws provide the sharp sword of treble damages,¹⁵⁸⁹ while most other competition laws confine the duty of cartel members to compensate losses at the payment of damages on a one-to-one basis. The foreign laws are, therefore, much less attractive for plaintiffs, and the wide geographical scope of application of the US antitrust laws makes invocation of foreign law redundant. This may however change in the future since in 2004 the US Supreme Court for the first time drew borders on the application of the US antitrust laws in its Empagran decision.¹⁵⁹⁰ In that case, an international price-fi xing cartel in the vitamin sector had caused adverse effects in the United States and, in addition, independent injury to purchasers in Australia, Ecuador, Panama and Ukraine; the latter losses being in no way connected to the American market. The antitrust claim of the foreign purchasers was dismissed by the Supreme Court, which held that the Sherman Act did not apply to claims based solely on foreign effects. Thus, cartel victims now for the first time have an incentive to invoke an infringement of foreign competition law in US courts in support of compensation claims flowing from foreign effects of anticompetitive conduct. While most foreign laws do not grant treble damages, litigation in the United States is nevertheless attractive for plaintiffs because of the availability of class actions as well as pretrial discovery of documents. However, it is still not settled by statute or precedent whether US courts will actually apply foreign competition laws in such cases. 1588 Com. Mons, 2 November 2000, Rev. dr. com. belge (2001), 617 at pp. 619 et seq. In a litigation arising from a franchising contract between a Belgian franchisor and a Tunisian franchisee governed by Belgian law, the commercial court of Mons refused to apply Tunisian competition law which strictly prohibited all exclusive dealership clauses in contracts made with Tunisian distributors; the law was said to be unique and too exceptional to be given effect outside its country of origin. 1589 See supra, para. 756. 1590 F. Hoff mann-La Roche Ltd. v. Empagran S.A., 542 US 155 (2004).

Chapter 4 – Imperative Norms : Protection of Foundational Principles

d) Emergence of bilateral conflict rules 761. The situation is different in Europe. After long scholarly debates conducted in many European countries, the Swiss act on private international law of 1987 was the first statute worldwide which explicitly dealt, in a bilateral conflict rule, with liability sounding in tort for the violation of competition law. Article 137 of the law states: “(1) Claims based on a restraint of competition are governed by the law of the state in whose market the restraint has direct effects on the injured party. (2) If claims based on a restraint of competition are governed by a foreign law, no compensation may be awarded in Switzerland other than that which would be awarded for a restraint of competition pursuant to Swiss law.”

The reference to the law of the market affected operates regardless of whether that law is Swiss law or foreign law. According to legal writers, the Swiss judge is even to apply foreign competition law under Article 137 when that law prohibits behaviour that would have been lawful under Swiss competition law had that law been applicable on account of an impact on the Swiss market.¹⁵⁹¹ So far, however, there is no evidence from judicial practice in support of this assertion, which may appear doubtful in some cases. Assume for example an exclusive dealership agreement between a Swiss franchisor and a Tunisian franchisee which would be lawful under Swiss competition law if applicable, but which infringes the absolute prohibition of such clauses under the law of the Tunisian market affected. It remains to be seen whether a Swiss court would actually apply Tunisian law or reject its application, invoking the Swiss public policy; the reservation made in paragraph 2 of Article 137 is confined to the amount of damages and does not concern other aspects of the claim.¹⁵⁹² 762. For all EU Member States except Denmark, Article 6, paragraph 3 Rome II has equally introduced a bilateral conflict rule relating to restrictions of competition:

1591 See Bonomi in Bucher, Commentaire romand, Art. 137, para. 2; Dasser and Drolshammer in Honsell, Vogt and Schnyder, Art. 137, para. 25, citing a decision of the Swiss Federal Court BG, 28 April 1992, BGE 118 II 193; in this judgment, the Court affirmed the competence of an arbitral tribunal seated in Switzerland to analyse the validity of a contract under the foreign competition law of countries affected by the contract in question, in this case under Article 85, EEC, which is now Article 101, TFEU. The precedent, thus, neither concerned the practice of State courts nor Article 137 of the Law of 1987. 1592 See Dasser and Drolshammer in Honsell, Vogt and Schnyder, Art. 137, paras. 19 and 22, referring to the rejection of treble damages under US law as the most significant example; in para. 26 the authors take the view that there is hardly any room left for the general public policy reservation.

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Public Regulation “(a) The law applicable to non-contractual obligation arising out of a restriction of competition shall be the law of the country where the market is, or is likely to be, affected.”

The effects doctrine laid down in this paragraph 3(a) may be replaced, at the plaintiff ’s option, by the lex fori where more than one national market including the market of the forum State is affected, see paragraph 3(b); the details of that exception are complicated.¹⁵⁹³ However, they do not matter in the present context since the application of the lex fori cannot in any event establish respect for foreign competition law. Only the effects doctrine enshrined in the basic conflict rule of paragraph 3(a) provides an example of such deference. But the extent of that respect is far from clear. 763. Recital 23 of the Rome II Regulation only mentions conduct prohibited under the law of the Union or the law of any Member State; it does not refer to the law of third States.¹⁵⁹⁴ On the other hand, the Rome II Regulation is of universal application in accordance with Article 3 and therefore would also apply where Article 6, paragraph 3(a) designates the law of a non-Member State such as Canada as governing the liability of a defendant. Since the law designated in the conflict rules of the Rome II Regulation in accordance with its Article 15 governs, inter alia, the basis of, and exemptions from, liability, one might in fact ask whether it is on the basis of Article 6, paragraph 3 Rome II and not in accordance with the relevant scope provisions or conflict rules of Canadian law that a European judge should determine whether Canadian competition law applies to a pending case.¹⁵⁹⁵ Since the effects doctrine has been espoused in so many countries, the answer will hardly matter in practice, however. Nevertheless, only the latter solution can be said to accord with the rationale of competition law. It is intended to protect competition in the market of the country where it was enacted, not in other 1593 See the analysis by Stéphanie Francq and Wolfgang Wurmnest, “International Antitrust Claims under the Rome II-Regulation”, in Jürgen Basedow, Stéphanie Francq and Laurence Idot, eds., International Antitrust Litigation – Conflict of Laws and Coordination, Oxford, 2012, pp. 81-129 at pp. 124-128, who advocate a restrictive interpretation of Article 6, para. 3 (b); Dimitrios-Panagiotis Tzakas, Die Haftung für Kartellrechtsverstöße im internationalen Rechtsverkehr, Baden-Baden, 2011, pp. 567590. 1594 Recital 23 Rome II: “For the purposes of this Regulation, the concept of competition should cover prohibitions on agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition within a Member State or within the internal market, as well as prohibitions on the abuse of a dominant position within a Member State or within the internal market, where such agreements, decisions, concerted practices or abuses are prohibited by Articles 81 and 82 of the Treaty [now Articles 101 and 102, TFEU] or by the law of a Member State.” 1595 See Francq and Wurmnest in Basedow, Francq and Idot, pp. 101-102.

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States; the determination of its scope of application through the operation of conflict rules of a foreign country must therefore be excluded. The Rome II Regulation offers a solution in Article 16, dealing with overriding mandatory provisions of the forum State, which could be applied by analogy to overriding mandatory provisions of foreign States. Where under Article 6, paragraph 3(a), Canadian law would determine the defendant’s liability but Canadian competition law would according to its own scope rules be inapplicable, these scope rules may and should be given effect. Another escape from the impasse would be to consider the Canadian scope rules as substantive rules which are covered by the designation of Canadian law under Article 6, paragraph 3 Rome II. 5.

Conclusion

764. With regard to the protection of foreign currency, foreign cultural property and competition in foreign markets, a general tendency can be observed which grants more respect to foreign imperative norms. But this respect has been implemented in a rather eclectic way. In the field of currency, Article VIII (2)(b) of the IMF Agreement can be characterized as a reverse unilateral conflict rule determining the scope of application of foreign imperative norms only. For cultural property, the claim of restitution granted to the State of origin may provide for a strong protection, but not in litigation exclusively involving private parties; in this respect, the innovative conflict rule of the Belgian code providing for an alternative designation of the law applicable to restitution is more effective. At first sight, the bilateral approach of Swiss law and Rome II with regard to antitrust liability appears to approximate the respect for imperative norms to the utmost degree possible to the approach of traditional conflict rules. The limits of this approach have also become visible, however: where imperative norms by their very nature are not fashioned for a balance between private interests, instead pursuing the public interest of a specific country, their scope cannot be determined by conflict rules which indiscriminately use the same connecting factor for both domestic norms and foreign norms of the kind in question. An approach of “double unilateralism” similar to the one espoused in the field of currency appears more reasonable. From this perspective, the scope rules of the imperative norms of the lex fori should be supplemented by additional conflict rules prescribing or permitting respect for foreign imperative norms. This is the solution of Article 7 of the Rome Convention of 1980. It is also the solution of Article 9 paragraph 3 Rome I, albeit to a lesser degree since the scope of that provision was reduced as compared to Article 7 paragraph 1 of the Rome Convention. It is more exactly targeted and should be pursued in other areas.

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Section 4: Conclusion 765. Critics of globalization and of the open society complain of the loss of regulatory power of States. They believe that the traditional role and responsibility of States in shaping social and economic relations is curtailed where private actors can readily relocate themselves or their activity to other States in order to avoid unwelcome State regulations. The loss of regulatory power is sometimes regarded as a decrease in the democratic legitimacy of the social and economic order, although the regulatory power of States is qualified irrespective of whether their constitution is based on democratic or autocratic principles. While the ability of States to enforce their own regulatory policies has actually decreased under conditions of open frontiers, it is still existent. In various areas covered by Part III of this enquiry, it could be observed that States still make use of their regulatory powers, and they do not even appear to refrain from their use where the unilateral imposition of national rules turns out to be ineffective. There is still an inclination of the courts to identify numerous mandatory rules and principles of the lex fori with public policy or overriding mandatory provisions which have to be enforced at any cost. 766. Other observations are more encouraging, however: a human rights standard which – at least in part – is not considered to be specific to the lex fori, but as common to humanity or large portions of it; the requirement of a certain connection of the pending case with the forum State which makes the invocation of public policy legitimate; the possibility, in federal entities, to strike down an excessive invocation of the forum State’s public policy by the federal court system; finally, the growing inclination of the international community to take into account the imperative norms of other States. While bilateral conflict rules are often inappropriate in the latter field, the emergence of reverse unilateralism, i.e. unilateral conflict rules for foreign imperative norms, is a promising occurrence. It gives evidence of a growing awareness among States that in an open society it is not sufficient to insist on the implementation of their own values and principles, but that respect for the values and principles of other communities is a necessary response to the greater mobility of persons and economic resources that ensues as frontiers grow more permeable. What comes to the fore is a solidarity of States which is increasingly practiced in a unilateral and spontaneous way by the courts and authorities of individual countries. It is a supplement of the open society which preferably finds its expression in international instruments providing for coordination and cooperation, for mutual assistance and for harmonization of laws. While this important and growing movement has not been the object of this enquiry, it should be recalled at this stage since it is a counterpart to the growing mobility in open societies.

General Conclusion

1. Social Change – From Closed to Open Societies 767. as opposed to many other scholarly treatises, this enquiry has not dealt with choice-of-law rules as stand-alone precepts which may be contemplated, explored and discussed as elements of an isolated world of private international law principles. Instead, the starting point of the analysis has been the social and economic change which not only produces effects in the substantive law and policy-making of the numerous jurisdictions, but which has repercussions in the law of transnational private legal relations as well. Some of the relevant changes have initially triggered legal debates and a new orientation of the law at the national level before later raising new issues in the conflict of laws: the emergence of mass tourism, the transformation of the trade in negotiable instruments into a securities booking system, and surrogacy motherhood provide examples in this regard. The change that is characteristic for the present stage of the social and economic development at an international level can best be encapsulated in the term of the open society. It has an intellectual and a physical side. The intellectual aspect is the growing confrontation of individuals and peoples with the habits and laws of other communities; as a consequence, people have to reflect on the patterns of behavior of their own societies increasingly often. The crucial question is always whether and to what extent traditional values and norms should be defended or whether divergent patterns of behaviour can be tolerated. The physical aspect is the growing cross-border movement of persons and economic resources. Precipitated by the technological innovations since World War II, the migration of workers and refugees, the international trade in goods and services, the cross-border movement of capital for investment or other purposes, and the worldwide electronic communication of data have contributed to a shrinking of the world and to an interconnectedness of legal orders that has never been as intense in legal history. 768. The development outlined above has not been the first gobalization movement in the more recent history of the world. In the second half of the nineteenth century the tremendous progress in mobility initiated by the invention of the steam engine and the telegraph as well as the construction of steel vessels and railroads brought about increases of cross-border flows and

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General Conclusion

exchanges of similar intensity. But contrary to that first stage of globalization, the second one is underpinned in manifold ways by commitments of States under public international law. Moreover, the international community has created a large number of international organizations which pursue the general objective of stabilizing a system consisting of States with ever more permeable frontiers. A third difference relates to the direction of national politics: in Europe, the nineteenth century witnessed the building of nation-States from numerous smaller territorial components, and these States, regarded as sovereign, were considered as the foundation of the international community and its law, as the ultimate source of legitimate power, and as the sole point of reference for both internal and international activities of private and public actors.¹⁵⁹⁶ The consequence of the European model which gradually spread across the globe was seclusive States which cared more for their internal homogeneity than for peaceful co-existence and productive cooperation with others. In that world, cross-border relations were not primarily maintained and developed by individuals, but were State-driven and advanced by Governments where this was held opportune. It is simple to understand that the predominance of public actors could easily turn international relations into hostilities where this appeared as appropriate and useful under the circumstances. As compared with that State-centred world, the system created after World War II – which has expanded to the major part of the globe upon the collapse of the socialist systems in 1990 – is much more built on the initiative of, and incentives for, private actors. The legal underpinnings of the open society permit individuals and companies to seek their advantage in countries of their choice. 769. These basic orientations explain some consequences for the law governing private international relations. They can be ascertained if we do not limit ourselves to viewing the current situation of the law as presented by statute and precedent from a horizontal comparative perspective; we have in fact added the historical dimension which, for example, permits us to hold Hague conventions of the first generation adopted before World War I up against those of present times covering analogous subjects. Such a vertical comparison renders the changes of private international law visible; they can be interpreted as a response to the transformation of human societies from closed to open entities. The reference to social change entailed a further methodological specificity of this investigation: innovations in society usually lead, at a first stage and, within the individual jurisdictions, to responses of substantive law which take effect at different points in time, thereby creating new divergences and conflicts of laws. The solutions to such new conflicts will follow over time, but they are often discussed in light of the basic orientations of substantive law. This observation has in many areas

1596 Telling is the title of Mancini’s famous “prelezione”, cited supra footnote 171: about nationality as the foundation of international law.

General Conclusion

required a short analysis of the development of substantive law preceding that of choice of law. 2. A Change of Perspective – from Public to Private Ordering 770. As a first consequence of the transformation towards an open society, the focus of private international law shifts from public to private actors. In the past, choice-of-law rules, including many of the bilateral ones such as the lex loci delicti commissi or the lex rei sitae, were conceived of for the primary purpose of delineating the scope of the lex fori: the main purpose was to protect the system of domestic norms and values against intrusions from outside. Private international law was placed at the periphery of legal systems. In a world system that is basically geared to international exchange and mobility of individuals and economic resources, the focus of private international law changes. From a perspective centred in the individual jurisdictions, it is now turning into the internal private law of world affairs. The major objective now should rather be to encourage private actors to make use of the freedoms of cross-border movement granted by public law, including public international law and European law. The beneficial effect of these freedoms for the international community as a whole can be achieved more effectively as more private actors avail themselves of those rights and freedoms. Therefore, the primary question to be asked by the framers of conflict rules should now be: what do private actors who are basically prepared to engage in transnational activities, but who are confronted with the risks of a multi-jurisdictional world, expect from law in respect of the framework of cross-border mobility ? How can private international law reduce and minimize their concerns ? The principal objective must be to create legal certainty; it involves the need to look at the operation of law from the ex ante perspective which is relevant at the time people decide whether or not to engage in transnational activities. The ex post perspective which mainly serves in achieving individual justice post factum in the single case cannot be completely removed, but must retreat and is bound to lose significance. 771. A second observation concerning knowledge can be added. Conflict rules contain implicit assumptions about the relative significance of certain connections between persons, things, and facts on the one side and jurisdictions and legal systems on the other. Who has the relevant knowledge to substantiate those assumptions ? The State or the individual ? In times of closed societies, the better base of knowledge could perhaps be allocated to the respective State. That State could, for example, reasonably assume that foreign workers would return to their home countries once their visas or work permits expired; as a consequence, issues of personal status and family matters could be subject to the law of the country which they were citizens of. In a similar vein, in former times it could be assumed by a State (as well as anybody else) that a tort or delict was most closely connected with the country where it was committed, which was usually a single State in times

507

508

General Conclusion

of closed societies. But where commercial activities such as the operation of a nuclear power plant, the disclosure of information to worldwide capital markets by the issuer of securities or the distribution of television programmes through an international satellite and cable network potentially affect a large number of countries, it is the private operators who will often be in a much better position than any single State to know of the potential effects and to determine the closest or most relevant connection. 3. Multiple Forms and Expansion of Private Arrangements 772. The main consequence drawn from these observations is the growing significance of private arrangements for the containment of the risks flowing from international contacts and transactions. The private arrangements have been ascertained in multiple forms and increasingly in areas of the law where private autonomy was unknown before. The forms of private arrangements include the design of contractual relations which entail a chanelling of the risks inherent in cross-border transactions to professionals; the export trade and package travel have been outlined as examples. In this context it has become clear that the so-called lex mercatoria dealing with various aspects of the export trade does not replace traditional choice of law, but reduces its practical significance. 773. Party autonomy as the traditional expression of individual freedom in private international law has been analysed in respect of its theoretical basis. It is premised, with regard to cross-border transactions, on the fact that individuals have a superior ability, as compared with State conflict rules, to produce the legal certainty needed by all persons involved in a multi-jurisdictional environment. Accordingly, party autonomy has made its way into and through various areas of the law where it had never before been recognized: agency, assignment, in rem rights in movables, the trade in securities, intellectual property, certain personal status issues such as the capacity to enter into a contract or the enduring powers to represent incapable persons, marital property, divorce and succession. To postulate the recognition of party autonomy in all these areas would certainly be an extreme overstatement. But the enquiry has provided evidence for the assertion that party autonomy is making progress in the aforementioned areas, sometimes only in single jurisdictions, but sometimes on a broad front. 774. A third form of private choice consists of the so-called optional instruments introduced in the European Union; they permit the private parties involved to choose a common European model instead of the national law applicable under the relevant conflict of laws regime. Intellectual property and corporate law have been the areas where this novel method has so far been implemented, but the European Commission has suggested going ahead with similar legislation in the field of contracts. A fourth and final change of the conflict of laws has been analysed: the gradual advance, in some areas, of connecting factors which permit private actors to establish connections to the jurisdictions they prefer. The lex loci celebrationis in matters of form and

