The Principles Behind Choice of Law with Regards to the Rome Regulations

INTRODUCTION

Choice of Law simply refers to the law that is applicable in a case. The question of choice of law is the second most important question that must be answered after that of jurisdiction in the decision of any international dispute brought before the courts. In this work, the principles behind choice of law would be briefly explained with regards to the Rome Regulations. Also, the relationship between a choice of law and the doctrine of public policy would be looked at, as well as a critical evaluation of the role of public policy on choice of law.

CHOICE OF LAW

The term “Choice of Law” is used to describe the body of law which is applicable to an international dispute as it relates to contractual or non-contractual disputes.

The Law Dictionary[1], defines Choice of Law as a contract provision specifying the governing jurisdiction over disputes arising from or relating to that contract in question.

Generally at Common Law, where parties agree as to the applicability of a law in their dispute, the courts would give effect to such an agreement as was established in the case of  Fraser v Buckle[2] per O’Flaherty

            “A choice of law will normally be given effect to providing it is bona fide and legal and not contrary to public policy”.[3]

However, under common law, where the parties had no such agreement as to the applicable law, the courts would come to a decision as to the law applicable using common law rules. The courts would take into consideration the law which has the most closest and most real connection with the transaction in question or in dispute as decided in the case of Amin Rasheed Shipping Corp v Kuwait Insurance Co[4]. This is as it relates to contractual disputes.

For non-contractual disputes, particularly tort, under common law, where parties have no agreement, the applicable law in such a situation would be the law where the tort took place. This position can however vary depending on the circumstances of the case as was established in the case of Chaplin v Boys[5], where the court applied English law even though the two British servicemen were stationed at Malta when the tort occurred.

Outside of Common Law, where member states of the European Union are concerned, the applicable laws would be the EU Regulations with regard to Choice of Law and that is the Rome Regulations[6]. Rome I applies to contractual disputes while Rome II applies to non-contractual disputes.

ROME I

            By virtue of the provisions of Article 3 of the Rome Regulations[7], where parties clearly or expressly choose a particular law to be applicable in their disputes, such a law shall apply. It also provides that parties may not in simpler terms, run away from the principles of the law of the place of jurisdiction by choosing another law where elements of their contract may be relevant.

            Nevertheless, in cases where there is no agreement, Article 4 of Rome I[8] provides that in contracts for the sale of goods, the applicable law shall be the law where the seller has his habitual place of residence[9]. For contracts for the provision of services, it shall be the law where the service provider has his habitual residence[10]. However, Article 4 also provides that where the circumstances of the case suggest a law that is more closely connected to the habitual residence of the seller or service provider, then such a law shall be applicable[11]. It further goes on to provide that where it cannot be determined from the circumstances of the case the applicable law, then the law of the place which is most closely connected shall be applicable[12]. 

            Article 9 of the Rome I Regulations[13] also provide for overriding mandatory provisions applicable in the forum state for the safeguarding of its public interests. While Article 21[14] provides for the public policy exception where if any part of the law chosen is contrary to public policy of the forum state, such section of the law shall be inapplicable.

ROME II

            This is applicable with respect to non-contractual disputes, for the purpose of this paper, particularly tort disputes. The general rule under the provisions of Rome II Article 4 states that the law applicable in a tort dispute shall be the law of the place wherein the damage occurred notwithstanding the country in which the event giving rise to the damage occurred or the countries where the indirect consequences of the event occurred[15].

            Article 4(2)[16] provides however, that where the person liable and the person who sustained the damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply. This is very similar to what was decided in the case of Chaplin v. Boys[17].

            Article 4(3)[18] also provides that where the tort is manifestly more closely connected with a country other than that where the damage occurred or where the habitual residence of the parties is, the law of such a country shall be applicable.

            Article 14(1)[19] also provides that the parties may decide to choose the law applicable in their tort disputes with reasonable certainty either by way of agreement or through the circumstances of the case. Article 16 provides for the overriding mandatory provisions while Article 26 provides for the public policy exception[20].

THE THEME OF PUBLIC POLICY

            According to Ghodoosi[21], the term public policy did not appear until the 18^th century in common law. Before then, there were references made to “encounter commone ley,” which meant prejudicial to the community or against the benefits of the commonwealth. However, one of the first instances of public policy recorded was in the case of Mitchel v. Reynolds[22], where the court voided a contract which was going to encourage restraint of trade for being against public policy.

