General Principles of Conflict of Laws

General Principles of Conflict of Laws

1. Principle One: Substance & Ancillaries v. Formalities (not Substance v. Procedure)

Law of the time for suit can be the law not of the place where the case is taken but place where the tort was committed. If you sue in Quebec, delay for suit is 3 years. If sue in NY under K, then use Quebec delay for suit (3 years). But Dicey and Morris thought procedure included the delay for suit (so use the 1 year NY delay).

Sue in NY in K. And they have a Guest Statute Rule for damages (you get more or less if you are a guest). Tetley thinks you should not apply it (because you should follow the K).

*It is still suggested that, rather than drawing distinctions, it is preferable to determine the proper law of each legal relationship using “Tetley’s methodology.”

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  Substance: the legal relationships (contracts and torts) which have a proper law of their own and which proper law is usually not of the forum
  
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  Ancillaries: Time limitations, cross defenses, rules of evidence, presumptions etc., which affect or qualify the legal relationship. They have a proper law of their own, which is usually identical to the proper law of the contract/tort to which they are connected.
  
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  Formalities of the forum court (including conduct of the trial) are of the forum only and administrative, e.g., the method of drawing up and serving the writ, where and how the court sits, how the trial is conducted, who questions the witnesses, whether the trial is by jury, how foreign law is proven, etc…
  

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  absolute as this rule was supposed to be, there was a difficulty in distinguishing between the two (Dicey and Morris) and as a result, many exceptions
  
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  Lord Wilberforce in Milangos – The traditional dichotomy is accepted but must be circumvented if it causes injustice (if procedure affects the creditor’s rights).
  
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  Batiffol and Lagarade and Mayer – All are kind of hesitant to adopt the traditional position.
  
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  The First Restatement – States the traditional position in section 585: All matters of procedure are governed by the law of the forum.” “Ancillaries” are also subject to the law of the forum.
  
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  Restatement Second – (Tetley likes the following) – does not attempt to distinguish substance from procedure (Chapter 6)
  
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  Procedure is the law with which the forum state has the most significant relationship – “A court usually applies its own local law rules prescribing how litigation shall be conducted even when it applies the local law rules of another state to resolve other issues in the case.”
  
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  Formalities are distinguished from procedure – the above deal with the former and not the latter
  
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  Certain rules of Chapter 6 allow exceptions to the “procedural” rules, which allow the court to apply a foreign law under given circumstances – describes when this should be done: when substantial rights and duties of the parties would be affected by the determination of this issue, where another sate has the dominant interest in question, and where the primary purpose of the relevant rule of the state of otherwise applicable law is to affect decision of the issue rather than tot regulate the conduct of the trial
  
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  example – s.125: procedure/substance dichotomy is not invoked…the local law of the forum is invoked to determine the question unless the rights and duties of the parties would be affected by the determination of the issue by the law of the forum
  

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  Italian Civil Code – governed by lex fori…other statutes mentioned as well making various distinctions between substance and procedure…p.53…
  
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  UK Law Commissions’ Report on Tort and Delict, 1990 – traditional distinction upheld for immunity, damages, ceilings on recovery, etc. – new choice of law rules should not apply to procedural matters but does not help with distinction.
  

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  Draft UK Bill 1990: “procedure with respect to proceedings” is part of the law of the UK and determined only by law of U.K., but “procedure” is undefined so must be characterized in each case.
  
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  Louisiana Civil Code: contains no explicit distinction between substance and procedure – prescription covered by lex fori but there are exceptions (remedial justice).
  
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  CCQ – distinction is found here. Art. 3132: Procedure is governed by the court seised of the matter. This rule is limited as certain issues which might normally be considered procedure are given a proper law of their own. For example: a. Art. 3130: evidence is governed by the law applicable to the merits of the dispute, subject to any rules of the court seized of the matter which are more favorable to the establishment of evidence; Art. 3131 Prescription is governed by the law applicable to the merits of the dispute; Art. 3133: Arbitration proceedings are governed by the law of the country where arbitration takes place unless either the law of another country or an institutional or special arbitral award has been designated by the parties.
  