General Conclusion

the replacement of nationality with habitual residence in matters of personal status have been outlined. A gradual withdrawal of traditional principles on the evasion of law can be witnessed in this context. 4. Public Regulation 775. The enquiry has not elaborated on the conflict rules applicable in the absence of private arrangements, but rather focused on public regulations, i.e. State measures intended to prevail over private ordering. The open society does not generally undermine the ability of a State to implement public regulations. But it reduces their effectiveness in many situations. At closer sight, the situation of public actors is more complicated than that of private actors discussed above because States are operating in two legal worlds: the international community and the municipal legal order. In the international community States address other States; by orders directed at individuals and companies they use these private actors as hostages or levers to put pressure on foreign States. While courts cannot avoid obeying the pertinent orders of their own State, they are called upon to mitigate the effects of foreign orders on private parties, not by categorically rejecting those orders, but by distributing the risk of their interference. 776. In the context of municipal law, States issue regulations for two groups of purposes: as countervailing measures where the disparity between the parties does not ensure that contracts warrant the presumption of justice and efficiency, and for the protection of public goods and foundational principles of a society. In private international law, the first goal of counteracting economic disparities is reflected by a tendency towards bilateral conflict rules, such as those for consumer contracts and employment contracts which provide for a mix of party autonomy and the protection of the weaker party by a law the consumer or employee is expected to be more familiar with. In addition, States aim at the production of collective goods such as the stability of the currency or the protection of the national cultural heritage, but also the preservation of an alleged social model or the protection of moral values as could be seen in the context of repudiation and surrogate motherhood. States attain objectives of this second type by enforcing their public policy or adopting overriding mandatory provisions, both being merged in this enquiry under the term of imperative norms. On the one hand there appears to be an uncurbed inclination of courts and legislatures to unilaterally implement principles of the forum State regardless of the problems this may raise for the individuals involved. On the other, several encouraging developments allow for some optimism that individuals are less seriously caught between divergent national laws in the future. These developments include: the increasing invocation of a universal human rights standard instead of a local standard of the lex fori; the relativity of public policy, i.e. a consideration of the result of the application of foreign law instead of its abstract rules and principles, and the requirement of a certain connection of the pending case with the forum State so as to make the enforcement of public policy legitimate; the possibil-

509

510

General Conclusion

ity, in federal entities, to strike down an excessive invocation of the forum State’s public policy; and finally, a growing inclination of the courts in many countries to take into account the imperative norms of other States. 5. Paradigm Europe 777. Europe has been the cradle of private international law. The founding fathers of the discipline – d’Argentré and Dumoulin, Voet and Huber, Savigny and Mancini (to name only a few) – they all conceived of conflict rules in light of the European situation of small jurisdictions which were in permanent contact with each other. Many countries followed the European model of bilateral conflict rules beginning in the nineteenth century. But in the twentieth century, European private international law gradually lost much of its model character. Unilateral thinking started to prevail. Governmental interests became more important than the protection of private expectations. It is symptomatic that the Hague Conference, which was an almost exclusively European organization at the time, did not achieve a single meaningful convention in the interwar period. 778. The onset of European federalism after World War II unleashed a new movement of scholarly, judicial and legislative activities aimed at safeguarding legal certainty for individuals in a multi-jurisdictional environment. The Brussels and Rome Conventions of 1968¹⁵⁹⁷ and 1980¹⁵⁹⁸ are milestones of progress along this path. When the Treaty of Amsterdam finally bestowed legislative power in matters of private international law on the European Union,¹⁵⁹⁹ a new era of the discipline began. Choice-of-law rules are now enacted and interpreted at a supranational level by the institutions of the EU which are fundamentally neutral vis-à-vis the national demands of Member States that their respective laws be applied. The great opportunity offered by federal structures is the existence of a potential referee who adjudicates on the rivalry of Member States. While federal institutions in the United States – both Congress and the Supreme Court – have essentially declined to perform such a function,¹⁶⁰⁰ the European institutions have quickly occupied the new field of competence. The resulting legislation is characterized by a bilateral spirit to a much greater degree than could be expected from any national statute on private international law. The new activities have restored the model character of European private international law as can be inferred from numerous statutes on the matter adopted outside the Union. Hopefully, the European activities and their spirit of international cooperation and tolerance can be transposed to the universal level, perhaps furthered by the efforts of the Hague Conference, an institution which has become truly universal in more recent years. 1597 See supra footnote 266. 1598 See supra footnote 345. 1599 Treaty of Amsterdam of 2 October 1997, OJ 1997 C 340; see supra footnote 48. 1600 See Basedow, Tulane L. Rev. 82 (2008), 2125-2129.

List of Statutory Materials¹

International Conventions a)

Multilateral

1883

Paris Convention for the Protection of Industrial Property, done on 20 March 1883, 828 UNTS 305 (available at the website of the World Intellectual Property Organization, see http://www.wipo. int/treaties/en) 123, 355, 356, 359, 360 Art. 2 356

1886

Berne Convention for the Protection of Literary and Artistic Works, done on 9 September 1886, 1161 UNTS 3 (available at the website of the World Intellectual Property Organization, see http://www.wipo.int/treaties/en) 123, 355, 356, 360, 704 Art. 5, para. 2 356 Art. 9 123

1889

Treaty on International Private Law of Montevideo (Tratado de Derecho Civil Internacional) done at Montevideo on 12 February 1889, printed in Universidad Nacional de La Plata, ed., Los Tratados de Montevideo de 1889 y su interpretacion judicial, La Plata 1940, p. 15 189 Art. 34-38 189 Annex to the Convention (II) with Respect to the Laws and Customs of War on Land, done at The Hague on 29 July 1899, text as amended available on the website of the International Committee of the Red Cross, see http://www.icrc.org/ihl.nsf/FULL/150 561 Art. 42 et seq. 561

1

References are to paragraphs including pertinent footnotes.

512

List of Statutory Materials

1902

Convention pour régler les conflits de lois en matiére de marriage, done at The Hague on 12 June 1902 (exclusively drawn up in French), available at the website of the Hague Conference Art. 1 Art. 2 Art. 9

486 486 707 491

Convention pour régler les conflits de lois et de juridictions en matière de divorce et de séparations de corps, done at The Hague on 12 June 1902 (exclusively drawn up in French), available at the website the Hague Conference 486, 506, 512 Art. 1 486, 506, 707 Art. 2 506 Art. 5 506, 512 Art. 6, para. 2 506 Art. 7 506 Art. 8 486, 538 Art. 9, para. 2 538 Art. 10 492 1905

Convention concernant les conflits de lois relatifs aux effets du mariage sur les droits et les devoirs des époux dans leurs rapports personnels et sur les biens des époux (drawn up exclusively in French), done at The Hague on 17 July 1905, available at the website of the Hague Conference 486, 488 Art. 1 486 Art. 5 733 Art. 9 486 Art. 10 538 Convention pour régler la tutelle des mineurs (drawn up exclusively in French), done at The Hague on 20 July 1905, available at the website of the Hague Conference 486

1910

Convention for the Unification of Certain Rules of Law with Respect to Collisions between Vessels, done at Brussels on 23 September 1910, authoritative French text in Reichsgesetzblatt 1913, 49 539 Art. 12 539 Convention for the Unification of certain Rules of Law Respecting Assistance and Salvage at Sea, done at Brussels on 23 September 1910, authoritative French text in Reichsgesetzblatt 1913, 66 Art. 15 539

List of Statutory Materials

1924

International Convention for the Unification of Certain Rules Relating to Bills of Lading, with Protocol of Signature, signed at Brussels, August 25, 1924, 120 LNTS 155 127, 159 International Convention for the Unification of Certain Rules relating to the Limitation of the Liability of Owners of Seagoing Vessels, with Protocol of Signature, signed at Brussels on 25 August 1924, authoritative French text and English translation in 120 LNTS 123 539 Art. 12 539

1926

Convention internationale relative à la circulation automobile, done at Paris on 24 April 1926, text in the Swiss collection Recueil systématique (RS) 0.741.11 500 Art. 7 500

1930

Convention Providing a Uniform Law for Bills of Exchange and Promissory notes, signed at Geneva on 7 June 1930, 143 LNTS 257 127 Convention Providing a Uniform Law for Checks, signed at Geneva on 19 March 1931, 143 LNTS 355 127

1933

Convention on Rights and Duties of States, adopted by the 7th International Conference of American States, done at Montevideo on 26 December 1933, 165 LNTS 19 551 Art. 1 551

1945

Charter of the United Nations, done at San Francisco on 26 June 1945, available at the website of the United Nations: http://www. un.org/en/documents/charter Art. 2, no. 1 532 Art. 41 565 Articles of Agreement of the International Monetary Fund, signed and entered into force on 27 December 1945 (Bretton Woods Agreements), 2 UNTS 39 743 Art. VI (3) 79 Art. VIII (2) (b) 743, 744, 745, 764

1947

General Agreement on Tariffs and Trade (GATT) 1947, available at the website of the WTO 72, 73, 75, 564

1948

Havana Charter of the International Trade Organization (ITO), Havana, 24 March 1948, available at the website of the WTO

72

513

514

List of Statutory Materials

1950

Universal Declaration of Human Rights, 10 December 1948, General Assembly, Official records, III, Resolutions, UN doc. A/810, p. 71 Art. 1 Art. 17 Art. 28

732 248 252 252

European Convention for the Protection of Human Rights and Fundamental Freedoms, signed at Rome on 4 November 1950, 213 UNTS 22 Art. 8

83

Convention for the Protection of Human Rights and Fundamental Freedoms, done at Rome on 4 November 1950, as amended by Protocol no. 11, Restructuring the Control Machinery Established thereby, done at Strasbourg on 11 May 1994, 2061 UNTS 7 87, 732 Art. 34 87 1951

1955

Convention relating to the Status of Refugees, signed at Geneva on 28 July 1951, 189 UNTS 150

82

Convention on the Law Applicable to International Sales of Goods, done at the Hague on 15 June 1955, English translation of the French authentic text in 1964 UNTS 148 538 Article 3, para. 2 179 Convention relating to the Settlement of the Conflicts Between the Law of Nationality and the Law of Domicile of 15 June 1955, drawn up in French only, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, p. 31 490 Art. 5 490

1956

Convention on the Contract for the International Carriage of Goods by Road (CMR), signed at Geneva on 19 May 1956, 399 UNTS 189 159 Convention concernant la reconnaissance de la personnalité juridique des sociétés, associations et fondations étrangères, done at The Hague on 1 June 1956, Hague Conference on Private International Law, ed., Collection of Conventions 1951 – 2009, The Hague 2009, p. 34; only the French text is authoritative 515 Convention on the Law Applicable to Maintenance Obligations towards Children, done at The Hague on 24 October 1956, Hague

List of Statutory Materials

Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 38 et seq. 411, 413, 539 Art. 6 538 1957

Convention on the Recovery Abroad of Maintenance, done at New York on 20 June 1957, 268 UNTS 3 with 65 411

1958

Convention Concerning the Recognition and Enforcement of Decisions relating to Maintenance Obligations towards Children, done at The Hague on 15 April 1958, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 41 et seq. 411

1959

Treaty between the Federal Republic of Germany and Pakistan for the Promotion and Protection of Investment, done at Bonn on 25 November 1959, BGBl. 1961, II-793

78

1960

Convention on the Organisation of Economic Cooperation and Development, done at Paris on 14 December 1960, available at the website of the OECD http://www.oecd.org/ Art. 5 (a) 80

1961

Organisation of Economic Cooperation and Development, OECD Code of Liberalisation of Capital Movements 1961, available at the website of the OECD http://www.oecd.org/ 80 Art. I 80 Convention Concerning the Powers of Authorities and the Law Applicable in Respect of the Protection of Infants of 5 October 1961, English translation in 1969 UNTS 145, also available at the website of the Hague Conference Art. 1 Art. 2 Art. 13, para. 3

487 487 487 538

Hague Convention on the Conflict of Laws relating to the Form of Testamentary Dispositions of 5 October 1961, in: Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 52 et seq. 476, 538 Art. 6 538 Art. 7 716 1963

Vienna Convention on Consular Relations, done at Vienna on 24 April 1963, 596 UNTS 261 Art. 36, para. 2 533

515

516

List of Statutory Materials

1964

Convention relating to a Uniform Law on the International Sale of Goods (ULIS) of 1 July 1964, English and French text in 834 UNTS 107 469 Art. 5 469

1965

Convention on the Settlement of Investment Disputes between States and Nationals of Other States, signed at Washington on 18 March 1965, 575 UNTS 159 Art. 25

87 87

1966

International Covenant on Civil and Political Rights, signed at New York on 16 December 1966, 999 UNTS 171 and 1057 UNTS 4 82 Art. 12 (2) 82, 83 Art. 23 83

1967

Protocol Relating to the Status of Refugees, signed at Geneva on 31 January 1967, 606 UNTS 267

82

Convention establishing the World Intellectual Property Organization, done at Stockholm on 14 July 1967, 828 UNTS 3 Art. 2 (viii) 352 1968

Convention on the Mutual Recognition of Companies and Bodies Corporate, done at Brussels on 29 February 1968, Bull. EC 1969 Supplement no. 2, p. 7-14; the authoritative languages of the convention are Dutch, French, German and Italian 131, 643, 778 Art. 3 515 Art. 13-15 643 Brussels Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, OJ 1972 L 299/32, English translation in OJ 1978 L 304/36 Art. 3 Art. 13-15 Art. 16 No. 4 Art. 27 No. 4

131 643 358 507

Convention on Road Traffic, done at Vienna on 8 November 1968 under the auspices of the Economic and Social Council of the United Nations, 1042 UNTS 17 Art. 41 et seq. 500 1969

Vienna Convention on the Law of Treaties, done at Vienna on 23 May 1969, 1155 UNTS 331 Art. 26 224

List of Statutory Materials

1970

International Convention on Travel Contracts (CCV), concluded at Brussels on 23 April 1970, 1275 UNTS 540 173, 175 Art. 2 175 Art. 40, para. 1 (a) 175 Convention on the Recognition of Divorces and Legal Separations, concluded on 1 June 1970, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, p. 134 506, 512 Art. 2 506, 512 Art. 6, para. 2 506 Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property, done at Paris on 14 November 1970, 823 UNTS 231 564, 574, 747, 754 Art. 1 747

1971

Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, done on 1 February 1971, see Hague Conference on Private International Law, ed., Collection of Conventions 1951 – 2009, The Hague 2009, p. 112 510 Hague Convention of 4 May 1971 on the Law Applicable to Traffic Accidents, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 148 et seq. Art. 3(b) 301 Art. 11 538

1973

Convention on International Trade in Endangered Species of Wild Fauna and Flora, signed at Washington, D.C. on 3 March 1973, 993 UNTS 243 564 Convention on the Law applicable to Products Liability, concluded at The Hague on 2 October 1973, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, p. 201 297 Art. 1 297 Art. 11 538 Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations, done at The Hague on 2 October 1973, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 212 et seq. 411, 413 Art. 8 413

517

518

List of Statutory Materials

Convention on the Law Applicable to Maintenance Obligations, done at The Hague on 2 October 1973, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 230 et seq. 24, 379, 411, 488, 538, 539 Art. 3 538 Art. 4 488 Art. 16 24, 379 Convention on the Grant of European Patents, done at Munich on 5 October 1973, 1065 UNTS 199 363 Art. 60, para. 1 363 1974

Convention (No. 139) concerning Prevention and Control of Occupational Hazards Caused by Carcinogenic Substances and Agents, adopted by the General Conference of the International Labour Organization at its 59th session, Geneva, 24 June 1974, 1010 UNTS 5 122 International Convention for the Safety of Life at Sea (SOLAS) concluded in London on 1 November 1974, 1184 UNTS 277 22 Art. VIII 22 Annex Art. 17 500

1975

Inter-American Convention on the Legal Regime of Powers of Attorney to be Used Abroad, adopted at Panama on 30 January 1975, available on the website of the Organisation of American States 268

1976

Convention on Limitation of Liability for Maritime Claims, 1976, done at London on 19 November 1976, 1456 UNTS 221 127, 539 Art. 15 127 Art. 15, para. 1 539

1978

Convention on Celebration and recognition of the Validity of Marriages of 14 March 1978, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, p. 256 487, 502 Art. 3 487 Art. 7-15 502 Convention on the Law Applicable to Matrimonial Property Regimes, made on 14 March 1978, in: Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 242 et seq. 386, 390, 488 Art. 2 390 Art. 3 390 Art. 4 390, 488

List of Statutory Materials

Art. 6 Art. 9, para. 2 Art. 11

390 390 472

Convention of 14 March 1978 on the Law Applicable to Agency, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 268 et seq. 268 Art. 4 268, 538 Art. 11-13 268 Art. 14 268, 270, 271, 272 Art. 15 272 Art. 17 538 United Nations Convention on the Carriage of Goods by Sea, done at Hamburg on 31 March 1978 (so-called Hamburg Rules), 1695 UNTS 3 127 Art. 2 127 1979

Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards, done at Montevideo on 8 May 1979, available at the website of the Organization of American States 508, 509 Inter-American Convention on Conflicts of Laws Concerning Commercial Companies, done at Montevideo on 8 May 1979, available at the website of the Organization of American States 516 Art. 2 516 Art. 3 516 Inter-American Convention on General Rules of Private International Law, done at Montevideo on 8 May 1979, available at the website of the Organization of American States Art. 6 524 Art. 6, para. 2 525 Inter-American Convention on the Domicile of Natural Persons in Private International Law, done at Montevideo on 8 May 1979, available at the website of the Organisation of American States 485

1980

United Nations Convention on Contracts for the International Sale of Goods, done at Vienna on 11 April 1980, 1489 UNTS 3 124, 127, 448, 469 Art. 1 127 Art. 6 124 Art. 7, para. 2 468

519

520

List of Statutory Materials

Art. 9, para. 1

153

Convention on the Law Applicable to Contractual Obligations, done at Rome on 19 June 1980, OJ 1980 L 266/1; consolidated version in OJ 2005 C 334/1 131, 185, 278, 279 611, 638, 639, 642, 662, 668, 674, 682, 698, 778 Art. 1, para. 2(h) 639 Art. 3 278 Art. 3, para. 1 185 Art. 4 278 Art. 5 611, 615, 626, 637, 643 Art. 5, para. 1 611, 615 Art. 5, para. 2 618 Art. 5, para. 2 first indent 618 Art. 5, para. 2 third indent 618 Art. 6 650, 662, 663, 669, 670, 671, 672, 676 Art. 6, para. 2 667 Art. 6, para. 2 (a) 669 Art. 7 637, 639, 677, 681, 764 Art. 7, para. 1 583, 584, 585, 680, 681, 759 Art. 7, para. 2 637, 638, 717 Art. 8, para. 1 599 Art. 12 278, 279 Art. 12, para. 1 278 Art. 12, para. 2 278 Art. 22 585 Hague Convention on the Civil Aspects of International Child Abduction of 25 October 1980, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 280 et seq. 132 Art. 6, 7 132 1982

