Choice of Law in a Federal System and an Internal Market

Abstract:     
This paper tries to develop a general framework for choice-of-law in a federal system and an internal market. The framework consists of two elements:

The first element is the criteria that should guide us in forging a choice-of-law rule, i.e., the answer to the question: How do we determine which choice-of-law rule is preferable? Recent European literature scrutinizes choice-of-law rules under the Dassonville/Cassis de Dijon test of Art. 28 EC, the parallel of the US Constitution's Dormant Commerce Clause, in the first ever intensive exploration of the influence of the concept of the internal market on choice-of-law. But this European literature overemphasizes a few "private interests", while largely ignoring the "state interests" involved, i.e., the horizontal power distribution of the federal system, an important element extensively addressed by the US literature. This paper joins these European and American ideas on a topic of common interest, to develop more sound criteria for forging choice-of-law rules in a system that is both federal and an internal market.

The second element is the authority to make choice-of-law rules, i.e., the answer to the question: Who gets to determine which choice-of-law rule is right? In a federal system, this authority should be exclusively the union's. It should ideally be vested in the federal legislature, otherwise possibly in the federal courts. This paper agrees with a growing body of US literature that finds this ideal state to be embodied in the US Constitution. In Europe, authors merely advocate a federal control of state choice-of-law rules (under the EC Freedoms), but this seems to be no more than a third-best cost-inefficient substitute for the (supposedly) missing European federal law-making power in choice-of-law matters.

Keywords: Choice of law, conflict of laws, federalism, internal market, free movement, commerce clause, private international law, European Union

JEL Classifications: H73, H77, K19, K29, K33

Working Paper Series