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  Australian Draft Choice of Laws Bill, 1992: Makes distinction between substance (time limitations, frauds, presumptions, etc.) and procedure. However, provides “escape hatches,” giving the courts discretion to apply the forum law of evidence and procedure where it would be impractical or cause injustice to do otherwise – distinctions seem to be only lip service.
  
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  Rome Convention: Tetley says that you can conclude from the Rome Convention that the substance/procedure distinction is no longer important. Article 1(2)(h) explicitly excludes evidence and procedure from its ambit but includes specific issues traditionally considered procedural: a. 10(1)(c) assessment of damages in general, a. 13 conflict rules of subrogation, a. 14 presumptions of law and rules governing burden of proof, each of which is governed by its own proper law. Article 14(2) – any mode of proof is admissible if acceptable under either the lex fori or the law under which the contract is properly and formally valid, provided that such a mode of proof can be administered by the forum court.
  

While formalities of the court are decided by the lex fori (i.e., the preparation of writs and written pleadings and forms and their service in the jurisdiction), not all decisions taken by the forum court are in accordance with the lex fori. Ancillaries (time limitations, presumptions, cross defenses, burdens of proof etc.) are traditionally deemed procedural, but have a proper law of their own, which may be a foreign law, or the law of the forum, but are usually the law of the subject matter to which they are ancillary.

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  Cross-defences (set-off, recoupment, compensation, counterclaim) are not necessarily procedural and are not necessarily subject to the lex fori – i.e., where there is a claim for freight by a ship-owner and consignee replies by claiming for damaged cargo, one must determine the proper law of each of the two claims. If a court decides that the principal claim has one proper law, and the cross-defense another, the court has the discretion to decide which law applies to the right to a cross-defense.
  
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  Time limitations: Extinguishes the right to claim or the right to sue; have a proper right of their own, usually attached to the right which it prescribes, are therefore not necessarily subject to the lex fori. If a court of a South American country which hasn’t adopted the Hague or Hague/Visby Rules were to decide a question concerning a shipment of goods from NY the proper law of the contract of carriage would be US COGSA 1936 and not the law of the South American court (depending on where bill of lading issued and shipment originated). If this were not the case, the application of lex fori could lead to forum shopping because time limitations would be applied by the law of the forum in every situation.
  
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  Presumptions: Burden of proof rules such as presumptions have proper laws of their own and are not necessarily subject to the lex fori. In the above example, the presumption resulting from a clean bill of lading would flow from the statute that governs, and not the lex fori.
  
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  Damages: Damages (including interest and currency) were traditionally left to the lex fori; while remoteness and heads of damages were deemed substantive, calculation of damages were deemed procedural. See: UK Law Commissions’ Report on Tort and Delict 1990, UK Law Commissions’ Working Paper 1984. The Rome Convention is better. Article 10(1)(c) provides that the proper law shall govern the assessment of damages in so far as it is governed by the rules of law. Similarly, the Restatement Second at s. 171 (tort) and s. 207 (k) says that you should follow the proper law vis measure of damages. Netherlands does the same.
  
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  Burden of proof, order of proof, conduct of the trial and formalities of the forum court:
  
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  Burden of proof: only decides who must prove a single question of fact and is substantive
  
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  Order of proof: the order in which a number of facts must first be proven by the claimant, followed by other facts proven by the defendant, and finally by the counter-proof by the claimant.
  
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  Conduct of the trial: the manner in which a trial or proceedings are carried out (i.e., rules which decide how the oath is administered, whether the court or opposing attorney questions witnesses)
  
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  Formalities of the Court: include the form of writs, subpoenas, conduct of the trial, judgments and related documents, their service and publication.
  

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  Parole Evidence Rule: prohibits the use of oral and other extrinsic evidence to add to, vary or contradict a written instrument – there are exceptions. It should be governed by the proper law of the contract as a substantive issue, rather than as a matter of procedure.
  
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  Statute of Frauds: certain contracts not in writing may not be enforced. The formal method in which proof is made is of the forum, but which facts a court will admit to prove the existence of the k should depend on the proper law of the k.
  