United Nations Convention on the Law of the Sea (UNCLOS), done at Montego Bay on 10 December 1982, 1833 UNTS 2 Art. 20 No. 2 87 Art. 94 674 Art. 92 543 Art. 187 (c) 87

1984

Inter-American Convention on Personality and Capacity of Juridical Persons in Private International Law, done at La Paz on 24 May 1984, available on the website of the Organization of American States 516

List of Statutory Materials

Inter-American Convention on Jurisdiction in the International Sphere for the Extraterritorial Validity of Foreign Judgments, done at La Paz on 24 May 1984, available on the website of the Organization of American States 508 1985

Convention concerning International Carriage by Rail (COTIF), concluded at Berne on 9 May 1985, 1397 UNTS 2, Appendix B: Uniform Rules Concerning the Contract for International Carriage of Goods by Rail (CIM) 1397 UNTS 112; amended by a Protocol, done at Vilnius on 3 June 1999 that took effect on 1 July 2006, available at the website of the Intergovernmental Organisation for International Carriage by Rail, http://www.otif.org 159 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, signed at New York on 10 June, 1985, 330 UNTS 3 182 Art. V (1) (c) 182 Convention on the Law Applicable to Trusts and on their Recognition, concluded on 1 July 1985, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 330 et seq. 504 Art. 11 504 Art. 16, para. 1 717

1986

Convention on the Law Applicable to contracts for the International Sale of Goods, done on 22 December 1986, in Hague Conference on Private International Law, ed., Collection of Conventions 1951 – 2009, The Hague 2009, p. 344 717 Art. 17 717

1988

Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, done at Lugano on 16 September 1988, OJ 1988 L 319/9 132 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, concluded at Vienna on 20 December 1988, 1582 UNTS 164 564

1989

International Convention on Salvage, done at London on 28 April 1989, 1953 UNTS 194 Art. 2 539 Inter-American Convention on Support Obligations adopted by the 4th Inter-American specialised Conference on Private Interna-

521

522

List of Statutory Materials

tional Law, Montevideo on 15 July 1989, RabelsZ 56 (1992), 157 et seq. 411 Convention on the Law Applicable to Succession to the Estates of Deceased Persons concluded on 1 August 1989, in: Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 358 et seq. 424, 425, 426, 429, 717 Art. 3 424 Art. 5, para. 1 425 Art. 6 425 Art. 6, 2nd sentence 426 Art. 7, para. 1 424 Art. 24 426 Convention on the Rights of the Child, signed at New York on 20 November 1989, UNTS 1577, 3 Art. 10

83

1993

Hague Convention on Protection of Children and Co-operation in Respect of Inter-country Adoption of 29 May 1993, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 375 et seq. 132 Art. 6 et seq. 132

1994

Inter-American Convention on the Law Applicable to International Contracts, done at Mexico on 17 March 1994, available at the website of the Organisation of American States Art. 7 185 Marrakesh Agreement establishing the World Trade Organization, concluded at Marrakesh on 15 April 1994, 1867 UNTS 3 69, 72, 123, 359 Art. II (2) 123 General Agreement on Trade in Services (GATS) (Annex 1B to the WTO Treaty of 1994), 1869 UNTS 183 69, 74, 75, 76, 652, 688 Art. I (2) 74 Art. II 75 Art. III 75 Art. V 75 Art. XVI 75 Art. XVII 75 Art. XXIV 75 General Agreement on Tariffs and Trade (GATT) (Annex 1A to the WTO Treaty of 1994), 1867 UNTS 190 72, 73, 75, 564, 748

List of Statutory Materials

Art. I Art. II Art. III Art. V Art. XI Art. XX Art. XXI Art. XXIV Art. XXVIIIbis

73 73 73, 75 75 73 564, 748 565, 567 75 73

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of 1994, 1869 UNTS 299 and also OJ 1994 L 3 at pp. 214-233 (Annex 1C of the Marrakesh Agreement establishing the World Trade Organization, signed at Marrakesh on 15 April 1994, 1867 UNTS 1, 299; OJ 1994 L 336/214) 123, 360 Art. 1, para. 2 352 Art. 2 360 Art. 2 (1) 123 Art. 9 360 Understanding on Rules and Procedures Governing the Settlement of Disputes (Annex 2 to the WTO Treaty), 1869 UNTS 401 Art. 23, para. 2(c) 586 1995

UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects, done at Rome on 24 June 1995, 2421 UNTS 457 747, 751, 752, 753 Art. 2 747 Art. 3, para. 2 751 Art. 4 753 Art. 5-7 753 Art. 6 753 Convention on Insolvency Proceedings, done at Brussels on 23 November 1995, Int. Leg. Mat. 35 (1996), 1223 133

1996

Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children of 19 October 1996, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 396 et seq. 132, 487 Art. 5 487 Art. 15 487 Art. 20 538, 540 Art. 29 et seq. 132

523

524

List of Statutory Materials

1999

Convention for the Unification of Certain Rules for International Carriage by Air, done at Montreal on 28 May 1999, 2245 UNTS 309 127, 159, 465, 469 Art. 1 465 Art. 1 (2) 127 Art. 26 469 Art. 49 469 Convention concerning International Carriage by Rail (COTIF), concluded at Berne on 9 May 1985, 1397 UNTS 2, Appendix B: Uniform Rules Concerning the Contract for International Carriage of Goods by Rail (CIM) 1397 UNTS 112 as amended by a Protocol, done at Vilnius on 3 June 1999 that took effect on 1 July 2006, available at the website of the Intergovernmental Organisation for International Carriage by Rail, http://www.otif.org 159

2000

Convention on the International Protection of Adults concluded on 13 January 2000, Hague Conference on Private International Law, Collection of Conventions 1951 – 2009, The Hague 2009, pp. 426 et seq. 268, 376, 377, 378 Art. 15 377

2001

Convention on the Contract for Carriage of Goods by Inland Waterway (CMNI), done at Budapest on 22 June 2001, available at the website of the Central Commission for the Navigation of the Rhine: http://www.ccr-zkr.org/Documents for downloadingConventions 159 United Nations, Security Council, Resolution 1373 (2001) adopted on 28 September 2001, S/RES/1373 (2001) 565 No. 1(d) 565 United Nations Convention on the Assignment of Receivables in International Trade, done at New York on 12 December 2001 (United Nations Convention on the Assignment of Receivables in International Trade, New York 2004) 280, 282

2005

Convention on Choice of Court Agreements, concluded on 30 June 2005, in Hague Conference on Private International Law, ed., Collection of Conventions 1951 – 2009, The Hague 2009, pp. 477 et seq. 739

2006

Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary, done on 5 July 2006, Hague

List of Statutory Materials

Conference on Private International Law, ed., Collection of Conventions 1951 – 2009, The Hague 2009, pp. 454 et seq. 349, 350, 351 Art. 2, para. 1 350 Art. 4 350 Art. 4, para. 1(a) 350 Art. 5 350 Art. 11, para. 2 717 2007

Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, done at Lugano on 30 October 2007, OJ 2007 L 339/3 132 Art. 2 13 Art. 5 13 Art. 6 13 Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance, done at The Hague on 23 November 2007, Collection of Conventions 1951 – 2009, pp. 502 et seq., not yet in force 411, 413 Art. 5 413 Protocol on the Law Applicable to Maintenance Obligations, done at The Hague on 23 November 2007, Collection of Conventions 1951 – 2009, pp. 564 et seq. 411, 413, 437, 450, 488 Art. 2 538, 540 Art. 3 413 Art. 4 413 Art. 5 488 Art. 7 414 Art. 8 414, 415 Art. 8, paras. 3 to 5 415 Art. 8, para. 3 415, 416 Art. 8, para. 4 416 Art. 8, para. 5 416 Art. 15 540

b)

bilateral

1899

Convention between Belgium and France on Jurisdiction and the Validity and Enforcement of Judgments, Arbitration Awards and Authentic Instruments, signed at Paris on 8 July 1899, Moniteur Belge 30-31 July 1900 (cited after http://ec.europa.eu/civiljustice/ publications/docs/report_conflits_belgique.pdf) 133

1925

Convention between Belgium and the Netherlands on Jurisdiction, Bankruptcy, and the Validity and Enforcement of Judgments,

525

526

List of Statutory Materials

Arbitration Awards and Authentic Instruments, signed at Brussels on 28 March 1925, Moniteur Belge 27 July 1929 (cited after http:// ec.europa.eu/civiljustice/publications/docs/report_confl its_belgique.pdf) 133 1941

USA-United Kingdom Atlantic Charter, 14 August 1941, available at the website of the NATO, http://www.nato.int

71

1955

Treaty of Friendship, Commerce and Navigation between the United States of America and the Federal Republic of Germany signed at Washington on 29 October 1955, United States Treaties and Other International Agreements (TIAS) 3062 = BGBl. 1956, II-487 Art. 25, para. 5 516

1955

Germany – Italy: Vereinbarung zwischen der Regierung der Bundesrepublik Deutschland und der Regierung der italienischen Republik über die Anwerbung von italienischen Arbeitskräften nach der Bundesrepublik Deutschland of 20 December 1955, as amended on 20 February 1961, printed in Bundesarbeitsblatt, 1962, 71 84 Art. 16 84

1959

Treaty of 25 November 1959 between the Federal Republic of Germany and Pakistan for the Promotion and Protection of Investments, signed at Bonn, BGBl. 1961, II-793

78

1961

Germany and Turkey Vereinbarung vom 30.10.1961 zur Regelung der Vermittlung türkischer Arbeitnehmer nach der Bundesrepublik Deutschland, Bundesarbeitsblatt 1962, 69 84 Exchange of memoranda by the German and the Turkish governments of 20 July and 30 September 1964, Bundesanzeiger 1968, no. 22, p. 1 with the text of the agreement as amended 84

1979

Vertrag zwichen der Bundesrepublik Deutschland und der Republik Österreich auf dem Gebiet des Kunkurs- und Vergleichs-(Ausgleichs)rechts (German-Austrian Bankruptcy Treaty) of 25 May 1979, BGBl. 1985, II-411 133

1995

Agreement between the Government of the United States of America and the Commission of the European Communities regarding the Application of their Competition Laws, OJ 1995 L 95/47 597

2010

Germany – France: Convention on the Creation of an Optional Marital Property Regime (Gesetz vom 15. März 2012 zu dem Abkommen vom 4. Februar 2010 zwischen der Bundesrepublik Deutschland und der Französischen Republik über den Güter-

List of Statutory Materials

stand der Wahl-Zugewinngemeinschaft, BGBl. 2012, II-178 at p. 180 for the text of the agreement in both French and German) Art. 1 Art. 3, para. 3 Art. 21 Explanatory Report, German Bundesrat, Bundesrats-Drucksache 67/11 of 4 February 2011 c)

470 472 470 471 471

Proposals and other documents Lex mercatoria

143 et seq., 154, 193, 267, 495, 529, 772

1928

Código Bustamante 1928 (Spanish version available on the website of the Organization of American States) 485 Art. 7 485

1963

Union Internationale du Notariat Latin, Resolution of the 1963 Congress, reproduced in Alfred von Overbeck, “La professio juris comme moyen de rapprocher les principes du domicile et de la nationalité en droit international privé”, in Liber amicorum Baron Louis Frederiq, Vol. 2, Gent 1965, pp. 1085-1086 424

1967

Institut de droit international, Resolution of 15 September 1967, Annuaire de l’Institut de droit international 52 II (1967), p. 558 no. 2 424

1968

Draft International Convention on the Travel Agency Contract (CCV), UNIDROIT – Yearbook 1967-1968, Vol. I, pp. 66-139 170

1985

UNCITRAL Model Law on International Commercial Arbitration 1985, with amendments as adopted in 2006, Vienna 2008 87, 128 Art. 28 195 Art. 34 (2)(a)(iii) 182

1991

Institut de droit international, The international sale of works of art from the angle of the protection of the cultural heritage, Institut de droit international, Annuaire, Vol. 64, t. II – Session de Basle 1991, Paris 1991, pp. 402 et seq., also printed in Erik Jayme, Nationales Kunstwerk und internationales Privatrecht – Vorträge, Aufsätze, Gutachten, Heidelberg 1999, pp. 155-157 747, 752 Art. 2 752 Art. 3 752

2002

Draft Articles on responsibility of states approved by the International Law Commission as laid down in Resolution 56/83 of the

527

528

List of Statutory Materials

General Assembly of the United Nations of 28 January 2002 (A/ RES/56/83) Art. 49, para. 2 586 2004

UNIDROIT, UNIDROIT Principles of international commercial contracts 2004, Rome 2004 128, 193 Art. 1.3 224 Art. 1.11 271

2007

International Chamber of Commerce, Uniform Customs and Practice for Documentary Credits in 1933; current version: Commentary on UCP 600 – Article-by-article analysis by the UCP 600 Drafting Group, Paris 2007 163, 164, 165 Art. 1 164 Art. 3 165 Art. 19 165 Art. 28 lit. e) 167 Art. 28 lit. f) ii 167 Art. 36 165

2008

The American Law Institute, Intellectual Property – Principles Governing Jurisdiction, Choice of Law, and Judgments in Transnational Disputes, St. Paul, MN 2008 §§ 301 et seq. § 311, para. 2 § 312, para. 2 § 313 (1)(b), (c)

2010

364 364 364 364

CIDIP VII program, Proposal of Buenos Aires for an inter-American Convention on Consumer Contracts, printed in the annex to the article of Claudia Lima Marques and María Laura Dalaloye, “La propuesta ‘Buenos Aires’ de Brasil, Argentina y Paraguay: El más reciente avance en el marco de la CIDIP VII de proteccíon de los consumidores”, Revista de direito do consumidor 19 (No. 73, 2010), 224-265, pp. 249 et seq. 627, 642 Art. 4 627 Art. 4, para. 2 627 International Chamber of Commerce, ed., Incoterms 2010 (ICCPublication 715 ED)) 150, 151, 152, 153, 154, 576 Definition A2 576 CIF Clause A 3 b) 167 CIF Clause A 3 b) para. 3 167

List of Statutory Materials

UNCITRAL Legislative Guide on Secured Transactions, New York, 2010 128 UNCITRAL Legislative Guide on Secured Transactions – Supplement on Security Rights in Intellectual Property Rights, New York, 2011 358 Recommendation 248 358 Recommendation 248 (b) 358 2011

Hague Conference, Permanent Bureau, Preliminary Document, Private international law issues surrounding the status of children, including issues arising from international surrogacy arrangements, no. 11 of March 2011, available on the website: http://www. hcch.network in progressgeneral affairs 710

2013

Hague Conference, Permanent Bureau, Preliminary Document, Choice of Law in International Contracts: Draft Hague Principles and Future Planning, available on the website: http://www.hcch. network in progressInternational Contracts, Prel. Doc. No. 6 of February 2013 195, 196, 722 Art. 2, para. 4 196 Art. 11 722

EU Law a)

Primary Law

1957

Treaty on the Establishment of the European Economic Community (Rome, 25 March 1957), 298 UNTS 14 449, 755 Art. 7 484 Art. 85 761 Art. 220 131 Art. 235 454

1972

Protocol no. 3 on the Channel Islands and the Isle of Man, attached to the Act concerning the conditions of accession [of Denmark, Ireland und the United Kingdom] and the adjustments to the Treaties of 22 January 1972, OJ 1972 L 73/164 636

1997

Treaty of Amsterdam of 2 October 1997, OJ 1997 C 340

25, 449, 778

Protocol (no. 5) on the Position of Denmark (1997), OJ 2006 C 321 E/201 584

529

530

List of Statutory Materials

2000

Charter of Fundamental Rights of the European Union, OJ 2012 C 326/391 730

2006

Treaty Establishing the European Community, consolidated version, OJ 2006, C 321 E/37 Art. 65 381, 584 Art. 69 584 Art. 81 228, 763 Art. 82 763

2007

Treaty on European Union as amended by the Treaty of Lisbon, consolidated version in OJ 2010 C 83/13 Art. 5, no. 1 448 Treaty on the Functioning of the European Union (TFEU), consolidated version in OJ 2010 C 83/47 688, 730 Art. 18 403, 407, 484 Art. 28 69 Art. 34 69, 356, 340 Art. 35 69, 356 Art. 36 458, 748 Art. 49 69, 114 Art. 50, para. 1 450 Art. 54 114, 455, 457, 519 Art. 56 69, 682 Art. 61 685 Art. 63 69, 77, 455 Art. 64 455 Art. 81 18, 25, 381, 498, 584, 585 Art. 81, para. 2 (c) 685 Art. 81, para. 3 391 Art. 91 451 Art. 100 451 Art. 101 451, 756, 761, 763 Art. 101, para. 2 756 Art. 102 763 Art. 114 127, 451, 454, 460 Art. 115 451 Art. 118 460 Art. 169 609 Art. 215 566, 572 Art. 267 684 Art. 288 450 Art. 326 et seq. 381, 391, 407, 460 Art. 352 454, 460

List of Statutory Materials

Art. 355, para. 5(c)

636

Protocol (no. 21) on the Position of the United Kingdom and Ireland in Respect of the Area of Freedom, Security and Justice, OJ 2010 C 83/295 Art. 1 585 Art. 3 585 Protocol (no. 22) on the Position of Denmark, consolidated version in OJ 2010 C 83/299 and 302 584 Art. 4 584 b)

Secondary Law

1964

Council Directive 64/224/EEC of 25 February 1964 concerning the attainment of freedom of establishment and freedom to provide services in respect of activities of intermediaries in commerce, industry and small craft industries, Official Journal (English Special Edition), series I, chapter 1963-1964, p. 126 178

1980

Council Directive 80/1263/EEC of 4 December 1980 on the introduction of a Community driving licence, OJ 1980 L 375/1 500 Art. 5, para. 2 500

1985

Council Regulation (EEC) no. 2137/85 of 25 July 1985 on the European Economic Interest Grouping (EEIG), OJ 1985 L 199/1 Recital 2 Art. 2 Art. 4, para. 2 Art. 6 Art. 12 Art. 13 Art. 14 Art. 14, para. 4

454 454 456 455 456 456 456 456 456

Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises, OJ 1985 L 372/31 Art. 5 636 1986

Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, OJ 1986 L 382/17 178, 705, 723 Art. 17 to 19 705

531

532

List of Statutory Materials

1988

Council Directive 89/48/EEC of 21 December 1988 on a general system for the recognition of higher-education diplomas awarded on completion of professional education and training of at least three years’ duration, OJ 1989 L 19/16 500 Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trademarks, OJ 1989 L 40/1 460

1990

Council Directive 90/314/EEC of 30 June 1990 on package travel, package holidays and package tours, OJ 1990 L 158/59 174, 175, 218 Art. 1 175 Art. 2, para. 1 174 Art. 7 175

