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

[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).