The substance/procedure distinction must be discarded because it is difficult to make, results in forum bias, and matters procedural are not always of the lex fori.

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  If you’re going to make a distinction, it should be between substance and ancillaries on one hand, and formalities of the forum court on the other.
  
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  The proper law of each legal relationship and ancillary should be determined using a methodology. The forum court should only apply the lex fori if it is the proper law of the legal relationship or ancillary, or in the case of a genuine formality of the forum court.
  

2. Principle Two: Renvoi

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  Single renvoi: referral by the forum court to the conflict rules (excluding renvoi rules) of a foreign state (i.e. the forum court applies the domestic law specified by the foreign conflict rules).
  
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  If there is reference back to the forum’s domestic law = remission
  
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  If there is reference on to the domestic law of a third state = transmission
  
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  Double renvoi: referral by the forum court to the conflict rules (including renvoi rules) of a foreign state. Limited in England. The conflict rules in the other jurisdiction say you must apply the conflict rules of another jurisdiction. For example, NY applies Ohio rules. With this and remission it is possible that the forum court will send the case back again resulting in a case of judicial ping-pong. Similar situation with transmission.
  

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  Renvoi was developed in order to counteract the territorial theory of Story, the citizenship theory of Napoleon and Mancini, and the offspring of the citizenship theory, such as the law of the flag. Because these theories often resulted in incongruous solutions to conflict problems, in many cases renvoi was chosen as the solution.
  
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  First arose in the 1861 case of Krebs v. Rosalino where foreign law, including conflict laws, was applied. It used to be argued that renvoi would achieve uniformity in conflict cases, regardless of where judgment was rendered – application of rules of foreign state would provide same results id they had been heard in this states itself.
  
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  Renvoi should not be used to find an equitable solution. Renvoi is an antiquated escape hatch, unnecessary under modern conflict rules as most national conflict statutes and international conflict conventions have escape hatches or general exceptions based on the closest and most real connection.
  
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  Today, the application of the closest and most real connection test does away with the need for renvoi, as does forum non conveniens.
  
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  Rejection of Renvoi – Renvoi has been specifically excluded by the Rome Convention 1980 at Art. 15. Generally, today renvoi is permitted only in exceptional cases, according to the authorities.
  

Accepted less and less today except in certain cases.

It is rejected in the First Restatement and the Restatement Second (with 2 exceptions, however these exceptions allow renvoi to be applied where there is no real conflict of laws).

English authorities usually accept it, but qualify/restrict their acceptance. Dicey and Morris reject it except in exceptional cases; Cheshire and North conclude that it is rejected, except in limited cases.

In Canada, Castel rejects renvoi (CCQ Art. 3080), as does McLeod (common law). The former believes that iniformity can only be achieved by agreements between all interested states. The latter thinks it might have worth in exceptional cases. Groffier (Quebec) seems to reject it.

1. Conventions

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  The UNCITRAL Model Law 1985 shows that a stipulation by the parties of the law applicable to the substance of a dispute does not automatically include that law’s conflict rules – it must be specific to include them.
  
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  Rome Convention 1980. Art. 15 rejects renvoi.
  

2. National laws

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  UK: Contracts (Applicable Law) Act 1990 gives the Rome Convention force of law in the UK, and thus excludes renvoi in contract, per article 15 of the Rome Convention. Renvoi also excluded for tort and delict by a Law Commission and Scottish Law Commission Report.
  
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  Austria: accepts referrals back and referrals to a third jurisdiction, but no further.
  
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  Quebec: 3080 CCQ specifically excludes renvoi.
  
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  USA: UCC permits limited application of renvoi.
  
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  Louisiana: LCC Art. 3517 specifically excludes renvoi but in certain cases must be considered
  
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  generally most countries who used to accept limited application of renvoi now prohibit it because of the Rome Convention, or prohibit it in their own laws (Hungary, Spain, Turkey, Portugal, Italy, Australia, Netherlands, China – p.85)
  

3. Reference in a Contract to Conflict Rules

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  Renvoi is the reference by the court of one state to the conflict of law rules of another state
  
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  It is not to be confused with express choice by parties of conflict of law rules to be applied to a contract.
  