1993

Council Directive 93/7/EEC of 15 March 1993 on the return of cultural objects unlawfully removed from the territory of a Member State, OJ 1993 L 74/74; Article 1 Council Regulation (EC) no 116/2009 of 18 December 2008 on the export of cultural goods (codified version), OJ 2009 L 39/1 747, 753 Art. 1, para. 1 747 Art. 12 751 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993 L 95/29 604 Art. 2 (c) 312 Art. 3 313 Art. 6, para. 2 217, 635, 641 Art. 8 610 Council Regulation (EC) no. 40/941 of 20 December 1993 on the Community Trademark, OJ 1994 L 11/1 460

1994

Council Regulation (EC) no. 2100/94 of 27 July 1994 on Community plant variety rights, OJ 1994 L 227/1 as amended 460 Directive 94/47/EC of the European Parliament and of the Council of 26 October 1994 on the protection of purchasers in respect of certain aspects of contracts relating to the right to use immovable property on a timeshare basis, OJ 1994 L 280/83 Art. 9 635, 641

1996

Council Regulation (EC) no. 2271/96 of 22 November 1996 protecting against the effects of the extra-territorial application of legisla-

List of Statutory Materials

tion adopted by a third country, and actions based therefrom or resulting therefrom, OJ 1996 L 309/1 592 Art. 6, para. 2, 2nd sentence 593 Art. 6, para. 3 592 Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 on the posting of workers in the framework of the provision of services, OJ 1997 L 18/1 691 Recital 3 652 Recital 13 652 Art. 1, para. 3 652 Art. 1, para. 3(b) 652 Art. 1, para. 4 691 Art. 3, para. 1 692, 693, 694 Art. 3, para. 7 693 Art. 3, para. 8 693 1997

Directive 97/7/EC on distance contracts Art. 12, para. 2

635, 641

1999

Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees, OJ 1999 L 171/12 Art. 7, para. 2 217, 635, 641

2000

Council Regulation (EC) no. 1346/2000 of 29 May 2000 on insolvency proceedings, OJ 2000 L 160/1 Art. 3, para. 1 Art. 4 Art. 31 to 33

133 332 332 133

Council Regulation (EC) no. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ 2001 L 12/1 (also referred to as Brussels I-Regulation) 13, 333, 507, 509, 592, 614, 621, 649 Art. 2 13 Art. 2 et seq. 510 Art. 5 13 Art. 5 no. 3 302 Art. 6 13 Art. 13 614 Art. 15, para. 1 (c) 100, 621, 622, 624 Art. 15, para. 3 624 Art. 15, para. 3 (c) 624 Art. 18-21 668

533

534

List of Statutory Materials

Art. 19 Art. 20 Art. 22, para. 4 Art. 34 Art. 35, para. 1 2001

677 677 12, 359 507 509

Council Decision (2001/539/EC) of 5 April 2001 on the conclusion by the European Community of the Convention for the Unification of Certain Rules for International Carriage by Air (the Montreal Convention), OJ 2001 L 194/38 450 Council Decision of 28 May 2001 establishing a European Judicial Network in civil and commercial matters, OJ 2001 L 174/25 as amended by decision no. 568/2009 EC of the European Parliament and of the Council of 18 June 2009, OJ 2009 L 168/35 134 Council Regulation (EC) no. 2157/2001 of 8 October 2001 on the statute for a European Company (SE), OJ 2001 L 294/1 454 Art. 2 455 Art. 7 457 Art. 8 457 Art. 8, para. 14 457 Art. 9 457

2002

Council Regulation (EC) no. 6/2002 of 12 December 2001 on Community designs, OJ 2002 L 3/1 460 Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements, OJ 2002 L 168/43 347, 349 Art. 2, para. 2 349 Art. 9 349 Art. 9, para. 2 349 Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/ EEC and Directives 97/7/EC and 98/27/EC, OJ 2002 L 271/16 Art. 12, para. 2 635, 641

2003

Council Regulation (EC) no. 1435/2003 of 22 July 2003 on the statute for a European Cooperative Society (SCE), OJ 2003 L 207/1 454 Art. 2 455

List of Statutory Materials

Council Regulation (EC) no. 2201/2003 of 27 November 2003 concerning jurisdicition and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) no. 1347/2000 (Brussels IIbis), OJ 2003 L 338/1 313, 408, 492, 499, 506, 511, 512 Art. 3 408, 512 Art. 3, para. 1(a) 3rd to 6th indents 492 Art. 3, para. 1(b) 492 Art. 8 492 Art. 22 512 Art. 24 512 Art. 25 506 Art. 46 499 2004

Regulation (EC) 261/2004 of the European Parliament and of the Council of 11 February 2004, establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) 295/91, OJ 2004 L 46/1 451

2005

Council Framework Decision 2005/214/JHA of 24 February 2005 on the principle of application of mutual recognition to financial penalties, OJ 2005 L 76/16 450

2007

Regulation (EC) no. 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II), OJ 2007 L 199/40 303, 304, 316, 317, 595 Recital 18 303 Recital 23 763 Recital 31 313, 323 Recital 32 300 Art. 3 538 Art. 4 100, 303, 594 Art. 4, para. 1 319 Art. 4, para. 2 305, 319 Art. 4, para. 3 305, 311, 313, 315, 319 Art. 5 319 Art. 5, para. 1 (a) 100 Art. 5, para. 2 319 Art. 6 319, 320, 446 Art. 6, paras. 1-3 111 Art. 6, para. 1, first sentence 611 Art. 6, para. 3 762, 763 Art. 6, para. 3 (a) 763 Art. 6, para. 4 320

535

536

List of Statutory Materials

Art. 7 Art. 8 Art. 8, para. 1 Art. 8, para. 2 Art. 8, para. 3 Art. 9 Art. 9, para. 1 Art. 9, para. 3 Art. 12 Art. 12, para. 3 Art. 14 Art. 14, para. 1 (a) Art. 14, para. 1 (b) Art. 14, para. 2 Art. 14, para. 3 Art. 15 Art. 16 Art. 17 Art. 25 Art. 25, para. 1 Art. 26 Art. 28 2008

319 319, 320 462 462 320 319, 320 585 585 295 594 312, 315, 320, 326, 444 308 312, 314, 320, 323 312 312 763 365, 524, 593, 716, 763 301 550 24 716 301

Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC, OJ 2008 L 133/66 Art. 22, para. 4 635, 641 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 2008 L 177/6 135, 197, 220, 225, 322, 438, 621, 624, 634, 635 Recital 6 685 Recital 13 135, 193 Recital 24 624 Recital 36 652 Recital 46 584 Art. 1, para. 2 (f) 479 Art. 1, para. 2 (g) 269 Art. 1, para. 3 639 Art. 2 538 Art. 3 196, 312, 362 Art. 3, para. 1 185 Art. 3, para. 1, 2nd sentence 579 Art. 3, para. 2, 2nd sentence 322 Art. 3, para. 3 215, 220, 257, 322, 683

List of Statutory Materials

Art. 3, para. 4 220, 257, 322, 683 Art. 3, para. 5 225 Art. 4 704 Art. 4, para. 1 (c) 112 Art. 5 297 Art. 5, para. 1 579 Art. 5-8 197 Art. 6 630, 635, 640, 643, 683 Art. 6, para. 1 615, 640 Art. 6, para. 1, 1st sentence 611 Art. 6, para. 1 (a) 618, 635, 640 Art. 6, para. 1 (b) 100, 621, 624, 640 Art. 6, para. 2 220, 626, 627 Art. 6, para. 4 615, 624, 640 Art. 7 712 Art. 7, para. 1 681 Art. 7, para. 2 639 Art. 7, para. 3 236 Art. 8 363, 648, 649, 650, 656, 662, 666, 669, 670, 672, 677, 679, 683, 690 Art. 8, para. 1 220 Art. 8, para. 2 652, 667, 677, 679, 681, 690, 695 Art. 8, para. 2, 2nd sentence 690 Art. 8, para. 3 679 Art. 8, para. 4 673, 676 Art. 9 322, 365, 636, 639, 640, 677, 679, 685, 690 Art. 9, para. 1 525, 584, 585, 679, 682, 683, 692, 694 Art. 9, para. 2 637, 640, 694, 717 Art. 9, para. 3 584, 585, 680, 681, 682, 684, 685, 695, 717, 753, 759, 764 Art. 10 225 Art. 10, para. 1 599 Art. 11 476, 479 Art. 11, para. 5 477 Art. 13 373, 375, 600 Art. 14 278, 279 Art. 14, para. 1 279, 280 Art. 14, para. 2 281, 283 Art. 18 296 Art. 21 322, 690, 716 Art. 22 550 Art. 22, para. 1 24 Art. 23 635 Art. 24 584 Art. 27, para. 2 279

537

538

List of Statutory Materials

Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trademarks, OJ 2008 L 299/25 460 Council Regulation (EC) no. 4/2009 of 18 December 2008 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations, OJ 2009 L 7/1 499, 507 Art. 15 538 Art. 17 540 Art. 23 540 2009

Directive 2008/122/EC of the European Parliament and of the Council of 14 January 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts, OJ 2009 L 33/10 Art. 12, para. 2 635, 641 Council Regulation (EC) no. 207/2009 of 26 February 2009 on the Community Trademark, OJ 2009 L 78/1 Recitals 3-5 Recital 6 Art. 5 Art. 6 Art. 83 Art. 101, para. 2 Art. 101, para. 3

460 460 462 461 461 461 462 462

Directive 2009/103/EC of the European Parliament and of the Council of 16 September 2009, relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to ensure against such liability, OJ 2009 L 263/11 296 Art. 18 296 Council Decision 2009/941/EC of 30 November 2009 on the Conclusion by the European Community of the Hague Protocol of 23 November 2007 on the law applicable to maintenance obligations, OJ 2009 L 331/17 Article 4 411 2010

Council Regulation (EU) no. 1259/2010 of 20 December 2010 implementing enhanced cooperation in the area of the law applicable to divorce and legal separation (Rome III), OJ 2010 L 343/10 381, 401, 406, 407, 409, 410, 492, 718, 719 Recital 6 407

List of Statutory Materials

Recital 22 Art. 1, para. 2 Art. 4 Art. 5-7 Art. 5 Art. 5, para. 1 (d) Art. 5, para. 2 Art. 5, para. 2 (d) Art. 8 Art. 10 Art. 12 Art. 13 Art. 15 Art. 21

407 300 407, 538 407 108 409 407, 409 409 100, 382, 407, 492 707, 714, 719, 737 716 719 24, 379 407

Commission Regulation (EU) no. 330/2010 of 20 April 2010 on the application of Article 101 (3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices, OJ 2010 L 102/1 451 Commission Decision of 26 April 2010, setting up the Expert Group on a Common Frame of Reference in the area of European contract law, OJ 2010 L 105/109 463 Council Regulation (EU) no. 961/2010 of 25 October 2010 on restrictive measures against Iran and repealing Regulation (EC) no. 423/2007, OJ 2010 L 281/1 571 Art. 1 (m) 572 Art. 2, para. 1 571 2011

Council Decision 2011/167/EU of 10 March 2011 authorizing enhanced cooperation in the area of the creation of unitary patent protection, OJ 2011 L 76/53 460 Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council, OJ 2011 L 304/64, 634, 635, 640 Recital 5 616 Art. 4 610 Art. 25 635

539

540

List of Statutory Materials

2012

Regulation (EU) no. 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and the creation of a European Certificate of Succession, OJ 2012 L 201/107 108, 428 Art. 21 428 Art. 22 108, 428 Art. 23 428 Art. 30 428 Regulation (EU) no. 1257/2012 of the European Parliament and of the Council of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection, OJ 2012 L 361/1 460 Council Regulation (EU) no. 1260/2012 of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements, OJ 2012 L 361/89 460 Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), OJ 2012 L 351/1 13, 507, 509, 592, 614, 621, 649 Art. 4 13 Art. 7 13 Art. 7, para. 2 302 Art. 8 13 Art. 17 614 Art. 17, para. 1 (c) 100, 621, 622, 624 Art. 17, para. 3 624 Art. 20-23 668 Art. 21 677 Art. 22 677 Art. 24, para. 4 12, 359, 624 Art. 45 507, 509

2014

Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union Art. 9 500

List of Statutory Materials

c)

Proposals and other Documents

1972

Preliminary Draft Convention on the law applicable to contractual and non-contractual obligations of 1972 (German text in RabelsZ 38 (1974), 211; partial English translation in RabelsZ 38 (1974), 6) 642, 662 Art. 2, para. 3 662 Art. 5 662

1980

Giuliano, Mario; Paul Lagarde, Report on the Convention on the law applicable to contractual obligations, OJ 1980 C 282/1 362, 719

1999

Proposal for a Council Regulation (EC) on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters, COM (1999) 348 final of 14 July 1999 507

2000

Lando, Ole; Hugh Beale, eds., Principles of European Contract Law, Parts I and II, The Hague 2000 Art. 1:301, para. 6 271 Art. 2:301 295

2001

European contract law, COM (2001) 398 final of 11 July 2001

2002

Communication from the Commission to the European Parliament and the Council – A more coherent European contract law – An action plan, COM (2003) 68 final of 12 February 2003 463

2002

Rome II – Preliminary Draft Proposal of the European Commission published in 2002, reproduced in RabelsZ 67 (2003), 1-56 Art. 7 304

2003

Commission Recommendation (2003/361/EC) of 6 May 2003 concerning the definition of micro, small, and medium-sized enterprises, OJ 2003 L 124/36 468

463

Rome II – Commission Proposal, COM (2003) 427 final of 22 July 2003 Art. 6 304 Proposal for a Council Decision concerning the signing of the Hague Convention on the law applicable to certain rights in respect of securities held with an intermediary of 15 December 2003, COM (2003) 783, OJ 2004 C 96/33 349

541

542

List of Statutory Materials

2005

Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), COM (2005) 650 of 15 December 2005 Art. 3, para. 2 135, 193 Art. 7, para. 3 269 Art. 13, para. 3 283

2006

Commission staff working document – annex to the Proposal for a Council Regulation amending Regulation (EC) no. 2201/2003 as regards jurisdiction and introducing rules concerning applicable law in matrimonial matters – impact assessment, 17 July 2006, SEC (2006) 949 annex 4

5

Green Paper on conflict of laws concerning matrimonial property regimes, including the question of jurisdiction and mutual recognition, COM (2006) 400 of 17 July 2006 391 Report from the Commission to the European Parliament and the Council, Evaluation report on the Financial Collateral Arrangements Directive (2002/47/EC), of 20 December 2006, COM (2006) 833 final 347, 349 2008

Proposal for a Council Regulation on the Statute for a European private company, COM (2008) 396 of 25 June 2008 454

2009

Withdrawal of obsolete Commission proposals, OJ 2009 C 71/17 349 Proposal of the European Commission for a Regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of decisions and authentic instruments in matters of succession and the creation of a European Certificate of Succession, COM (2009) 154 final of 14 October 2009 428 Art. 4 493 Art. 16 493 Art. 17 108, 493

2010

Proposal for a Council Regulation (EU) implementing enhanced cooperation in the area of law applicable to divorce and legal separation, COM (2010) 105 final/2 of 30 March 2010

5

Commission Decision of 26 April 2010, setting up the Expert Group on a Common Frame of Reference in the area of European contract law, OJ 2010 L 105/109 463

List of Statutory Materials

Green Paper from the Commission on Policy Options for progress towards a European contract law for consumers and businesses, COM (2010) 348 final of 1 July 2010 463 European Commission, Green Paper – Less bureaucracy for citizens: promoting free movement of public documents and recognition of the effects of civil status records, COM (2010) 747 final of 14 December 2010 499 Question 10 371, 418 Commission Proposal for a Regulation of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), COM (2010) 748 final of 14 December 2010 509 Art. 43-46 509 2011

European Commission, Proposal for a Council Regulation on jurisdiction, applicable law and the recognition and enforcement of decisions in matters of matrimonial property regimes, COM (2011) 126 final of 16 March 2011 391, 472, 493 Art. 3-5 493 European Commission, Proposal for a Council Regulation on jurisdiction, applicable law and the recognition and enforcement of decisions regarding the property consequences of registered partnerships, COM (2011) 127 final of 16 March 2011 391 Art. 16 392 Art. 17 393, 394 Art. 18 392, 394 Art. 18, paras. 2 and 3 394 Art. 21 392 Art. 22 394 Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law, COM (2011) 635 final of 11 October 2011 Recital 10 Recital 28 Recital 29 Art. 4 Art. 4, para. 2 Art. 4, para. 3 Art. 7, para. 2 Art. 11 Art. 13

463 466 468 468 467 467 467 468 468 467

543

544

List of Statutory Materials

National statutes Algeria Civil Code (Code Civil), French version available at http://www.premierministre.gov.dz/images/stories/dossier/Codes/code_civil.pdf Art. 14 412 Angola Civil Code (Código Civil); Decreto-Lei N° 47344 of 25 November 1966, German translation in Jan Kropholler; Hilmar Krüger; Wolfgang Riering; Jürgen Samtleben and Kurt Siehr, eds., Außereuropäische IPR-Gesetze, Hamburg and Würzburg, 1999, p. 36 Art. 21 524 Argentina Civil Code (Código Civil), available at http://www.infoleg.gov.ar/infolegInternet/anexos/105000-109999/109481/texact.htm, English translation in Frank Joannini (translator), The Argentine Civil Code, Boston 1917 (with an older version of Art. 164). A new Civil Code was adopted in 2014 and published in the Boletín Oficial of 8 October 2014; Articles 2594 et seq. regulate the conflict of laws and will take effect in 2016. This book refers exclusively to the old Civil Code. Art. 6 373 Art. 7 373 Art. 164 382, 403 Australia The Law Reform Commission, Report no. 58, Choice of law, 1992

374

Austria Act on private international law of 1978 (Bundesgesetz vom 15. 6. 1978 über das internationale Privatrecht, IPRG), BGBl. No. 304/1978, English translation in Edith Palmer, Am. J. Comp. L. 28 (1980), 222 5 §9 403, 421 § 18 403 § 19 389 § 20 403 § 20, para. 2 403 § 28 421 § 31, para. 1 332

List of Statutory Materials

§ 33a § 34 § 35 § 41

349 357 316 618

Belgium Civil Code (Code Civil), English translation in John H. Crabb (translator), The Constitution of Belgium and the Belgian Civil Code, Littleton, Colorado 1982 Art. 3 682 Code on private international law of 16 July 2004 (Loi du 16 juillet 2004 portant le Code de droit international privé), English translation in RabelsZ 70 (2006), 358 308, 363, 387, 406, 425, 719 Art. 15 § 1 2nd sentence 435 Art. 18 524, 525 Art. 37 370 Art. 38 370 Art. 44 397 Art. 49 389 Art. 50 § 3 388 Art. 51 387 Art. 55 382, 403 Art. 55 § 1 no. 4 403 Art. 55 § 2 406 Art. 55 § 3 406 Art. 57 § 2 721, 737 Art. 79 425 Art. 79 § 2 427 Art. 87 § 3 280 Art. 88 332 Art. 89 332 Art. 90 752 Art. 93 § 1 357 Art. 93 § 2 363 Art. 100 310 Art. 101 308 Art. 110 521 Art. 111 521 Brazil Civil Code of 1916 (Código Civil, Lei No. 3.071), English translation in Joseph Wheless (translator), The Civil Code of Brazil, St. Louis 1920 Art. 13 187