In a recent Supreme court decision in Irish bank Resolution Corporation Limited v. Quinn[23],the court stated that

 “For many hundreds of years, the courts have refused, on grounds of illegality, to enforce certain contracts. This has been so even where the courts recognize that in an action for breach of contract, to plead illegality may “sound at all times very ill in the mouth of the defendant”. It is not for the defendant’s sake however that the objection is ever allowed “but it is founded in general principles of policy that no court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act”.

In this work, reference has been made to the public policy exception. As earlier stated, the provisions of the Rome Regulations both in contractual and non-contractual disputes make reference to a public policy exception.

            “The application of a provision of the law of any country specified by this Regulation may be refused only if such application is manifestly incompatible with the public policy (ordre public) of the forum”[24].

            In simpler terms, what the above provision means is that where a part of the law applicable in a dispute is against the public policy of the forum state.i.e. the state which has jurisdiction, then such provision of the law would not be applied in the said dispute. In the case of Fender v. Mildmay[25], Justice Atkin stated

“…the doctrine (of public policy) should be invoked only in clear cases, in which the harm to the public is substantially incontestable and does not depend upon the idiosyncratic inferences of a few judicial minds”.

Thus, the courts would only seem to bring into play the doctrine of public policy when it would cause considerable and unquestionable harm to the public and not when the judges deem it fit to apply it.

In the case of Fraser v. Buckle[26], where the parties had an agreement to let the plaintiffs undergo litigation on behalf of the defendants for a part of their inheritance, the Irish courts did not apply a provision of the law applicable to the contract for being champertous as this was contrary to the pubic policy of Ireland. The plaintiff’s tried to argue that the law of champerty was inapplicable to such contracts, that such contracts were not champertous as the agreements related to proceedings outside Ireland and so they could not be contrary to Irish public policy. But the Irish courts dismissed this argument deciding that the contract was contrary to Irish public policy irrespective of whether they related to estates in Ireland or abroad[27].

            Also, in the case of Sporting Index Ltd. V. O’Shea[28], where the plaintiff sought to enforce an English Court Judgement obtained based on betting debts in Ireland, the defendant argued that the judgment was unenforceable by reason of Section 36 of the Gaming and Lotteries Act, 1956, which prohibited the enforcement of any betting contracts. Counsel for the plaintiff argued that the court was not being asked to enforce a betting contract in the present case, but rather, a judgment for monies owed, validly obtained in the English courts enforced in the Irish jurisdiction. But the courts decided that the plaintiff’s submission was unrealistic as it was asking the court to permit the plaintiff to enforce a court order which would in turn enforce a gambling debt which was contrary to Irish public policy and so the judgment was unenforceable. In making their decision, the court went further to expand on when it would become necessary to apply the doctrine of public policy when it stated,

            “Recourse to the public-policy clause can be envisaged only where recognition or enforcement of the judgment delivered in another Contracting State would be at variance to an unacceptable degree with the legal order of the State in which enforcement is sought inasmuch as it infringes a fundamental principle. In order for the prohibition of any review of the foreign judgment as to its substance to be observed, the infringement would have to constitute a manifest breach of a rule of law regarded as essential in the legal order of the State in which enforcement is sought or of a right recognised as being fundamental within that legal order”

            From the above, it can be clearly seen that the courts would only apply the doctrine of public policy when there is a fundamental and obvious breach of an important rule of law in the forum state.

EVALUATION

            It would seem that from all that has been discussed so far, there shouldn’t necessarily be an issue as to the role of public policy in ascertaining the choice of law applicable in contractual and non-contractual disputes. However, there have been a series of arguments tossed for and against the principle of public policy and how it has and is being applied in the decision making of the courts when it comes to the choice of law involved in a case.

Ghodoosi[29] stated that Justice Burrough had called the doctrine of public policy “a very unruly horse”. Judging this statement merely from reading the cases above where public policy was applied, one may state or argue that categorizing public policy as an unruly horse was overstretching. However, a look at the case of Greenwood v. Curtis[30] may make you think differently. In that case, a South Carolina domiciliary sold goods to the defendant in Africa in return for a promise to deliver a quantity of slaves. Part of the slaves were delivered, and the defendant stated an account as to the rest, translating the value of the slaves into cash, so that the account stated said nothing about slaves. The defendant then gave a note to the plaintiff’s agent in Africa, translating the debt back into slaves and promising to pay nine four-foot slaves, thirty-seven prime slaves, and a small sum of money. The note was to be paid in Africa where the slave trade was legal. The plaintiff would then have transported the slaves to South Carolina for sale, the trade being legal there too. Defendant failed to perform, and the plaintiff brought suit on the account stated and on the note in Massachusetts. Defendant’s counsel relied on a Massachusetts statute prohibiting the slave trade and on the contention that the slave trade was a vicious and immoral practice in his argument that no relief should be granted. The court stated that this objection may apply to the attempt to recover on the note, but could not defeat the plaintiff’s attempt to recover the cash amount stated in the account, since the payment of cash is not immoral[31]. Even though the court must have known that the parties did not intend to fulfill their obligations through the payment of cash, it didn’t stop them from validating a contract that was obviously for the trade of slaves. Other cases such as the case of Roundtree v. Baker[32] was also recorded where the court made a similar decision for the enforcement of payment of a note concerning the trade of slaves even though slave trade had been abolished long before the dispute arose.