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  Choice of law rules should not be assumed to be part of a general reference in a contract to a state’s laws. The choice of conflict rules in a contract should be express and should exclude renvoi to avoid all the problems that renvoi entails.
  
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  Renvoi should only have a role in contracts if parties have expressly referred to the conflict rules of another state, and not just the foreign law of another state.
  

“Renvoi should receive neither general nor special application in maritime law.”

should have no role in contracts, unless expressly referred to conflict rules of a foreign law – has no application to torts

One suggested application of renvoi is in the sale of ships when the ship is within the jurisdiction of another state so that the purchaser’s title would be upheld in the foreign state – reach proper result (to allow title to be enforced regardless of forum – intended laws always govern). But, the proper law of the registration of the title is the law of the place of the ship’s registry, but the proper law of the agreement of sale may be some other law. Or, the forum state could apply forum non conveniens.

It is improper to use renvoi to reach an equitable solution because it results in practices that cannot be controlled

Maritime decisions that have invoked renvoi reveal that it has been used where the closest and most real connection test could have been used instead. Renvoi has been used in order to avoid an undesirable result, but has been carried out without a consistent application or methodology. Some courts have properly rejected renvoi, and/or have invoked forum non conveniens. In most of these cases, the same result would have been reached regardless. The only difference was the inconsistency of Renvoi and its application.

Reference in a contract to the law and conflict of law rules of a particular state is not Renvoi and is valid unless the public order/mandatory rules of the otherwise proper law are being evaded.

It is a short-term, virtually uncontrollable, indiscriminate solution to a single problem which places any rational system of conflicts of law at risk…

3. Principle Three: Public Order, Public Policy

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  In the US, the meaning of public policy includes mandatory rules. However, public policy has become absorbed into the concept of interest analysis.
  
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  In Europe, the Rome Convention recognizes international public order/policy and mandatory rules of a closely connected foreign law. They have moved in a different direction then the U.S.
  
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  Public order/policy, mandatory rules and obligatory forum court statutes are important in choice of law, choice of jurisdiction, and recognition of foreign judgments.
  

Art. 6 of civil code – “no one may by private agreement contravene the laws of public order/good morals.” (domestic public order)

International public order – domestic public order is extended to the protection of principles of natural law and the preservation of the political/social foundation of France and safeguarding of certain legislative policies (prohibition against divorce by mutual consent until 1975). A mechanism controlling the application of otherwise applicable foreign law – distinct from domestic public order. Defencds against intolerable foreing laws and practices.

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  Rome Convention refers to public law of the forum and reflects the distinction between domestic and international public order, mentioned above
  

8 CCQ – domestic public order – no person may renounce exercise with civil rights except to extent consistent with public order (used to be good morals)

9 CCQ – no derogation from rules of public order in exercise of civil rights

308 CCQ – international public order for choice of law in private international law – Quebec will apply will not apply foreign laws if their application would be manifestly inconsistent with public order as understood in international relations

3155(5) CCQ – international public order for recognition and enforcement of foreign judgments unless manifestly inconsistent with public order as understood in international relations
Louisiana

Art. 3520 marriage; art. 3535 form of contract; art. 3540 freedom of choice in contract. In each case, public order of the otherwise applicable foreign law is considered.

Art. 16 refers to international public order of the forum – the application of the law of any country specified by this Convention may be refused only if such application is manifestly inconsistent with the public policy of the forum

Art. 7(2) mandatory rules of the forum regardless of the applicable law

Art. 7(1) mandatory rules of a closely connected law if those rules must be applied whatever the law applicable to the contract – regard must be given to their nature or purpose and to the consequences of their application or non-application

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  Re. Fuld’s Estate (No. 3) …an English court will refuse to apply a law that outrages its sense of justice or decency. But before it exercises such a power it must consider the foreign law as a whole – high limit
  
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  Dicey and Morris state that English courts will not enforce a foreign law which would be inconsistent with the fundamental public policy of English law – far less prominence here
  
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  According to Cheshire and North, public policy may be invoked in England as a basis for refusing to recognize a foreign law where its enforcement would offend some moral, social or economic principle sacrosanct in English eyes, or would offend some feature of internal policy. In the former case, the foreign law will be unenforceable in all actions; in the latter, the law will be unenforceable only if the governing law is English – narrower in international rather then domestic law
  
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  UK Law Commission’s Report on Choice of Law in Tort and Delict, 1990 – general rule that courts do not apply foreign law when doing so would be inconsistent with fundamental policy of English law.
  