545

546

List of Statutory Materials

Introductory Act to the Civil Code of 1942 (Ley de introdução ao código civil brasileiro), English translation in Paul Garland, Bilateral Studies. American-Brazilian Private International Law, New York, 1959, pp. 111 et seq. Art. 7 370, 373 Art. 9 187 Art. 11, para. 1 513 Consumer Protection and Defense Code of 11 September 1990 (Lei Federal 8.078/1990 – Código de Defesa do consumidor), available at http://www. planalto.gov.br/ccivil_03/Leis/L8078.htm 632 Law 9307/1996 (Ley no. 9.307, de 23 de setembro de 1996 – dispõe sobre a arbitragem), Coleção das Leis da República Federativa do Brasil 188 (1996) 4271, English translation available at www.jus.uio.no/lmInternational Commercial Arbitration & other dispute settlementNational arbitration Laws/Brazil 187 Art. 2 §1 187 Art. 2 §2 195 Bulgaria Private International Law Code of 4 May 2005, English translation available at http://www.ifrc.org/Docs/idrl/868EN.pdf Art. 40 389 Art. 53 370 Art. 56 513 Art. 79, para. 1 388 Art. 79, para. 2 388 Art. 79, para. 3 387, 388 Art. 79, para. 4 389 Art. 82 403 Art. 82, para. 3 403 Art. 89, para. 2 420 Art. 89, para. 3 425, 427 Canada Halsbury’s Laws of Canada, Markham, Ont. 2006, HCF-202 at p. 678, HCF205 at p. 680 and HCF-208 at p. 686 412 Canadian Extraterritorial Measures Act, 1984 as amended in 1996 (R.S.C. 1985, c. F-29, available at the website of the Canadian Minister of Justice http://laws-lois.justice.gc.ca, also in Int. Leg. Mat. 36 (1997), 117) 591 Art. 9 593

List of Statutory Materials

Québec Civil Code (Code civil du Québec), L.Q., 1991, c. 64, English version available via the website of the ministry of justice: www.justice.gouv.qc.ca/english/accueil.aspSearch:IndexCCivil Code 441 Art. 3083 373 Art. 3083, para. 2 513 Art. 3094-3096 412 Art. 3094 413 Art. 3096 413 Art. 3098, para. 2 425 Art. 3099, para. 1 427, 432 Art. 3117 611 Art. 3117, para. 1 618, 626 Chile Civil Code (Código Civil), available at http://www.leychile.cl/Navegar?id Norma=172986; an English translation of Art.  14 can be found in Dennis Campbell, ed., International Securities Law and Regulation [2007] I, 221 Art. 14 373 PRC China Bestimmungen des Obersten Volksgerichts zu einigen Fragen der Rechtsanwendung bei der Behandlung von zivil- und handelsrechtlichen Vertragsstreitigkeiten mit Außenberührung, 11 June 2007, Fashi [2007] Nr. 14, German translation in IPRax (2008), 67 §3 186 Law of the People’s Republic of China on the Laws Applicable to Foreign-Related Civil Relations of 28 October 2010, English translation available at http://www.wipo. int/wipolex/en/details.jsp?id=8423 186, 343, 344, 370, 387, 405, 410, 429, 442, 611 Art. 4 717 Art. 5 717 Art. 10 435 Art. 11 373 Art. 12, para. 1 600 Art. 12, para. 2 600 Art. 14 514 Art. 16, para. 2 269 Art. 24, 1st sentence 389 Art. 24, 2nd sentence 387, 388 Art. 25 403 Art. 26 382, 405

547

548

List of Statutory Materials

Art. 27 Art. 29 Art. 31 Art. 37 Art. 38 Art. 42 Art. 43 Art. 43, 2nd sentence Art. 44 Art. 48 Art. 49 Art. 50

405 413 420, 422 343 343 611, 620, 625 664 666 301, 305, 308 357 362 357

Ecuador Civil code (Código Civil), available at http://www.cortenacional.gob.ec/cn/ wwwcn/pdf/leyes/codigo_civil.pdf; German translation in Jan Kropholler, Hilmar Krüger, Wolfgang Riering, Jürgen Samtleben and Kurt Siehr, eds., Außereuropäische IPR-Gesetze, Hamburg and Würzburg, 1999, p. 210 Art. 14 373 Egypt Civil Code, English translation in Nicola H Karam, Business Laws of Egypt, Vol. II, London 1990 Art. 11 et seq. Art. 11 Art. 11, para. 2 Art. 13 Art. 13, para. 2 Art. 15 Art. 17 Art. 19 Art. 21 Art. 21, para. 1 Art. 21, para. 2 Art. 22

191 93 372 514 411 381 411 420 190 299 299 299 109

Estonia Private international Law Act of 27 March 2002 (Riigi Teataja 2002 I, 35, p. 216), English translation available at www.jafbase.fr/docUE/Estonie/LoiDIP_fichiers/X30075.htm § 25 424

List of Statutory Materials

Finland Ärvdabalk of 5 February 1965, no. 40 as amended by the Lag om ändring av ärvdabalken of 13 December 2001, no. 1228, Finlands Författningssamling 2001, 3454, English translation available at http://www.finlex.fi/en/laki/ kaamokset/1965/en19650040.pdf 26 kap. 6 § 424 France Code Michaud 1629

505

Déclaration des droits de l’homme et du citoyen of 26 August 1789 (Unofficial English translation available at Eurodocs: Online Sources for European History: http://www.hrcr.org/docs/frenchdec.html) 247 Art. 1 247 Civil Code (Code civil), English translation available at http://www.legifrance. gouv.fr/content/download/1950/13681/version/3/file/Code_22.pdf 56, 220, 372, 383 Art. 3 381 Art. 3, para. 1 717, 723 Art. 3, para. 3 372 Art. 6 717 Art. 16-7 708 Art. 16-9 708 Art. 1134 220 Art. 1382 294 Art. 1608 147 Art. 1837 514 Commercial Code (Code de Commerce), English translation available at http://www.legifrance.gouv.fr/content/download/1951/13685/version/5/file/ Code_32.pdf Art. L-210-3 514 Art. L 223-2 114, 522 Code du Travail Maritime 1926 (Loi du 13 décembre 1926 portant code du travail maritime), cited by Wolfgang Wurmnest in Jürgen Basedow, Ulrich Magnus and Rüdiger Wolfrum, The Hamburg Lectures on Maritime Affairs 2009 & 2010, p. 126 Art. 5 656, 674 Consumer Code (Code de la consummation), English translation available at http://www.legifrance.gouv.fr/content/download/1960/13727/version/3/ file/Code_29.pdf 638

549

550

List of Statutory Materials

New Code of Civil procedure (Nouveau code de procédure civile), English translation available at http://www.legifrance.gouv.fr/content/download/1962/13735/version/3/file/Code_39.pdf Art. 12 436 Art. 12, para. 3 193 Art. 12, para. 4 436 Loi no. 2003-721 of 1, 673 August 2003 pour l’initiative économique, Journal officiel de la République Française of 5 August 2003 Art. 1 114, 522 Loi no. 2013-98 of 28 January 2013, Journal officiel de la République Française of 29 January 2013 470 Germany Code of Civil Procedure (Zivilprozessordnung, ZPO), English translation available at http://www.gesetze-im-internet.de/englisch_zpo/index.html § 50 519 § 328 505 Commercial Code (Handelsgesetzbuch, HGB), English translation in Charles E. Stewart (translator), German Commercial Code & Code of Civil Procedure in English, New York, 2001 §§ 84-92c 723 § 92c 723, 724 Former §§ 778-900 and 905 (English translation in Simon L Goren (translator), The German Commercial Code, 2nd ed., Littleton, Colorado, 1998)

168

Civil Code, English translation available at http://www.gesetze-im-internet. de/englisch_bgb/index.html § 138 581, 722 § 305, para. 1 3rd sentence 313 § 448 (1) 146 § 1409 388 § 1519 470 Introductory Law of the German Civil Code (EGBGB), English translation available at http://www.gesetze-im-internet.de/englisch_bgbeg/index.html Art. 3a, para. 2 Art. 4, para. 3 Art. 6 Art. 7

396 378 395 600

List of Statutory Materials

Art. 7, para. 1 Art. 10 Art. 11 Art. 12 Art. 14 Art. 14, para. 1 no. 2 Art. 14 (1) no. 3 with Art. 17 Art. 14, para.3 Art. 14, para. 4 Art. 15 Art. 15, para. 2 Art. 15, para. 3 Art. 16 Art. 17 Art. 17, para. 1, 2nd sentence Art. 17, para. 4 (as of before 1986) Art. 25 Art. 25, para. 2 Art. 29 (as of 1986) Art. 30 (as of 1896) Art. 34 (as of 1986) Art. 40 Art. 43, para. 2 Art. 45 Art. 46

372, 600 369 479 600 100, 401, 402 381 402 405 472 386, 387 388 472 396 381, 402, 405 402 402 421 421 612, 615, 637 707 637 302 358 331 337

Law on limited liability companies (Gesetz betreffend die Gesellschaften mit beschränkter Haftung, GmbHG), English translation in Carsten Jungmann and David Santoro, German GmbH Law, Munich, 2011 §5 522 § 5a 114, 522 § 15, paras. 3 and 4 479 Act against restraints of competition, first enacted in 1957 (Gesetz gegen Wettbewerbsbeschränkungen), English translation available at http://www. gesetze-im-internet.de/englisch_gwb/index.html § 33 756 § 130 217 § 130 (2) 120, 719, 723 Law for the reform of private international law (Gesetz zur Neuregelung des internationalen Privatrechts) of 25 July 1986, BGBl. 1986, I-1142, English translation in Int. Leg. Mat. 27 (1988), 6 719, 733 Securities Deposit Act (Gesetz über die Verwahrung und Anschaff ung von

551

552

List of Statutory Materials

Wertpapieren Depotgesetz) 11 January 1995, BGBl. 1995, I-34 § 17a

348

Proposal for a law on the private international law (Entwurf eines Gesetzes zum internationalen Privatrecht für außervertragliche Schuldverhältnisse und für Sachen), Deutscher Bundestag, 14. Wahlperiode, Drucksache 14/343 of 1 February 1999 Copyright Act (Urheberrechtsgesetz) 2002 § 32, paras. 1, 3 § 32b

337 704 704 704

Law for the reform of insurance contract law (Gesetz zur Reform des Versicherungsvertragsrechts) of 23 November 2007, BGBl. 2007, I-2631 Art. 4, para. 1 Art. 14, para. 3 Art. 17 Art. 25

168 405 405 420

Law on the insurance contract (Versicherungsvertragsgesetz), 23 November 2007, BGBl. 2007, I-2631, English translation available at http://www. gesetze-im-internet.de/englisch_vvg/index.html § 209 168 Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG) of 23 October 2008, BGBl. 2008, I-2026 114, 522 Law on proceedings in family matters and matters of voluntary jurisdiction (FamFG) of 17 December 2008, BGBl. 2008, I-2586 § 98, para. 1 no. 4 11 Gendiagnostikgesetz of 31 July 2009, BGBl. 2009, I-2529, English translation available at www.eurogentest.org/uploads/1247230263295/GenDG_German_English.pdf §18 712 German Democratic Republic Act on the application of law to international legal relations and to international economic contracts (Rechtsanwendungsgesetz) of 5 December 1975, Gesetzblatt DDR 1975 I, 748 § 10 331 § 13 342

List of Statutory Materials

Greece Civil Code, English translation in Constantine Taliadoros, Greek Civil Code, Athens, 1982 Art. 14 402 Art. 16 402 Art. 28 420 Hungary Law-Decree of 1979 on private international law (1979. évi 13. törvényerejű rendelet a nemzetközi magánjogról), English translation published by the Ministry of Justice of the Hungarian People’s Republic, Budapest, 1982 §8 524 § 40 402 Iran Civil Code 1935, English translation in A. H. Taleghany, The Civil Code of Iran, Littleton, 1995 Art. 6 Art. 7 Art. 21 Art. 962 et seq. Art. 968 Art. 971

93 93 411 93 189 109

Iraq Civil Code, English translation in Nicola H Karam (translator), Business Laws of Iraq, Vol. 3, 1990 Art. 21 411 Art. 25 190 Anti-boycott law 57/1990; German translation in Krüger, RIW 1990, 934

588

Italy Codice della Navigazione 1942, English translation in Plinio Manca, The Italian Code of Navigation, Milan 1958 Art. 9 656, 674 Preliminary Provisions of the Civil Code of 1942, English translation in Beltramo, Mario, Giovanni E. Longo and John Henry Merryman (translators), The Italian Civil Code, Dobbs Ferry, New York, 1969

553

554

List of Statutory Materials

Art. 22

339

Civil Code (Codice civile), English translation in Susanna Beltramo, ed., The Italian Civil Code, New York, 2010 Art. 1510 147 Art. 1524 334 Art. 2704 334 Law on the reform of private international law 1995 (Legge di riforma del sistema italiano di diritto internazionale) Gazz. Uff., Suppl. ord. n. 128, 3 June 1995, English translation in Int. Leg. Mat. 35 (1996), 765 Art. 12 109 Art. 14 435 Art. 25, para. 1 513 Art. 29 387 Art. 30 387 Art. 31 381, 402 Art. 46 420 Art. 46, para. 2 424 Art. 46, para. 2, 2nd sentence 426 Art. 46, para. 2, 3rd sentence 432 Art. 51 339 Art. 51, para. 1 339 Art. 51, para. 2 339 Art. 54 356 Art. 62, para. 2 304 Japan Act on General Rules for Application of Laws no. 78 of 2006, English translation in Jürgen Basedow, Harald Baum and Yuko Nishitani, eds., Japanese and European Private International Law in Comparative Perspective, Tübingen 2008, p. 405 369, 402, 429 Art. 4 et seq. 93 Art. 7 185 Art. 11, para. 1 611, 626 Art. 12 663 Art. 13, para. 2 331 Art. 17 300, 302 Art. 18 303 Art. 19 303 Art. 20 304 Art. 21 307 Art. 25 381, 387, 402 Art. 25, 3rd sentence 402

List of Statutory Materials

Art. 26 Art. 26, para. 2 Art. 26, para. 3 Art. 27 Art. 36

387 389 396 381, 402 420

Jordan Civil Code, English translation in Hisham Hashem, The Jordan Civil Code of Moslem Jurisprudence, Amman, 1990 Art. 12 et seq. Art. 12, para. 2 Art. 16 Art. 20 Art. 22

93 514 411 189 300

Korea Private International Law Act 2001, English translation in YBPIL 5 (2003) 315 369,402, 425, 442 §7 717, 725 § 13 372 § 16 513 § 22 331 § 24 356 § 27 611, 615 § 27, para. 1 626 § 27, para. 1 no. 2 618 § 28, para. 1 663 § 28, para. 2 663 § 32 302 § 32, para. 2 303 § 32, para. 3 309 § 33 307 § 37 381, 386, 387, 402 § 37 no. 3 402 § 38 387 § 38, para. 2 388 § 39 381, 402 § 46 412 § 49, para. 2 424

555

556

List of Statutory Materials

Kuwait Civil Code, English translation in Nicola Karam (translator), The Civil Code of Kuwait, Decree law No. 67 of 1980, London 2011 Art. 45 412 Latvia Conflict Statute, English translation available at http://www.ur.gov.lv/faili/ ENGLISH%20Normativie%20akti/civillikums.doc 429 Libya Civil Code, English translation in Meredith O. Ansell and Ibrahim Massaud al-Arif, The Libyan Civil Code, New York, 1970 Art. 15 412 Liechtenstein Law on private international law of 19 September 1996 (Gesetz über das internationale Privatrecht), LGBl. 1996 Nr. 194, French translation in Rev. crit. dr. int. pr. (1997), 858 Art. 39 316 Art. 52 303 Lithuania Conflict Statute (Civilinio kodekso patvirtinimo, 2000 m. liepos 18 d. Nr. VIII-1894), English translation available at http://www3.lrs.lt/pls/inter3/ dokpaieska.showdoc_e?p_id=404614) 429 Macao Civil Code of 1999 (Código Civil), (partial) English translation in YBPIL 2 (2000) 342 Art. 47 357 Mexico Civil Code (Código Civil), English translation in Abraham Eckstein and Enrique Zepeda (translators), Mexican Civil and Commercial Codes, 1995 Art. 13, para. II 373 Art. 2736 513 Ley de Protección al Comercio y la Inversión de Normas Extranjeras que

List of Statutory Materials

Contravengan el Derecho Internacional of 10 October 1996, Diario Oficial of 23 October 1996, English translation in Int. Leg. Mat. 36 (1997), 145-147 591 Mozambique Civil Code (Código Civil, Decreto-Lei N° 47344) of 25 November 1966, German translation in Jan Kropholler, Hilmar Krüger, Wolfgang Riering, Jürgen Samtleben and Kurt Siehr, eds., Außereuropäische IPR-Gesetze, Hamburg and Würzburg, 1999, p. 566 Art. 21 524 Art. 33 514 Netherlands Buitengewoon Besluit Arbeidsverhoudingen 1945; the current version of this instrument can be found on http://wetten.overheid.nl. Art. 6 647 Wet conflictenrecht inzake ontbinding huwelijk en scheiding van tafel en bed of 25 March 1981, Stb. 1981, no. 166, English translation available at http://www.dutchcivillaw.com/actconflictdivorce.htm Art. 1 (1) (a) Art. 1 (1) (b) Art. 1 (1) (c) Art. 1 (4)

403 403 403 405

Private International Law (Succession) Act (Wet conflictenrecht erfopvolging of 4 September 1996), Stb. 1996 no. 457, English translation available at http://www.dutchcivillaw.com/actconflictlawsuccession.htm Art. 1 425 Private International Law (Torts) Act (Wet conflictenrecht onrechtmatige daad van 11 April 2001), Stb. 2001, no. 190, English translation in Hans Warendorf and Richard Thomas, eds., Company and Business Legislation of the Netherlands, Vol. II, Alphen aan den Rijn, 2008, Suppl. 2 (2009) 316 Private International Law (Law of Property) Act (Wet van 25 februari 2008, houdende regeling van het conflictenrecht betreffende het goederenrechtelijke regime met betrekking tot zaken, vorderingsrechten, aandelen en giraal overdraagbare effecten (Wet conflictenrecht goederenrecht)), Staatsblad van het Koninkrijk der Nederlanden 2008, no. 70, English translation in Hans Warendorf and Richard Thomas, eds., Company and Business Legislation of the Netherlands, Vol. II, Alphen aan den Rijn, 2008, Suppl. 4 (2009) 278, 280 Art. 2, para. 2 332