            The above cases may make one to determine that the courts deem it fit to apply the doctrine of public policy when they want to as there are no laid out definite rules in deciding whether or not a particular contract or law is classified as contrary to public policy other than when the courts believe it would not be in the best interest of the public to do so and then I question this of course, because from the above cases of Greenwood[33] and Roundtree[34], did the courts really act in the best interest of the public?

Nutting[35] stated,

“if the courts are let free to refuse recognition to foreign rights of action by reverting to an entirely unlimited conception of public policy, their enforcement must necessarily be uncertain and capricious”.

In addition to Nutting’s statement, I would also like to add when the courts also allow certain foreign rules to apply by reverting back to an entirely unlimited conception of public policy, their enforcement must of necessity become unpredictable, inconsistent and ambivalent.

Williams[36], stated

            “A condition is against public policy if it is in the interest of the state that it should not be performed. What is contrary to public policy has varied from time to time, and many conditions now upheld, in former days, would have been declared to be contrary to the (public) policy of the law. The rule remains, but its application varies with the principles which for the time being guide public opinion”.

In trying to understand the above statement, one could suggest that public policy is and would always be changing. It has no limits and is not confined to a particular thing or time frame. What is contrary to public policy today may not be contrary to public policy tomorrow and what was not contrary to public policy yesterday could be contrary to public policy tomorrow. The concept of public policy is as changing as the type of clothes people wear or the songs they sing. One cannot define where public policy begins and where it ends nor can it be said that this is and would of a certainty continue to be contrary to public policy. Why? Because the court determines what guides the principles of public policy as it goes and deems fit.

            Granted, the many arguments may be causing some form of legal push to make the courts begin to make some determinants available to decide when public policy should be applied as in the recent case of Irish Bank Resolution Corporation Ltd v. Quinn[37], where the Supreme Court set out certain criteria which are likely to be the basis on which Irish courts will in future, determine the question of the enforceability of a contract in respect of which there is an allegation of some degree of illegality, but that is that enough? And that is just one aspect of the numerous ways the issue of public policy may come into play. Besides, at the end of the day, it is still the decision of the court to determine what falls within that category and what doesn’t.

CONCLUSION

            It cannot be argued that the doctrine of pubic policy is an important part of any judicial system and as much as it may bring up questions of uncertainty and doubt, it is still very crucial in determining the choice of law in a given case. However, I am of the opinion in agreement with Justice Burrough that the doctrine of public policy is of a certainty “a very unruly horse”. It has no boundaries, no reins by which it can be controlled or checked. It changes with the times and seasons as well as with the particular judge who sits to determine a case. There is no basic and specific laid down principle by which the applicability of the doctrine of public policy may be definitive and for this reason, it would continue to bring up more arguments for and against it.

            My suggestion would be for the courts and law makers to look intensively at the doctrine of public policy and try to refine its scope to as much as they can, accommodate various situations and determine various cases based on a somewhat certain and irrefutable blueprint to sort of mitigate the many questions of ambiguity that may continue to arise in relation to the role of public policy in determining the choice of law applicable in a dispute whether it be contractual or non-contractual.