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  Rome Convention: applies to contracts under English law. International public order intended. Re. mandatory rules, there has been a reservation as to Art. 7(1).
  

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  Falconbridge: the doctrine of public policy as applied to conflicts is connected with some essential principles of justice or morality of the forum. He almost recognized foreign or international public order as opposed to domestic public order even though writing about 40 years ago.
  
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  Castel: difficult to define but declares that must involve essential public or moral interest or forum’s conception of essential justice and morality – purely internal public policy must not be given the same character in the external sphere.
  
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  McLeod: No contract will be enforced in the forum if it is contrary to the fundamental policy of the forum, or if it is illegal according to the appropriate system of law.
  

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  Sykes & Pryles: see public policy as a defense against the enforcement of rights arising abroad on grounds of their “repugnancy” either to the forum’s “moral code” or its “basic legal notions.”
  
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  Necessarily subjective and more felxbile when applied to foreign transactions as opposed to domestic ones.
  
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  Australian Law Reform Commission: has recommended retaining the traditional common law doctrine of public policy as a useful defense against foreign laws repugnant to the court’s conscience.
  

The concept of public policy in American conflict law has been enmeshed with interest analysis, with domestic public policy and with interstate conflicts.

Story: viewed public policy as a device upholding standards of fairness in respect of foreign contracts – no nation is bound to enforce any contracts that are injurious to its own interests, or those of its subjects.

This view was confirmed by Cardozo in Loucks v. Standard Oil: courts are only free to refuse to enforce a foreign right unless to do so would violate some fundamental principle of justice …

In Mertz v. Mertz, it was held that public policy could only be found in the constitution, statutes and judicial decisions (i.e. a narrower view).

However, there has been a slow move in the US jurisprudence towards a better understanding of public policy in the conflict of laws and away from associating it with the internal public policy of states. This move realigns public policy with the original classic concept of Story and Cardozo (not only found in laws but also in prevalent social and moral attitudes of the community)

due process considered as an extension of public policy

Interest Analysis - Principle found in the Restatement Second 1969.

choice of law can sometimes be overridden by the law of the state wit the materially greater interest

There is a relationship between the application of public policy and governmental interest analysis. American courts tend to subsume the classic concept of public policy under the umbrella of interest analysis, because many American conflicts cases involve interstate, and not international, situations – the policy of one state vs. another will never be so far outside either’s standards

Equity Analysis - Public policy in the US is heavily equity-oriented; its public policy favors justice for the weaker party – very result oriented. Equity is thus a major factor in public policy because American social and justice system is corrective rather than distributive.

Conclusion – American courts will on occasion apply public policy rather than interest analysis, but it is usually domestic and not international public policy.
International Public Order/Policy of the Forum and Domestic Public Order/Policy of the Proper Law

the traditional concept of public order/policy was originally tied to the law of the forum, in both jurisdictions, so that courts could ensure local ideas of justice, morality, etc. over alien laws

The modern concept of public order/policy in conflicts is the forum’s international public order/policy.

This means that foreign laws are not struck down just because they differ from local rules/ideas – more limited concept.