557

558

List of Statutory Materials

Art. 2, para. 3 Art. 3, para. 2 Art. 3, para. 3 Art. 10

332 341 341 278

Wet van 19 mei 2011 tot vaststelling en invoering van boek 10 (Internationaal Privaatrecht) van het Burgerlijk Wetboek (Vaststellings- en invoeringswet boek 10 Burgerlijk Wetboek) of 19 May 2011, Stb. 2011, no. 272, English translation in YBPIL 13 (2011), 657-694 278, 280 Art. 56, paras. 1 and 2 405 Art. 117 et seq. 513 Art. 128 341 Art. 135 278 Art. 145 425 Art. 159 316 Civil Code (Burgerlijk Wetboek), English translation in Hans Warendorf, Thomas Richard and Ian Curry-Summer, The Civil Code of the Netherlands, Alphen aan den Rijn 2009 Book 4, Art. 95 481 Art. 992 (former version abrogated in 1982) 478 Peru Civil Code 1984, English translation of Book X (Private International Law: Art. 2046-2111) in Int. Leg. Mat. 24 (1985), 1002 Art. 2073 513 Poland Civil Code (Kodeks cywilny), English translation in Kierzkowska, Danuta, ed.,The Polish Civil Code, 2nd ed., Warsaw, 1997 Art. 31 § 2 305 Law of 2011 on private international law (English translation available at http://www.polishlaw.com.pl/pct/fileakty_prawne13_0.pdf and in YBPIL 13 (2011), 641-656) 268, 521 Art. 8, para. 2 753 Art. 17 521 Art. 19, para. 1 2nd sentence 521 Art. 23, para. 1 269 Art. 44 349 Art. 47 363 Art. 51 388 Art. 52 389

List of Statutory Materials

Art. 64, para. 1

425

Portugal Civil Code (Código Civil), Decreto-Lei No. 47344 of 25 November 1966 Art. 21 Art. 31 Art. 48 Art. 52 Art. 55 Art. 62

524 421 357 403 403 421

Roman Law Codex Iustinianus 7, 60, 1 and 7, 56, 4 (both Diocletian), see the edition by Paul Krüger, Codex Iustinianus, Berlin 1877, reprint Goldbach 1998 263 Romania Private International Law Act of 1992, German translation in Wolfgang Riering, ed., IPR-Gesetze in Europa, München 1997, p. 132 296, 304, 357 Art. 8, para. 1 b) 524 Art. 20 388 Art. 54 341 Art. 60 357 Art. 66 427 Art. 68, para. 1 425, 427 New Civil Code of 2012, French translation in Rev. crit. dr. int. pr. 101 (2012), 459, 341, 425 Art. 2564 524 Art. 2589 388 Art. 2592 388 Art. 2619 341 Art. 2624 357 Art. 2633-2636 427 Art. 2634 425 Russia Civil Code (Гражданский кодекс Российской Федерации), English translation in William E. Butler (translator), Civil Code of the Russian Federation, London, 2010), German translation of the 2013 amendments of the sixth section of part III on private international law in IPRax 2014, 459 658 Art. 1195 370

559

560

List of Statutory Materials

Art. 1198 Art. 1202 Art. 1206, para. 2 Art. 1207 Art. 1210, para. 1 Art. 1211, para. 3 Art. 1212 Art. 1219 Art. 1219, para. 2 Art. 1219, para. 3

370 513 332 332 339 658 611, 615, 626, 658 301, 303 305 308

Labour Code of the Russian Federation of 31 December 2001 (Federal Law no. 197-FZ of 2001), English translation available at the website of the International Labour Organization: http://www.ilo.org/dyn/natlex Art. 11 659 Art. 11, para. 2 657, 658, 659 Art. 11, para. 4 657, 658 Slovenia Private International Law and Procedure Act of 1999, Official Gazette of the Republic of Slovenia, no. 56/1999, German translation in RabelsZ 66 (2002), 748-776 Art. 6 Art. 14 Art. 17 Art. 30 Art. 37 Art. 37, para. 2 Art. 37, para. 3 Art. 37, para. 4 Art. 38 Art. 39, para. 2

429 389 370 513 317 403 403 403 403 388 389

Spain Civil Code (Código Civil), English translation available at the website of the Spanish Ministry of Justice, http://www.mjusticia.gob.es via a search for “Civil Code” Art. 6, para. 4 524 Art. 9, para. 2 (Code as amended by the Law 11/1990 of 15 October, Boletín Oficial del Estado of 18 October 1990, p. 30527, French translation in Rev. crit. dr. int. pr. 80 (1991), 624) 406 Art. 9, para. 8 422

List of Statutory Materials

Art. 10, para. 5 Art. 10.1, para. 3 Art. 10, para. 5 Art. 12, para. 4 Art. 107

196 339 196 524, 525 403

Art. 107, para. 2 subpara. 2 (b) (now replaced by the Rome III Regulation) Art. 806 et seq. Art. 809 Art. 1465

406 526 526 148

Sweden Marriage Code (Äktenskapsbalk) (1987:230), the relevant parts of an English translation published by the Swedish Ministry of Justice 1995 can be found at http://ceflonline.net/wp-content/uploads/Sweden-Divorce-Legislation.pdf 5 kap. 1 – 3 § 381 Law on Certain International Legal Relationships relating to Marriage and Guardianship (Lag 1904:26 s. 1) om vissa internationella rättsförhollanden rörande äktenskap och förmynderskap, French translation published by Forssius, Le code suédoise du mariage, Paris, 1955 3 kap. 4 § 381 Law on International Legal Relationships relating to estate (Lag (1937:81) om internationella rättsförhållanden rörande dödsbo), English translation available at http://www.sweden.gov.se/content/1/c6/02/77/80/d8a2b3f7.pdf 1 kap. 1 § 421 Law on genetic integrity (Lag om genetisk integritet of 18 May 2006, SFS 2006:351), English translation available at http://www.smer.se/news/thegenetic-integrity-act-2006351/ 2nd chapter 2 712 Switzerland Federal Law on Private International Law (Bundesgesetz über das Internationale Privatrecht) of 18 December 1987, BBl. 1988 I 5, AS 1988, 1776, English translation in Am. J. Comp. L. 37 (1989), 193 304, 308, 310, 321, 341, 579, 611, 613, 625, 663, 761, 764 Art. 13 215, 579 Art. 15 305 Art. 16 435 Art. 17 716 Art. 18 215, 717, 725

561

562

List of Statutory Materials

Art. 19 Art. 35 Art. 36 Art. 37 Art. 52 Art. 53, para. 2 Art. 54 Art. 55 Art. 57 Art. 61 Art. 61, para. 2 Art. 61, para. 3 Art. 90 Art. 90, para. 2 Art. 91 Art. 91, para. 2 Art. 100, para. 2 Art. 102, para. 2 Art. 102, para. 3 Art. 103 Art. 104 Art. 108-108d (as amended in 2008) Art. 110 Art. 110, para. 2 Art. 110, para. 3 Art. 116-126 Art. 116, para. 3, 3rd sentence Art. 120 Art. 120, para. 1(a) Art. 120, para. 2 Art. 121, para. 3 Art. 122 Art. 122, para. 3 Art. 124 Art. 126 Art. 132 Art. 133 Art. 133, para. 3 Art. 137 Art. 137, para. 2 Art. 141 Art. 154 Art. 160

583, 585, 753 373, 600 600 370 389 388 387 388 397 401 401 403 421 425 421 425 359 341 341 341 339 351 357 320 362 269 269 611, 613, 615 618 625 363 363 363 476 269 308 305 310 761 761 296 513 513

List of Statutory Materials

Syria Civil Code (Code Civil), in French and German in Jan Kropholler, Hilmar Krüger, Wolfgang Riering, Jürgen Samtleben and Kurt Siehr, eds., Außereuropäische IPR-Gesetze, Hamburg and Würzburg, 1999, p. 770 Art. 12, para. 2 514 Art. 16 412 Art. 22 300 Taiwan Act of 2010 on private international law, English translation in Basedow/ Pissler, eds., Private International Law in Mainland China, Taiwan and Europe, Tübingen 2014, p. 453; German translation available at http://www. mpipriv.de/shared/data/pdf/ipr-gesetztaiwan2010.pdf 403, 429 Art. 7, para. 2 524 Art. 10 600 Art. 10, para. 3 600 Art. 13 513 Art. 18 269 Art. 19 269 Art. 38, para. 3 332 Art. 42, para. 2 363 Art. 44 348 Art. 48, para. 1. 389 Art. 48, para. 2 388 Art. 48, para. 3 397 Art. 50 403 Art. 57 413 Art. 58 421 Tunisia Act on Private international law, in French and German in Jan Kropholler, Hilmar Krüger, Wolfgang Riering, Jürgen Samtleben and Kurt Siehr, eds., Außereuropäische IPR-Gesetze, Hamburg and Würzburg, 1999, p. 854 429, 632 Art. 30 524 Art. 32 435 Art. 38 717 Art. 39 et seq. 93 Art. 40, para. 1 514 Art. 42 370 Art. 48 389 Art. 49 382, 403 Art. 54 421

563

564

List of Statutory Materials

Art. 59 Art. 67 Art. 68 Art. 70, para. 2 Art. 71

332 664 476 303 308

Turkey Act No. 5718 on Private International Law 2007, English translation in YBPIL 9 (2007), 583 303, 304, 308, 429 Art. 6 717, 725 Art. 9, para. 4 513 Art. 14 382, 403 Art. 14, para. 1 403 Art. 20, para. 1, 2nd sentence 420 Art. 21, para. 2 332 Art. 22 332 Art. 23 357 Art. 23, para. 2 320 Art. 26, para. 1 611, 626 Art. 26, para. 2(b) 618 Art. 26, para. 4 615 Art. 27 663 Art. 28, para. 3 362, 363 Art. 34 301 Art. 34, para. 5 308 Copyright Act

354

(so-called) Turkish Republic of Northern Cyprus Constitution of 1985, English translation available at http://www.cypnet. co.uk/ncyprus/main/polsyst/constitution/ Art. 159 533 Ukraine Family Code (Vidomosti verkhovnoi rady – VVR– 2002, no. 21-22, p. 135) English translation available at the website of the Foreign Ministry of Ukraine: http://www.mfa.gov.ua/data/upload/publication/usa/en/7148/ family_kideks_engl.pdf Art. 123 708 Art. 123, para. 2 708 Art. 123, para. 3 708

List of Statutory Materials

Act of 2005 on Private International Law Art. 8, para. 1 Art. 10 Art. 12 Art. 14, para. 1 Art. 14, para. 2 Art. 39, para. 2 Art. 52 Art. 53 Art. 54

429 435 524 716 717 753 339 664 664 664

United Kingdom Statute of Anne, 8 c. 21, 1710

353

Equal Pay Act, 1970 c. 41 Section 1(1) Section 1(11)

656 656 656

Protection of Trading Interests Act 1980 c. 11

592, 593

Employment Rights Act, 1996 c. 18 Sect. 196

656 656

British Competition Act 1998 c. 41 Sec. 2(1), (3)

120 758

Enterprise Act 2002 Sec. 22 (1) Sec. 33 (1)

120 120

“Note No. 196 of the British Embassy at Washington to the United States Department of State”, 27 July 1978, Brit. YBIL 49 (1978) 390 758 The Law Commission, Working Paper no. 87, and The Scottish Law Commission, Consultative Memorandum no. 62, Private international law, Choice of law in tort and delict, London 1984, no. 4.21 328 United States US Constitution Art. I sec. 8 Art. IV sec. 1 (Full Faith and Credit Clause) Clayton Antitrust Act, 38 Stat. 730, 15 USC, § 15 as amended

459 18, 508, 710

565

566

List of Statutory Materials

§4 PL 95-163 of 9 November 1977, 91 Stat. 1278 (Air Cargo)

756 40

Airline Deregulation Act of 1978 for passenger traffic: PL 95-504 of 24 October 1978, 92 Stat. 1705 40 Harter Act of 13 February 1893, 27 Stat. 445, codified in 46 U.S.C. §30702 et seq. (2011) 159 Fair Labor Standards Act of 1938, codified as amended in 29 USC § 201 et seq. 656, 681 29 USC § 203(b) 677 29 USC § 203(c) 656, 723 29 USC § 203(j) 656, 723 29 USC § 206(a) 656 29 USC § 206(a)(1)(C) 677 Uniform Foreign Money-Judgments Recognition Act, 1962, drafted by the National Conference of Commissioners on Uniform State Laws, Uniform Laws Annotated 13 Part II (2002) p. 39 508, 510 Sec. 4 508 Sec. 5 508 Uniform Foreign Money-Judgments Recognition Act, 1962, drafted by the National Conference of Commissioners on Uniform State Laws, Uniform Laws Annotated 13 Part II (2002) p. 39 508, 510 Sec. 4 (b)(2) 508 Sec. 4 (b)(3) 508 Sec. 5 508 Administration Act 1979 of 29 September 1979, Public Law no. 96/72, 93 stat. 503, 50 U.S.C. § 2405 (a) (1) 566 § 2415 (2) 566 Interim Rule of 22 June 1982, Fed. Reg. 47 (1982) 27250

566

Final Rule of 16 November 1982, Fed. Reg. 47 (1982) 51851 Foreign Trade Antitrust Improvement Act 1982

119

Sherman Antitrust Act 754 15 U.S.C. § 1-7 15 U.S.C. § 6a

755 119

List of Statutory Materials

Helms-Burton Act / Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, Pub.L.104-114, 110 Stat. 785 (1996), 22 U.S.C. §§ 6021 et seq., also in Int. Leg. Mat. 35 (1996), 359-378 588, 591 Title III 590, 597 Section 4(1) and (11) (22 U.S.C. § 6023(1) and (11)) 590 Section 4(4) (22 U.S.C. § 6023 (4)) 590 Section 4(13) (22 U.S.C. § 6023(13)) Section 301(2), (3) (22 U.S.C. § 6081 (2) and (3)) 590 Section 302(a) (1) (22 U.S.C. § 6082(a)(1)) 590 Defense of Marriage Act, Public Law, 104-199, of 21 September 1996, 110 Stat. 2419; Section 2 is codified as 28 U.S.C. §1738 C 381 Uniform Interstate Family Support Act (UIFSA), last amended or revised in 2001 under the auspices of the National Conference of Commissioners on Uniform State Laws, available on a website of the University of Pennsylvania: http://www.law.upenn.edu/bil/archives/ulc/uifsa/final2001.htm 411 Sec. 303 412 Uniform Computer Information Transactions Act of 2002, available on the website of the National Conference of Commissioners on Uniform State Laws: http://www.nccusl.org/acts.aspx Section 109(a) and (b)(1) and (2) 620 Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 of the United States, Public Law 111-195 of 1 July 2010, 124 Stat. 1311 566 Uniform Probate Code 423 Sect. 2-703 423 Uniform Commercial Code § 1-105 § 1-301(c)(2) § 1-301(e)(1) Art. 8 § 8-102(a)(15) § 8-110(a),(b) § 110(e)(1), (2) Art. 9 § 9-304 (a) § 9-304 (b)(1) § 9-305(a)(2),(3) § 9-305(b)(1), (2) Restatement

Second,

Conflict

186, 196 196 196 342, 348 348 348 348 330, 342 342 342 342 342 of

Laws,

St. Paul/Minn., 1971 305, 339, 374, 389, 423, 726, 729

567

568

List of Statutory Materials

§6 § 6, para. 1 § 6, para. 2 § 6, para. 2 (a), (d), (f) § 122 § 145 comment d §§ 145 and 6 § 156 § 187 § 187, para. 2 § 196 § 198 § 199 § 201 §§ 233-234 §§ 236 et seq. § 244 § 251 § 258, para. 2 and comment b § 260 § 263 § 264 with comment e § 285 §§ 296 et seq.

660 729 726 729 109 301 305 301 215, 374 196, 374 660 374 476 599 396 420 339 339 389 421 421 423 382 513

Restatement Third, Foreign Relations Law, Foreign Relations Law of the United States, Vol. 1, St. Paul/Minn., 1987 § 401 543 § 402, para. 1 542 § 402, para. 1(c) 543 § 402, para. 2 543 § 402, para. 3 543 § 403 543 § 442, Reporters’ note No. 4 543 President John F. Kennedy, Special Message to the Congress on protecting the consumer interest, March 15, 1962, in: Public Papers of the Presidents of the United States, John F. Kennedy, containing the public messages, speeches and statements of the President, January 1-December 31, 1962, pp. 235-243 609 California Civil Code, available LawCivil Code Sect. 946

at

http://leginfo.legislature.ca.gov/California 330

List of Statutory Materials

Insurance Code, available at http://leginfo.legislature.ca.gov/California LawInsurance Code § 10147 (c) 712 Louisiana Louisiana Revised Statutes, available at http://www.legis.state.la.us/About the LegislatureRevised Statutes § 51:1418(A) § 51:1418(A)(2) § 51:1418(B)

641 618 618 625

Civil Code, available at http://www.legis.state.la.us/About the LegislatureCivil Code Art. 2328 389 Art. 3521 403 Art. 3523-3527 389 Art. 3531 423 Art. 3538 476 Art. 3539 374 Art. 3542 as enacted by Act no. 923 of 1991, RabelsZ 57 (1993), 50 305 New York Estates, Powers and Trusts Law (EPT) codified in the 2010 New York Code, see http://law.justia.com/codes/new-york/2010/ept § 3 – 5.1 422 Oregon Oregon Revised Statutes (see http://www.leg.state.or.us/ors/) § 31.870 (1) § 31.885 § 81.109 (2009 Act) § 81.109(4)(a)(B)

641 308 308 625 618

Uruguay Civil Code (Código Civil), available at http://sip.parlamento.gub.uy/codigos/ codigocivil/2002/cod_civil-indice.htm, a German translation of the conflict of laws provisions of the Uruguayan Civil Code can be found in Jan Kropholler, Hilmar Krüger, Wolfgang Riering, Jürgen Samtleben and Kurt Siehr, eds., Außereuropäische IPR-Gesetze, Hamburg and Würzburg, 1999, pp. 908 et seq. 189 Art. 1291, para. 1 221 Art. 2304 189 Art. 2394 513 Art. 2396 382, 403

