Application of Overriding Mandatory Rules in International Commercial Arbitration: An Empirical Analysis

Abstract

Overriding mandatory rules are rules of a public policy nature that supersede the otherwise applicable law and apply automatically to any dispute falling within their scope. They pose a limit to the principle of party autonomy in private international law; while national courts usually have wide discretion to apply foreign overriding mandatory rules, the courts are required to apply forum overriding mandatory rules when the dispute falls within the scope of the application of the overriding mandatory rules. For example, if a contract provides for the importation of cotton from Egypt to the United States (U.S.), an overriding mandatory rule could be a trade ban issued by Egypt against the U.S. The trade ban overriding mandatory rules’ application would be required if the forum is an Egyptian court; however, the situation could be different if the forum is a court in the U.S., and it would definitely be different if the forum is international arbitration. International commercial arbitration’s landscape is quite different given that arbitration does not have a forum, which makes the application of any overriding mandatory rules in international commercial arbitration entirely discretionary for arbitrators. In this regard, scholars have uniformly agreed that arbitrators have the power to apply overriding mandatory rules in arbitral disputes; however, this does not mean that they will actually apply them in practice. This article analyzes the circumstances that prompt arbitrators to apply overriding mandatory rules in international commercial arbitration. There are many contentious forces that arbitrators have to grapple with; namely, the duty to render an enforceable award, to preserve the integrity of international arbitration by avoiding the utilization of arbitration as a mechanism for evading the application of mandatory rules, and to protect the parties’ legitimate expectations.

Keywords: Arbitration, Overriding Mandatory Rules, Lois de Police, Private International Law, Empirical Analysis