Where a foreign law is the proper law, the foreign public policy is part of that law and entitled to recognition and enforcement, unless it conflicts with the forum’s international public order/policy. However, courts have often been reluctant to recognize a purely domestic foreign public policy. But, in some contracts cases, domestic public order of the foreign proper law has been introduced to prevent some illegality under the foreign law of the place of performance (although in such cases courts have avoided using the public order) – partial recognition of foreign public order, policy in some contract conflicts cases

Lemenda Ltd. v. African Middle East Co.

where a contract infringes on a rule of public policy the English court will not enforce it, whatever the proper law of the contract and wherever the place of performance

An “international”, or universal, public policy of a foreign state may be upheld at common law because of its similarity to the local public order/policy of the forum – international comity

However a purely domestic foreign public policy will seldom, if ever, be recognized, which is unfortunate because it refuses to recognize that where the foreign law is the proper law, the foreign public policy, however purely domestic it may be, is part and parcel of the foreign law and entitled to enforcement unless directly conflicting with forum’s international public policy/order (wouldn’t a better policy be to declare forum non conveniens?).

Recognition of the domestic public policy of the proper law is part of American government interest analysis, the Louisiana Civil Code, and the Restatement Second, 1969.

The five principles in Barnes Group Inc. v. C & C Products Inc. show an effort by at least some US courts to recognize the “fundamental policy” of the more “interested” US state instead of the chosen law, when confronted with a serious conflict between laws of two or more American states. It is not clear whether these principles apply to international conflict problems
Rome Convention 1980 and Public Order/Policy

Art. 16 permits refusal of the rule of law of any country if its application is manifestly incompatible with the public order/policy of the forum.

It can be inferred that the Continental concept of public order is intended, which connotes the international public order of the forum.

Also, this provision does not rule out the application of the domestic public policy of the proper law.

Only manifest incompatibility between the foreign law rule as applied and public policy of the forum will trigger the application of art. 16 and this manifest incompatibility must relate to the application of the foreign law within the jurisdiction of the forum court in the particular circumstances of the case and not to the foreign law itself.

Public order/public policy used interchangeably in this provision.

4. Mandatory Rules (part of Public Order/Policy, has broadened in same way)  term of legal art

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  CCQ Art. 3076 - invokes mandatory rules of the forum by implication – see also 3079 CCQ
  
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  CCQ Art. 3111 - expressly mentions foreign mandatory rules for contracts when no foreign element – closest and most real connection
  
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  CCQ Art. 3117 - designed to prohibit evasion of the mandatory rules of the law of the consumer’s place of residence in respect of consumer contracts.
  
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  CCQ Art. 3118 - designed to prohibit evasion of the mandatory rules of the law of the worker’s habitual place of work in respect of employment contracts.
  
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    much of the same ideas were recommended by the Australian Law Reform Commission in 1992
    

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  Vita Food Products v. Unus Shipping (1939) shows reticence of courts to recognize the compulsory character of some sets of international mandatory rules; the Privy Council overlooked the mandatory nature of the Hague Rules and applied only English common law and not even the Sea Carriage of Goods Act. However, this decision has been ignored or distinguished, and overruled by conventions and legislation.
  

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  Even if the mandatory nature of international conventions isn’t recognized, they should at least be accepted as a very strong contact ion the choice of the proper law of the contract. The obligatory nature of these rules at the time of contracting militates in favor of their great significance as a contact in identifying the proper law of an international shipment form a jurisdiction that had adopted them.
  

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  Mandatory rules of the proper law: Mandatory rules are part of the applicable foreign proper law, and should be applied whenever a court decides that that foreign law is the proper law. However, courts in the UK, France, and Canada have been reluctant to do this.
  
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    “Mandatory rules provide a strong indication as to the proper law of the contract in a conflicts case.”
    
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    Example: A & B (Quebec residents) form contract and say Japanese law will apply. Court will ask what is the “closest and most real connection” and are there any mandatory rules of this proper law? For example, court will say the Quebec CPA applies (because contract made in Quebec, base of operations in Quebec, resident in Quebec, etc.) and cannot be contracted out of. Despite express choice of Japanese law, cannot evade Quebec’s mandatory rules.
    
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    Art. 7(1) Rome Convention permits contracting states to apply the mandatory rules of the law of another country with which the situation has a close connection. Art. 3079 CCQ has the same effect.
    