569

570

List of Statutory Materials

Art. 2399 Art. 2403

189 206, 227

Uruguayan foreign ministry’s proposal for a general conflict of laws regulation (Ministerio de Relaciones Exteriores, Ley General de Derecho Internacional Privado, presently in legislative proceedings (the proposal is on file with the author)) 189 Art. 48 189 Venezuela Law on private international law 1998 (http://www.tsj.gov.ve/legislacion/ ldip.html), English translation available at https://www.law.kuleuven.be/ipr/ documents/Venezuelaanse%20codex%20IPR%20engels.pdf 403, 429 Art. 8 716 Art. 10 717 Art. 16 373 Art. 20 513 Art. 22 389 Art. 23 382, 403 Art. 32 303 Art. 34 422 Art. 37 476 Art. 56 109 Art. 60 435 Yemen Civil Code; a German translation of the pertinent Articles of the Civil Code can be found in Hilmar Krüger, “Allgemeiner Rechtszustand und internationales Privatrecht der Republik Jemen”, RIW (1993), 28 with a German translation of the pertinent Articles of the Civil Code at p. 31 Art. 25, 2nd sentence 514 Art. 30 191 Art. 32 300

Table of Cases¹

European Union ECJ, 5 February 1963, Case 26/62 (Van Gend & Loos), [1963] ECR 1 (special English edition) 69 ECJ, 12 December 1972, Joined Cases 21-24/72 (International Fruit Co. N. V. v. Produktschap voor Groenten en Fruit), [1972] ECR 1219 567 ECJ, 21 June 1974, Case 2/74 (Reyners v. Belgian State), [1974] ECR 631 69 ECJ, 3 December 1974, Case 33/74 (Van Binsbergen v. Bestuur van de Bedrijfsvereniging voor de Metaalnijverheid), [1974] ECR 1299 69 ECJ, 14 October 1976, Case C-29/76 (LTU v. Eurocontrol), [1976] ECR 1541 649 ECJ, 20 February 1979, Case 120/78 (Rewe v. Bundesmonopolverwaltung für Branntwein – “Cassis de Dijon“), [1979] ECR 649 500 ECJ, 29 November 1978, Case 83/78 (Pigs Marketing Board v. Raymond Redmond), [1978] ECR 2347 69 ECJ, 11 November 1981, Case 203/80 (Casati), [1981] ECR 2595 69 ECJ, 15 November 1983, Case 288/82 (Duijnstee v. Goderbauer), [1983] 3663 313 ECJ, 10 April 1984, Case 14/83 (Sabine von Colson and Elisabeth Kamann v. Land Nordrhein-Westfalen), [1984] ECR 1891 450 ECJ, 27 September 1988, Joined Cases 89/85 (Åhlström Osakeyhtiö v. Commission – “Wood Pulp”), [1988] ECR 5193 120, 758 ECJ, 27 September 1988, Case 81/87 (ex parte Daily Mail), [1988] ECR 5483 454 ECJ, 25 July 1991, Case C-221/89 (ex parte Factortame), [1991] ECR I-3905 455 ECJ, 16 June 1992, Case C-351/90 (Commission v. Luxembourg), [1992] ECR I-3945 69 ECJ, 3 February 1993, Case C-148/91 (Vereniging Veronica Omroep Organisatie v. Commissariaat voor de Media) [1993] ECR I-513 527 ECJ, 19 September 1995, Case C-364/93 (Marinari v. Lloyds Bank) [1995] ECR I-2719 302 ECJ, 14 December 1995, Joined cases C-163/94, C-165/94 and C-250/94 (Sanz de Lera), [1995] ECR I-4821 69 ECJ, 9 March 1999, Case C-212/97 (Centros v. Erhvervs- og Selskabsstyrelsen), [1999] ECR I-1459 114, 522, 528 1

References are to paragraphs including the pertinent footnotes.

572

Table of Cases

Opinion of Advocate General La Pergola, delivered on 16 July 1998, [1999] ECR I-1461 114, 528 ECJ, 1 June 1999, Case C-126/97 (Eco Swiss China Time Ltd. v. Benetton International NV), [1999] ECR I-3055 182 ECJ, 23 November 1999, Case C-149/96 (Portugal v. Council), [1999] ECR I-8395 567 ECJ, 23 November 1999, Case C-369/96 (Arblade and Leloup), [1999] ECR I-8453 585, 682 ECJ, 27 June 2000, Joined Cases C-240/98 to C-244/98 (Océano Grupo Editorial SA v. Rocío Murciano Quintero) [2000] ECR1-4963 604 ECJ, 9 November 2000, Case C-381/98 (Ingmar v. Eaton Leonard Technologies), [2000] ECR I-9305 219, 705, 724 ECJ, 20 September 2001, Case C-453/99 (Courage Ltd. v. Bernard Crehan), [2001] ECR I-6314 756 ECJ, 20 September 2001, Case C-168/00 (Simone Leitner v. TUI Deutschland GmbH & Co KG), [2002] ECR I-2631 175 ECJ, 22 November 2001, Joined Cases C-541/99 and C-542/99 (Cape v. Idealservice, [2001] ECR I-9049 612 ECJ, 5 November 2002, Case C-208/00 (Überseering BV v. Nordic Construction Company Baumanagement GmbH), [2002] ECR I-9919 114, 519-521, 730 ECJ, 30 September 2003, Case C-167/01 (Inspire Art), [2003] ECR I-10155 114 ECJ, 2 October 2003, Case C-148/02 (García Avello v. Belgian State), [2003] ECR I-11613 370, 730 ECJ, 10 June 2004, Case C-168/02 (Kronhofer v. Maier), [2004] ECR I-6009 302 ECJ, 20 January 2005, Case C-464/01 (Johann Gruber v. Bay Wa AG), [2005] ECR I-439 614 ECJ, 18 December 2007, Case C-341/05 (Laval un Partneri v. Svenska Byggnadsarbetareförbundet), [2007] ECR I-11767 689, 691, 693 ECJ, 3 April 2008, Case C-346/06 (Rüffert v. Land Niedersachsen), [2008] ECR I-1989 693 ECJ, 14 October 2008, Case C-353/06 (Grunkin and Paul), [2008] ECR I-7639 302, 730 ECJ, 16 December 2008, Case C-210/06 (Cartesio), [2008] ECR I-9641 457 ECJ, 16 July 2009, Case C-168/08 (Hadadi), [2009] ECR I-6871 313 ECJ, 2 April 2009, Case C-523/07 (A), [2009] ECR I-2805 99, 492 ECJ, 2 March 2010, Case C-135/08 (Rottman v. Freistaat Bayern), [2010] ECR I-1449 501 ECJ, 7 December 2010, Joined Cases C-585/08 and C-144/09 (Peter Pammer and Hotel Alpenhof ), [2010] ECR I-2527 100, 622, 623 ECJ, 15 March 2011, Case C-29/10 (Koelzsch v. État du Grand-Duché de Luxembourg), [2011] ECR I-1595 648, 668, 669, 678 ECJ, 15 December 2011, Case C-384/10 (Voogsgeerd v. Navimer SA), [2011] ECR I-0000, not yet reported 670 ECJ, 12 July 2012, Case C-378/10 (VALE Épitési kft), [2012] ECR I-0000, not yet reported 458

Table of Cases

ECJ, 17 October 2013, case C-184/12 (United Antwerp Maritime Agencies (Unamar) NV v. Navigation Maritime Bulgare), [2013] ECR I-0000, not yet reported 683 ECJ, 16 April 2013, Joined Cases C-274/11 and C-295/11 (Spain and Italy v. Council), [2013] ECR I-0000, not yet reported 459 ECJ, 17 October 2013, Case C-218/12 (Emrek v. Sabranovic), [2013] ECR I-0000, not yet reported 625 ECJ, 8 April 2014, Joined Cases C-293/12 and 594/12 (Digital Rights Ireland v. Minister of Communications), [2014] ECR I-0000, not yet reported 81 GC, 12 June 2014, Case T-286/09 (Intel v. Commission), [2014] ECR II-0000, not yet reported European Court of Human Rights ECHR, 18 December 1996, case 15318/89 (Loizidou v. Turkey) 533 ECHR, 9 November 2010, case 664/06 (Losonci Rose and Rose v. Switzerland) 733 International Court of Justice ICJ, 27 June 1971, Legal consequences for states of the continued presence of South Africa in Namibia (SouthWest Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion, ICJ Reports 1971, 16 559 ICJ, 27 June 2001, La Grand case (Germany v. United States of America), ICJ Reports 2001, 466 533 Australia Homestake Gold of Australia Ltd. v. Peninsula Gold PTY Ltd., [1996] 131 FLR 447 374 Austria Verfassungsgerichtshof, 14 December 2011, Recht der Medizin 2012, 104 OGH, 21 May 1968, SZ 41 no. 62 OGH, 14 December 1983, JBl 1984, 550 = IPrax 1985, 165

710 759 335

Belgium Com. Mons, 2 November 2000, Rev. dr. com. belge 2001, 617 Arbeidshof te Brussel, 13 July 2011, Rechtskundig Weekblad 2012-13, 834 Brazil Superior Tribunal de Justiça 11 April 2000, Resp. 63.981 – SP, Revista de Jurisprudência do Superior Tribunal de Justiça 137 (2001) 387, here cited

759 834

573

574

Table of Cases

from the website of the Superior Tribunal de Justiça (STJ): http://www. stj.gov.br/portal_stj/publicacao/engine.wsp 633, 643 Canada Vita Food Products Inc v. Unus Shipping Co Ltd, [1939] AC 277 (PC)

159

France Conseil d’État, 29 June 1973, Rev. crit. dr. int. priv. 63 (1974) 344 Cass. civ., 7 January 1964, Clunet 91 (1964) 302 Cass. civ., 18 April 1972, Rev. crit. dr. int. priv.. 61 (1972) 672 Cass. civ., 3 May 1973, Rev. crit. dr. int. priv. 64 (1975) 426 Cass. com., 11 May 1982, Rev. crit. dr. int. priv. 72 (1983) 450 Cass. com., 5 December 1989, Rev. crit. dr. int. priv. 80 (1991) 667 Cass. crim., 12 November 1990, Rev. crit. dr. int. priv. 80 (1991) 667 Cass. civ., 25 June 1991, Rev. crit. dr. int. priv. 80 (1991) 667 Cass. civ., 16 December 1997, Rev. crit. dr. int. priv. 87 (1998) 300 Cass. civ., 19 October 1999, Rev.crit.dr.int. priv. 89 (2000) 29 Cass. civ., 7 March 2000, Rev. crit. dr. int. priv. 90 (2001) 101 Cass. civ., 23 May 2006, Rev. crit. dr. int. priv.. 96 (2007) 85 Cass. civ., 9 September 2007, Rev. crit. dr. int. priv. 97 (2008) 99 Cass. civ., 11 February 2009, Bull. civ. 2009 I, no. 27 Cass. civ., 11 March 2009, Bull. civ. 2009 I, no. 49 Cass. civ., 11 March 2009, Bull. civ. 2009 I, no. 50 Cass. com., 16 March 2010, JCP édition entreprise et affaires 2010 no. 1438 Cass. civ. 1ère, 6 April 2011 (no. 369 – 09-66.486), Gaz. Pal. 2011 Rec., p. 1181 Cass. civ. 1ère, 6 April 2011 (no. 370 – 10-19.053) Cass. civ. 1ère, 6 April 2011 (no. 371 – 09-17.130) Cour d’appel de Paris, 3 October 1984, Clunet 113 (1986) 156 Cour d’appel de Paris, 13 July 1989, Clunet 117 (1990) 430

702 505 514 560 333 518 518 518 297 615 297 638 386 437 437 437 407 709 709 709 514 182

Germany BverfG, 4 May 1971, BVerfGE 31, 58 = IPRspr. (1971), no. 39 BverfG, 22 February 1983, BVerfGE 63, 181 = IPRspr. (1983), no. 56 BverfG, 6 February 2001, NJW (2001), 957 BGH, 1 January 1954, NJW (1954), 1086 BGH, 21 December 1960, BGHZ 34, 169 BGH, 30 January 1961, IPRspr. (1960/61), no. 39 b BGH, 26 September 1966, NJW (1967), 36 = IPRspr. (1966/1967), no. 14 BGH, 1 July 1970, NJW (1970), 1733 BGH, 22 June 1972, NJW (1972), 1575 BGH, 9 May 1980, NJW (1980), 1846 = IPRax (1980), no. 20 BGH, 19 March 1997, IPRax (1998), 285-29 = IPRspr. (1997), no. 34

733 733 396 301 581 724 561 438 722 117, 122 615, 637

Table of Cases

BGH, 2 October 1997 (Spielbankenaffaire), JZ (1998), 1015 365 BGH, 13 March 2003, JZ (2003), 525 521, 730 BGH, 13 October 2004, JZ (2005), 298 516 BGH, 5 July 2004, RIW (2004), 787 = IPRspr. (2004), no. 15 521, 730 BGH, 4 November 2004, RIW (2005), 144 = IPRspr. (2004), no. 22 479 BGH, 19 September 2005, RIW (2005), 945 = IPRspr. (2005), no. 7 521, 730 BGH, 27 October 2008, NJW (2009), 289 = IPRspr. (2008), no. 11 521, 730 BGH, 12 July 2011, NJW (2011), 3372 521, 730 BGH, 17 December 2013, RIW (2014), 156 479 BAG, 21 October 1980, NJW (1981), 1975 = IPRspr. (1980), no. 52 702 BAG, 30 April 1987, NJW (1987), 2766 702 BAG, 24 August 1989, IPRspr. (1989), no. 72 648, 675, 683 BFH, 6 December 1985, IPRspr. (1985), no. 61 721 OLG Düsseldorf, 23 September 2003, IPRspr. (2003), no. 25 266 OLG Hamm, 20 January 2004, IPRspr. (2004), no. 18 266 OLG Schleswig, 24 October 2008, IPRspr. (2008), no. 12 266 OLG München, 10 December 2008, IPRspr. (2008), no. 13 266 LAG Baden-Württemberg, 17 July 1980, RIW (1981), 272 = IPRspr. (1980), no. 51 675 LG Freiburg, 6 December 1966, IPRspr. (1966/67), no. 34a 759 AG Neumünster, 16 December 1986, IPRspr. (1986), no. 108 553, 563 AG Duisburg, 12 September 2003, IPRspr. (2003), no. 24 266 Italy Cass. sezioni unite, 8 January 1981, no. 189, Riv. dir. int. priv. proc. 17 (1981) 787 Corte d’Appello di Milano, 6 April 1956, Il Foro Italiano 1957, I, 1856 Tribunale di Milano 12 March 1927, Monitore dei Tribunali 1927, 631 Tribunale di Torino, 25 March 1982, Riv. dir. int. priv. proc. 18 (1982) 625

722 335 759 574

Netherlands HR, 16 May 1997, Ned. Jur. 1998, no. 585 277, 278, 280, 284 HR, 24 February 2012, Ned. Jur. 2012, no. 274 647 President Rechtbank ’s-Gravenhage (Den Haag), 17 September 1982 Rechtspraak van de Week/Kort Geding 1982, no. 167 533, 570 Switzerland BG, 10 December 1924, BGE 50 II 507 BG, 28 April 1992, BGE 118 II 193 BG, 4 August 1995, BGE 121 III 336 BG, 20 December 2005, BGE 132 III 285

560, 563 761 613, 615, 630 194

575

576

Table of Cases

United Kingdom A-G of New Zealand v. Ortiz, [1982] 3 All ER 450 (CA) 573, 574 Armitage v. A-G, [1906] P 135 (Ch) 13 Bodley Head Ltd v. Flegon, [1972] 1 WLR 680 (Ch) 374 Boys v. Chaplin, [1971] AC 356 (HL) 300 Carl Zeiss-Stiftung v. Rayner & Keeler Ltd., [1965] 1 All ER 300 (CA); [1966] 2 All ER 536 (HL) 556 Coggs v. Bernard, (1703) 92 ER 107 (KB) 160 De Nicols v. Curlier, [1900] AC 21 (HL) 389 Duff Development Company Ltd v. Government of Kelantan, [1924] AC 797 (HL) 554 Harvey v. Farnie, (1882) 8 AC 43 (HL) 13 Hesperides Hotels Ltd. v. Aegean Turkish Holidays Ltd., [1978] QB 205 (CA) 562 Holman v. Johnson, (1775) 98 ER 1120 (KB) 573 Huntington v. Attrill, [1893] AC 150 (PC) 301 Indyka v. Indyka, [1969] 1 AC 33 (HL) 13 Islamic Republic of Iran v. Denyse Berend, [2007] EWHC 132 435 LeMesurier v. LeMesurier, [1895] AC 517 (PC) 13 Lochgelly Iron & Coal Co. v. M’Mullan, [1934] AC 1 (HL) 292 Marc Rich & Co. AG v Bishop Rock Marine Co. Ltd. (Nicholas H), [1995] 3 All ER 307 (HL) 295 Metall- und Rohstoff AG v. Donaldson Lufkin & Jenrette Inc., [1988] 3 All ER 116 (QB); [1990] 1 QB 391 (CA) 300 Oppenheimer v. Cattermole, [1976] AC 249 (HL) 735 Ralli Bros. v. Compañia Naviera Sota y Aznar, [1920] 2 KB 287 (CA) 741 Regazzoni v. Sethia, [1958] AC 301 (HL) 582 Pitt v. Pitt, (1864) 10 Jurist NS 735, 141 RR 752 (HL) 13 Travers v. Holley, [1953] P 246 (CA) 13 Vita Food Products Inc v. Unus Shipping Co. Ltd., [1939] AC 277 (PC) 159 X & Y (Foreign Surrogacy), [2008] EWHC 3030 710 United States Aiello v. United Airlines, Inc., 818 F. 2d 1196 (5th Cir. 1987) 660 Allstate Insurance Co. v. Hague, 449 US 302 (1981) 729 American Banana Co. v. United Fruit Co., 213 US 347 (1909) 119 AT&T v. Concepcion, 583 US 321 (2011) 631 Bodum USA, Inc. v. La Cafetière, Inc. 621 F. 3d 624 (7th Cir. 2010) 435 Bullen v. State of Wisconsin, 240 US 625 (1916) 523 Carnival Cruise Lines, Inc. v. Shute, 499 US 585 (1991) 604, 605, 631 Dailey v. Transitron Electronic Corp., 475 F. 2d 12 at p. 14 (5th Cir. 1973) 660 David v. Veitscher Magnesitwerke Actien Gesellschaft, 35 A.2d 346 (Pa. 1944) 735 Farris v. ITT Cannon, 834 F. Supp. 1260 (D. Colo. 1993) 660 Franchise Tax Board v. Hyatt, 538 US 488 (2003) 729

Table of Cases

Hartford Fire Ins. Co. v. California, 509 US 764 (1993) 119, 758 F. Hoff mann-La Roche Ltd. v. Empagran S.A., 542 US 155 (2004) 119, 760 Huntington v. Attrill, 146 US 657 (1892) 301, 573 Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011) 570 International Shoe Co. v. Washington, 326 US 310 (1945) 412 Klaxon Co. v. Stentor Electric Manufactoring Co., 313 US 487 (1941) 25 McKinney v. National Dairy Council, 491 F. Supp. 1108 (D. Mass. 1980) 660 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 US 614 (1985) 182 Sawyer v. Market America, Inc., 661 SE 2d 750 (NC Ct. App. 2008) 661, 679, 723 State of Texas v. White, 74 US 700 (1868) 557, 563 Sullivan v. Oracle Corp., 254 P. 3rd 237 (Cal. 2011) 661, 679, 723 World-Wide Volkswagen Corp. v. Woodson, 444 US 286 (1980) 412 U.S. v. Aluminium Company of America, 148 F. 2d 416 (2nd Cir. 1945) 119, 758

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Index The numbers refer to the paragraphs including the footnotes, not to pages

A abduction 132 active consumers 616 ff., 636 ff. adjustment 334 adoption 132, 710 adults, protection of - see protection agency 264 ff. - commercial agency 141, 178, 705 - travel agency 170 ff. aircraft - see means of transport aliens 535 alternative connecting factors 6, 11 American Conflicts Resolution 7, 15 American Law Institute 133, 364, 729 “anational” arrangements 137 ff., 142 antitrust - see competition, restriction of application of foreign law 433 f. art - see culture asbestos 117, 122 Anstalt (Liechtenstein) 518 assignment 274 ff. - Dutch law 277 ff., 285 - national conflict rules 280 ff. - registration 287 f. - subsequent 282 f. asymmetric information 323, 601 ff. Atlantic Charter 71 authentic instruments 499 authentification 479 balancing approach 119 basic freedoms 69, 114, 336, 341, 448, 528, 684, 730

B Batiffol 206, 214 Baylis 60 Beale 206 Beck, Ulrich 61 Bergson 30 ff, 58 better law approach 6 bilateral conflict rules 17, 514, 544 ff., 610, 617, 625, 630, 642 f., 650, 660, 662, 685, 715, 761 bilateral treaties 69, 77, 130, 470 f., 516, 570, 575 bill of lading 156 BITs 77 f. blocking statutes 549, 586 ff. Bodin 541 borax 581 Brazil 187 f., 195 Bucher 5 C capacity 372 ff., 519, 521, 600 capital, free movement of 77 ff., 455 carriage 155 ff. - contract of 197 cascade connections 100, 403, 406 f., 413. 492 Central counterparty (CCP) 140 Central Securities Depository (CSD) 346 ff. CESL 463, 466 characterization 295 ff., 646 ff., 661 children 132, 710 choice of forum 189, 206, 227, 232, 408 f., 603 ff. choice of law 102 ff., 204 ff., 234 ff. - direct 108, 183 ff.