BIBLIOGRAPHY

• Carr I and Stone P, International Trade Law (2017)
• ‘Decision_on_Illegality_and_the_enforcement_of_contracts.Pdf’ <http://www.efc.ie/images/uploads/Decision_on_Illegality_and_the_enforcement_of_contracts.pdf> accessed 24 October 2018
• ‘Ghodoosi – The Concept of Public Policy in Law Revisiting Th.Pdf’ <https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=2833&context=nlr> accessed 22 October 2018
• Ghodoosi F, ‘The Concept of Public Policy in Law: Revisiting the Role of the Public Policy Doctrine in the Enforcement of Private Legal Arrangements’ (2016) 94 NEBRASKA LAW REVIEW 53
• Murray C, Holloway D and Timson-Hunt D, Schmitthoff the Law and Practice of International Trade (12th edition, Sweet & Maxwell 2012)
• Nutting CB, ‘Suggested Limitations of the Public Policy Doctrine’ (1934) 19 Minnesota Law Review 196
• Paulsen MG and Sovern MI, ‘“Public Policy” in the Conflict of Laws’ (1956) 56 Columbia Law Review 969
• ‘Regulation (EC) No 764/2008 of the European Parliament and of the Council’, in Union European, Core EU Legislation (European Union 2008) <http://link.springer.com/10.1007/978-1-137-54482-7_19> accessed 17 October 2018
• ‘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)’ <https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32007R0864&qid=1539803674876&from=EN> accessed 17 October 2018
• ‘What Is CHOICE OF LAW CLAUSE? Definition of CHOICE OF LAW CLAUSE (Black’s Law Dictionary)’ (The Law Dictionary, 18 October 2012) <https://thelawdictionary.org/choice-of-law-clause/> accessed 21 October 2018
• Williams WJ and others, Williams on Wills (Butterworths 2002)
• Amin Rasheed Shipping Corporation v Kuwait Insurance Co (1983) 1983 WLR 3
• Chaplin v Boys (1968) 2 QB
• Fraser v Buckle (1996) 1996 IR 1
• Greenwood v Curtis (1810) 6 Mass
• Irish Bank Resolution Corporation Ltd v Quinn (2012) 2012 NICh
• Mitchel v Reynolds (1711) 1 P Wins
• Roundtree v Baker (1869) 52 Ill

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[1] ‘What Is CHOICE OF LAW CLAUSE? Definition of CHOICE OF LAW CLAUSE (Black’s Law Dictionary)’ (The Law Dictionary, 18 October 2012) <https://thelawdictionary.org/choice-of-law-clause/> accessed 21 October 2018.

[2] (1996) 1996 IR 1.

[3] Fraser v. Buckle ibid 7.

[4] (1983) 1983 WLR 3.

[5] (1968) 2 QB.

[6] ‘Regulation (EC) No 764/2008 of the European Parliament and of the Council’, in Union European, Core EU Legislation (European Union 2008) <http://link.springer.com/10.1007/978-1-137-54482-7_19> accessed 17 October 2018.

[7] 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) <http://link.springer.com/10.1007/978-1-137-54482-7_19> accessed 17 October 2018.

[8] Ibid

[9] Article 4(1)(a)

[10] Article 4(1)(b)

[11] Article 4(3)

[12] Article 4(4)

[13] 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) <http://link.springer.com/10.1007/978-1-137-54482-7_19> accessed 17 October 2018.

[14] ibid

[15] Article 4(1) 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) <http://link.springer.com/10.1007/978-1-137-54482-7_19> accessed 17 October 2018.

[16] 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) <http://link.springer.com/10.1007/978-1-137-54482-7_19> accessed 17 October 2018.

[17] (n 5).

[18] 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) <http://link.springer.com/10.1007/978-1-137-54482-7_19> accessed 17 October 2018.

[19] Ibid.

[20] Ibid.

[21] Farshad Ghodoosi, ‘The Concept of Public Policy in Law: Revisiting the Role of the Public Policy Doctrine in the Enforcement of Private Legal Arrangements’ (2016) 94 NEBRASKA LAW REVIEW 53.

[22] Mitchel v Reynolds (1711) 1 P Wins.

[23] Irish Bank Resolution Corporation Ltd v Quinn (2012) 2012 NICh.

[24] Article 21 of Rome I and Article 26 of Rome II ‘Regulation (EC) No 764/2008 of the European Parliament and of the Council’ (n 6).

[25] (1937) 3 All ER.

[26] (n 2).

[27] Chaplin v. Boys (n 5).

[28] (2015) 407 IEHC.

[29] Ghodoosi (n 21).

[30] Greenwood v Curtis (1810) 6 Mass.

[31] Monrad G Paulsen and Michael I Sovern, ‘“Public Policy” in the Conflict of Laws’ (1956) 56 Columbia Law Review 969.

[32] Roundtree v Baker (1869) 52 Ill.

[33] Greenwood v. Curtis (n 30).

[34] Roundtree v. Baker (n 32).

[35] Charles B Nutting, ‘Suggested Limitations of the Public Policy Doctrine’ (1934) 19 Minnesota Law Review 196.

[36] William James Williams and others, Williams on Wills (Butterworths 2002).

[37] Irish Bank Resolution Corporation Ltd v. Quinn (n 23).