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    hopefully states will realize the important role these rules play in international commerce…
    

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  Under the Rome Convention, the law applicable to a contract (the proper law, determined by Art. 3 and 4) includes the mandatory rules of that law, though this is not expressed overtly. But some provisions of the Convention do explicitly recognize mandatory rules of certain types and protect them from choice of law clauses, and even against the law applicable absent any choice, in some cases.
  
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    For example
    
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      3(3) – overriding effect given to mandatory rules of the sole connected law, where all other elements relevant to the situation at the time of the choice are connected with one country only – an evasion/fraude a la loi provision
      
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      5(2) – consumer protection provisions from habitual residence of consumer despite express choice of law in contract
      
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      6(1) – protection of employees against losing the benefit of mandatory rules despite express choice in employment contract
      
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      9(6) – protects against avoiding the mandatory rules of the site of the immovable property
      
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      As well as those of a closely connected law (7(1)), of the forum (7(2)) and of international conventions (21).
      
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      7(1) – very important. This article contemplates the mandatory rules of a third country and not of the forum or of the applicable law. It has three conditions for its application and is not onerous: 1) there must be a close connection of the situation with the state to which the mandatory law belongs; 2) the law must be mandatory no matter what law is applicable to the contract; and 3) the court is still not obliged to apply the mandatory rules, but shall give consideration to their nature and purpose and to the consequences of their application or non-application.
      
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        This provision prevents the evasion of mandatory rules of a third state that had a close connection to the contract. However, the UK, Germany, Luxembourg and Ireland have made a reservation to this provision, which is bad because foreign mandatory rules of any connected state should be considered, at least. It is possible that the reservation may prevent English courts from applying the principle of evasion that already existed in the common law.
        
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      7(2) – This provision guarantees that the forum’s applicable mandatory rules may be applied regardless of the law otherwise applicable. It refers to the mandatory rules of the forum court, including obligatory forum court statutes.
      
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      21 – This provision refers to international conventions and means that the RC does not affect the operation and mandatory force of the Hague rules, etc.
      

5. Obligatory Forum Court Statutes (Tetley terminology)

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  Example – UK Merchant Shipping Act 1979, enacting the Limitation of Liability for Maritime Claims Convention 1976. The convention will be applied whenever any ship-owner’s limitation proceedings are taken in an English court in respect of an incident anywhere in the world.
  
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  Asbestos: CCQ 3129 The application of the rules of this Code is imperative in matters of civil liability for damage suffered in or outside Quebec as a result of exposure to or the use of raw materials, whether processed or not, originating in Quebec. Think of Canadian medication being bought in the US.
  
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  Obligatory forum court statutes are different from public order or mandatory rules because the forum court automatically applies them, even when there is no connecting factor with the forum.
  

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  Such statures are bad, because they undermine the normal operation of contacts and closest and most real connection. However, courts may avoid them with forum non conveniens.
  

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  Public order and public policy have become almost identical in private international law, as seen in the Rome Convention 1980.
  
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  The forum applies its international definition of public order policy, not its domestic notion with respect to conflict of laws.
  
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  The domestic public order/policy of the putative foreign proper laws should be applied as part of the proper law.
  
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  Mandatory rules of the putative foreign proper law should also be recognized, and obligatory forum court statutes should be avoided.
  
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  We need a consistent methodology to solve conflict problems.
  

6. Principle Four: Evasion/Fraude a la loi

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  Evasion (common law) or fraude (civil law) is essential to all private international law, but it is only partially acknowledged in the civil law, while its formal existence is not admitted in the common law.
  
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  It is only dealt with indirectly under public order/policy, mandatory rules, governmental interests, or by the application of the lex fori.
  

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  Can be invoked in choice of law, choice of jurisdiction, and recognition of foreign judgments (when a judgment is not recognize because there has been evasion of the law or proper jurisdiction in obtaining that judgment – fraude au jugement).
  
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  Evasion/fraud may be the act of one person (i.e., contract of adhesion or standard form contract) or of two persons (i.e., when both parties to a divorce travel to another jurisdiction to avoid the applicable law) or of two parties against a third party (i.e., a shipper and carrier contract so that the normal law of estoppel benefiting a third party consignee of a bill of lading is not applicable).
  