628

Index - divorce 407 ff. - ex ante 323 ff., 433 - ex post 322, 433 - by choice of forum 271, 444 - indirect 474 ff. - limitations 444 ff. - limitation of eligible laws 377, 396, 407, 414, 424 ff., 445 - maintenance 414 - non-state law 193 f. - optional instruments 448 ff., 453 ff. - procedural 433 ff., 436 f. - property rights 334 ff. - standard terms 314 - succession 421 ff. - tacit 386 ff. - torts 307 ff. - validity - see also party autonomy 599, 603 Churchill 71 CIDIP 627, 642 CISG 124, 127, 448, 469 Citizenship - see nationality principle classification - see characterization classification societies 295 clawback provisions 589, 592 ff. clean documents 157 co-determination 648, 702 codification 5, 442 collateral 336 f. collective bargaining 645, 655 collective goods 700 f. comity 119, 582, 596 commerce 37 commercial agents 141, 178, 705, 723 f. communications 37, 132 - elections 42 Community trademark 460 ff. - infringement 462 - registration 461 commuters 99 company law 114, 454 ff., 479, 513 ff., 528, 561 comparative law 628, 708, 731 competition - and choice of law 228 - regulatory 101 ff., 106 ff., 517, 522

- restriction of 119, 217, 304, 319, 719, 755 f. - unfair 117, 304, 319 f. conflit mobile 334, 652 consignment note 156 consumer 611 ff. consumer contracts 196, 197, 217, 236, 313, 325, 466 ff., 609 ff. contracts - capacity 372 ff., 374 f. - choice of law 185 ff., 263 ff. - DCFR 463 - place of contracting 94 - place of performance 94 cooperation 124 ff., 132 f., 498 coordination 124 ff., 129 ff. copyright 357, 361, 364 f. corporate law - see company law countervailing measures 586 ff., 598 ff., 644 ff. coutume de Paris 385 crisis, financial 44,46 crystallization 19 culpa in contrahendo 295 cultural property 564, 574 culture 482, 746 custom, commercial 153, 164 cyberspace 98 D data 81, 292, 352 decision 450 defamation 293, 304 default rules 21, 28, 96, 207, 261, 343, 387, 534, 666 delocalization 97 ff. dépeçage 393 diagonal conflicts 24 differentiation 6 direct claims 296 directed activities 621 ff. disclosure of information 591 f. discrimination 356, 360 dismissal, unfair 647, 675, 678 divorce 13, 100, 381, 399 ff., 486, 492, 512, 707, 719, 737 - recognition 506, 737 documentary credit 161, 163 Doha round 73

Index DOMA 381 domestication of international transactions 137 ff., 177 ff. domicile 13, 382, 386, 401, 485, 489 dominance 606 ff. Draft Common Frame of Reference 463 ff. dual citizenship 402, 406, 484, 489 f. Dumoulin 385, 395 E economic analysis 104, 137 ff. economic order 17 economy, national 57 effects doctrine 111, 119 f., 757 ff. efficiency 104 f., 113, 229, 235 ff. Egypt 191, 300, 303 Eingriffsnormen 217, 546, 634, 655 electronic commerce 375, 619 ff. embargo 564 ff. employer’s establishment 662, 670 ff., 675 ff. employment contracts 197, 313, 325, 644 ff., 712 - patents arising from 363 endangered species 564 enforcement 498 enlightenment 234 ff. environmental liability 304, 319 equality 240 escape clause 311, 315, 319, 662 f., 673 étrangers, condition des - see aliens Europe 777 f. European Cooperative Society 454 ff. European Court of Human Rights 87 European Economic Interest Grouping 454 ff. European Judicial Network 133 European patent - see patent Europeanization 448 ff. evasion of the law 474, 523 ff. ex ante perspective 2, 3, 261 exchange control - see currency expert liability 295 export trade - see also trade in goods 143 ff., 566 expropriation 77 f.

extraterritorial application 591, 597, 758

118, 569 ff.,

F factoring 275, 283, 285 fair and equitable treatment 78 false conflict 14 family 379 ff. family provision 426 FDI - see investment federal entities 729 feudalism 399 fiduciary ownership 335, 337 flag 539, 543, 674 ff. Flessner 185 flexibilization 100, 304 flying personnel 651, 667 force majeure 580 forced heirship 425 ff., 432 Foreign Office (UK) 554 foreign policy 535, 548, 549 ff., 558, 582, 589 foreign public law 575, 739 ff. form 476 ff. forum shopping 103, 511 f. Franco-German marital property regime 470 ff. Frankenstein 199 ff. fraus legis 474, 523 ff. freedom 239 ff. - of establishment 519, 522 - to provide services 652, 681, 691 - see also basic freedoms Fremdenrecht - see aliens Fresnedo de Aguirre 204 ff., 227, 230 frustration 580 Full Faith and Credit Clause 18, 710 fundamental rights see human rights G GATS 74 ff., 652, 688 GATT 72 f., 564 f. gender 367 genetic diagnosis 712 germanic peoples 368 ff., 421 globalization 38 ff., 55 ff., 60 f., 62, 116 gold clause 741 ff.

629

630

Index Goldschmidt, Werner 37 goods in transit - see res in transitu governmental interests analysis 15, 97, 305, 660 f., 726 Grotius 242 grouping of contacts 100 guardianship 376 ff., 486 f., 553 H habitual residence 382, 394, 403, 412, 484 ff., 489 habitual workplace 662, 667 ff., 690, 695 Hague Conference 125, 129, 443, 448, 490 f. Hague Rules 127, 159 Hague Sales Law 469 hardship 580 harmonization 124 ff. harmony of decisions 14 Harter Act 159 Hartley 15 Hegel 207 ff. High Seas 99 Hobbes 541 Holmes, O.W. 523 holographic wills - see wills horizontal conflicts 23 hostages 140 Huber 102 Hull formula 77 human rights 248 ff., 518, 559, 732 ff. I ICAO 125 ICC 150, 163 ICSIO 87 ILA 133, 159 IMF 79 IMO 125 immigrants 53, 382, 402, 424, 485 immutability 386 ff. Imperative norms 699 ff., 715 ff., 739 ff. incidental question - see preliminary question incorporation 109 Incoterms 146 ff., 150 ff., 576 industrial action 304, 319 f., 689 industrial organization 653

industrial revolution 39 initial ownership 361 ff. innovation 39 ff. insolvency 133, 174 Institut de droit international 255, 443, 747, 752 Institute Cargo Clauses 167 institutionalization of international law 8 insurance 161, 166 ff., 308, 712 insurance contracts - see also direct claim 197, 236, 463 integration 89 intellectual property 98, 123, 304, 319 f., 352 ff., 459 ff. interest 629 intermediaries 141, 178, 180, 266 internal conflicts 24 internal market 449, 454, 459 international administrative law 500 international community 548, 549 ff., 559, 731, 758 International Competition Network 755 international law 102, 542 f., 570, 575, 586, 758 international organizations 85, 125, 442 f. international transaction dilemma 137 ff. International Tribunal for the Law of the Sea 87 internet 42, 81, 93, 292, 375, 619 ff. interpersonal law 379 interpretation, autonomous 313, 649 interreligious law 379 interventionist state 545 ff. investment 47 ff., 77 ff., 87 Iran 190 islamic law 89, 412, 707 iteration 140 iura novit curia 434 J Jayme 255 Juenger 388 jurisdiction 130 - adjudicatory 542 - concurrent 12 ff., 510 - consumer contracts 614, 638 f. - direct 130 f. - divorce 408, 492 - electronic commerce 621 ff. - employment 668, 677

Index - enforcement 542 - exclusive 11, 12 ff., 509, 739 - indirect 130, 508 ff. - personal 543 - prescriptive 542 f., 570 K Kant 240 ff., 247, 248 Kinsch 734 Kelsen 207 Kennedy 609 knowledge 91, 96 Kronstein 17 L labour relations - see employment contracts language 57 Latin America 187 ff. Law Commission 328 law-mix 626 legal assistance 130 legal certainty 8 ff., 15, 20, 137, 235, 249, 253, 256, 345, 349, 674, 696, 729, 740 leggi di applicazione necessaria 217, 546, 655 legislative guides 128 legitimate expectations 616 ff. Leibfried 65, 116 letters of credit 160 ff. lex causae theory 579 lex loci celebrationis 476 ff. lex loci protectionis 354 ff., 462 lex mercatoria 143 ff. lex situs 330 ff., 397, 420 ff., 749 liability insurer 296 liberalization 6, 69, 70 ff., 80, 476 ff., 496 ff. license 362, 704 Liechtenstein 518 liner shipping conferences 227 f. local data 301 localization 11, 14 Locke 210, 239, 242 lois de police 217, 546, 634, 655 Lombards 368, 477 M macro-economic disequilibrium

231 f.

maintenance 411 ff., 486, 488, 507, 741 Mancini 93. 102. 254. 382. 402, 484 manning companies 654 marital agreement 406, 407, 409, 470 marital property 384 ff., 470, 486, 488 maritime labour 674 ff. maritime law 539 market dominance - see dominance market imperfection 96, 534, 548, 601 ff., 644 ff. marriage 399 ff., 486 f., 707 - form 400, 480 - recognition 499 materialization 6 matrimonial property - see marital property means of transport 332, 338 medical progress 711 f. mercantilism 354 MERCOSUR 125 mergers 140 methods 11 Middle Ages 367 ff., 404 ff., 440 Middle East 190 ff., 404 migration 51 ff., 82 ff., 424, 484 f. minimum contacts 412, 432, 445, 455, 512, 514, 572, 726, 735 ff. minimum standards 122, 678 ff. model laws 128 money 741 ff. monogamy 707 monopoly 227, 606 moral hazard 644 mortgage loans 284 most-favoured-nation clause 70, 73, 75, 692 multicultural society 440, 746 multinational enterprises 95, 99 N name 370, 730 narcotic drugs 564 nation-state 55 ff., 116, 126, 399, 482, 505 national treatment 70, 73, 75, 355, 360, 516 nationality principle - see also dual citizenship 93, 110, 382, 401 ff., 482 ff., 543 negotiable instruments

631

632

Index - see securities Niboyet 206, 429 Nishitani 254 non-cumul 298, 309 non-state law 193 ff. notary 478, 479, 481 nuda pacta 477 O OECD 80 official address 456 OHADA 125 O’Hara 235 open society 4, 21, 29 ff., 67, 494 opportunistic behaviour 644 optional law 447 ff., 453 ff., 469 ff. ordre public - see public policy outsourcing 653 overriding mandatory provisions 217, 219, 525, 546, 583 f., 595, 634, 655, 661, 667 ff., 682, 715 ff., 750 P package tour 169 ff. pacta sunt servanda 234, 241 ff. parentage 418, 707 ff. parental responsibility 132 party autonomy 108, 183 ff., 525, 698 - consumer contracts 629 - divorce 404 ff. - employment contracts 662 ff., 665 f., 698 - family relations 383 ff. - intellectual property 360 ff. - objections 204 ff. - procedure 436 ff. - property rights 334 ff. - succession 422 ff. - torts 307 ff. passive consumers 616 ff. patent 361 - arising from employment 363 - European patent 460 penal laws 301 personal status 93, 110, 507 personality principle 543 personality rights 293, 304 persons 367 ff., 706 ff. “planning” rules 2

pleading of foreign law 435 polygamy 16, 707, 721 Popper 34 ff., 58 posting of workers 652, 666, 678, 688 ff. powers of representation - see agency - enduring 377 preliminary question 507, 736 PRIMA 349 f. principal place of business 455, 467 principles 128, 233 ff., 449 Pringsheim 477 private actors 20, 26, 135 ff. private ordering 96, 181 procedural dispositions 433 ff., 436 f. proceduralization 6 procedure, law of 15, 109 product liability 297, 304, 319 professio iuris - see also choice of law, succession 440 property rights 252, 329 ff., 749 ff. Proportionality 684 ff., 730 protection - against the State 251 - of adults 376 ff. - of infants 487 - of weaker parties 226 ff., 236, 323 ff., 598 ff., 669, 696 protective principle 543 proximity 97, 396, 494, 508, 544, 546, 561, 563, 583, 626, 635, 698, 725 public actors 20 f., 26 public goods 700 f. public international law - see international law public policy 16, 214 ff., 369, 546, 575, 706 f., 715 ff., 761, 764 761, 764 public rule-making 96, 531 ff., 534 Q qualification - see characterization quotas 70 R Rabel 429 reciprocity 516, 532, 538 ff. recognition 11, 18 ff., 497 ff. - administrative acts 500 - authentic instruments 499

Index - companies 503, 573 ff. - divorce decrees 506, 512 - judgments 130 f., 498, 505 ff., 540, 592 - legal situations 501 ff. - maintenance decisions 507 - marriages 502 - money judgments 507 f. - principle of natural recognition 474, 496 ff. - states 550 ff. - trusts 504 recruitment of foreign worker 84, 93 redistribution - see protection refugees 82 registered office 457 registration 109, 333, 335, 359, 361, 456, 460, 464 regulation 451 regulatory competition - see competition, regulatory relational contracts 644,652 religious law 379, 404 renvoi 188, 189, 389 reprisals 586 ff. repudiation 707, 721, 737 res inter alios acta 263, 272 res in transitu 332, 339, 343 res judicata 498 f. restitution 594, 753 retention of title 335, 337, 341 ff. revision au fond 505 Ribstein 235 Rigaux 267 Ricardo 70, 122 Rieger 65, 116 Roosevelt 71 Rousseau 210, 239, 242 f. 248 S sailors - see seafarers same-sex relations 381, 707 Sassen 116 Saudi-Arabia 191 Savigny 14 ff., 102, 277, 474, 476, 478, 546 sea waybill 156 seafarers 651, 674 ff. securities 141, 345 ff. securitization 275, 284, 285

security assignment 275, 277, 285 Security Council 565 security interests 342, 358 self-fulfilling contracts 244 ff. services - see also freedom 74 ff., 660 settlement 499 shares 479 shipping 39, 41, 153, 159, 169, 227 f., 232, 579, 591, 597; 606, 654 Ships - see means of transport Simitis 655 SME 467 Smith, Steve 60 social change 4, 7 social order 17, 116, 702 f. Societas Europaea 454 ff. Sonderanknüpfung 583 ff. sovereign equality 532, 541 sovereignty 56, 116, 126, 205 ff., 331 f., 459, 505, 541 ff. special connection - see Sonderanknüpfung statehood 551 ff. stateless persons 489 f., 553 Statutenwechsel - see conflit mobile strike 645 succession 420 ff., 481, 493 support - see maintenance surrogate motherland 708 f. Symeonides 5, 324, 326, 420 T temporary employment 652, 667 territoriality 97, 117, 119, 352 ff., 459 ff., 543, 655 ff., 701, 704 ff. testamentary disposition - see wills torts 290 ff., 594 f. - and administrative law 292 - and criminal law 292, 299 - commercial activities 313 - in competition law 760 ff. - development of PIL 299 ff. - double actionability 300 - lex loci actus 303 - lex loci damni 302 ff.

633

634

Index - most significant relationship 305 - preexisting relationship 309 - primary and secondary rules 293 - specific torts 304, 318 ff. tourists - see package tours trade in goods - see also embargo 43 ff., 70 ff., 117, 123, 332, 459 trade in services - see also embargo 45, 74 ff., 683 trademark - see Community trademark trade unions 645 transaction costs 113, 124, 235, 372 transfer of shares 479 transit - see res in transit transport - see also means of transport, carriage 39 ff. transport documents 155 ff., 161 transsexuals 369 treaties of friendship, commerce and navigation 70, 72, 516 treaty law 538 ff. treble damages 760 TRIPS 123, 360 trusts 504 U UCP 160 ff., 163 ff. ULIS 469 UN 255 UNCITRAL 125, 164, 195, 358, 445 Unidroit 125, 173, 193, 195, 448 unification of laws 122 f., 124 ff., 139 uniform (substantive) law 6, 127 ff. uniformity of result 14, 15 unilateralism 548, 583, 630 ff., 635 ff., 650, 655 ff., 745, 759 unitary right 460 United Nations 248, 255, 541, 565 United States 196, 298, 304 universality principle 543 unjust enrichment 594 Uruguay 189, 206 Uruguay Round 72 usage - see custom

V vehicles - see means of transport Venturini 330 Verhoeven 560 vertical conflicts 23 von Hayek 91, 96 W weaker party - see protection welfare, global - see efficiency welfare state 16, 545 Wengler 583 wills 421, 478, 481 winding-up 457 WIPO 125 workers, foreign 84 works council 648, 668, 702 World Bank 77 World Wide Web - see internet WTO 72, 123, 360 Z Zeiss 556 Zweigert 583