The Impact of Internationally Mandatory Laws on the Enforceability of Arbitration Agreements

Abstract

This article examines the impact that internationally mandatory rules of the forum state may have on the effectiveness of arbitration agreements. This question arises when claims are based on such internationally mandatory rules, but the parties submitted their contract to a foreign law. The specific problems of conflicts of economic regulation are illustrated and discussed on the basis of Belgian and German court decisions relating to commercial distribution and agency agreements. European courts have adopted a restrictive practice of denying the efficacy of such tandems of choice-of-law and arbitration clauses if there is a strong probability that their internationally mandatory rules will not be applied in foreign procedures. This article shows that neither this approach nor the much more pro-arbitration biased solutions proposed by critics are convincing. It elaborates a third solution, which allows national courts to reconcile their legislator’s intention to enforce a given public policy with the parties’ original intention to arbitrate and to optimize the effectiveness of both public interests and arbitration.

Keywords: international arbitration, conflict of laws, public policy

JEL Classification: F23, K12, K33, K40, K41, K42