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  Evasion/fraud always involves the international public order of the forum, the domestic public order of the properly applicable law, a mandatory rule of the properly applicable law, or the appropriate jurisdiction.
  
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  It must be intentional and improper doing of something indirectly what one cannot do directly.
  
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  Evasion/fraud may occur at the time of the contract/juridical act or after it as in the case of forum shopping.
  

1. 
   Conscious manipulation of conflict rules by modification of a connecting factor.
   
2. 
   Subjective intention to improperly circumvent the law.
   
3. 
   There must be a law that is evaded.
   

• 
  Nullity of the entire contract/juridical act or if there is only an offending clause, then nullity as regards the party responsible for the evasion.
  
• 
  The justification for such sanctions is that if all contacts are with a particular country, and the parties are able to incorporate a foreign law by reference, despite the mandatory provisions of the first country, then the mandatory law of that country is undermined.
  

• 
  Traditionally, French courts didn’t invoke fraud in the case of evasion of a mandatory foreign law. There is a growing acceptance in France that fraud is applicable to an attempted evasion of a mandatory foreign law.
  
• 
  The Rome Convention is in force in France, and in Arts. 3(3), 7(1) and 16 will prevent the evasion of foreign mandatory rules and international public order of the forum in the most flagrant cases.
  

• 
  Forum shopping is looked on unfavorably, has been dealt with by non-recognition of foreign judgments.
  
• 
  Where parties of equal bargaining strength agree to a clause calling for suit in another jurisdiction as a judicial convenience to both, this is avoidance, not fraud.
  

• 
  3079 CCQ provides a basis for refusal of an express choice of law on the grounds of fraud – it invokes mandatory rules of another country.
  
• 
  Its use depends on whether a judge found that the prevention of the law of another state from being evaded, through the use of the QC court, qualified as being in the legitimate, etc. interests of that state.
  
• 
  Evasion is specifically prohibited in consumer and employment contracts and non-marine insurance.
  

• 
  Because common law contracts have an objective (actual words used, not motive behind) basis, and evasion has a subjective basis, insofar as it requires an intention to manipulate a connecting factor, it is difficult for the common law to deal with evasion, and receives little attention.
  
• 
  There is also a tradition of common law judges to construe statutes strictly and limit their influence on the development of law – evasion doctrine is contrary to English ideal of liberty law.
  
• 
  Also, since evasion may require the recognition of foreign mandatory rules and international public order and English courts are reluctant to recognize these, evasion is underdeveloped in the common law.
  
• 
  Application is rare and lacks consistency.
  

• 
  There is no general doctrine of evasion in the US – public policy used instead but usually only in respect of American law.
  
• 
  Ehrensweig says that while avoidance of the law does not receive encouragement, it is not illicit (tax loopholes). He therefore implicitly draws a distinction between avoidance and evasion.
  
• 
  The Restatement Second, 1969 (Interest Analysis) – leaves door slightly open to doctrine of evasion.
  
• 
  187(2)(b) – law of state chosen by parties governs contract unless application of that law would be contrary to the fundamental policy of a state which has materially greater interest than the chosen state in the determination of the particular issue (no specific mentioning of evasion)
  
• 
  At s.187(2)(a) it requires the state of the parties’ expressly chosen law to have a substantial relationship to the parties or the transaction. So, the express choice cannot evade a law that is most closely connected to the governmental interest.
  
• 
  The court is given the right to intervene and impose the fundamental policy of the appropriate law, which makes evasion difficult through this interest analysis.
  

• 
  Evasion is closely connected to unconscionability and equity. In Bremen the Supreme Court ruled that forum shopping cannot be unreasonable and unjust or result in fraud or overreaching, In Carnival Cruise, it was unclear whether the ruling in Bremen is exceptionally or generally applied – held that forum selection clauses in ship passenger tickets must only be freely bargained for…
  

• 
  There is no general doctrine; consensus was that the doctrine of evasion did not exist in English law. However, results equivalent to an express application of evasion may be achieved through public policy.
  
• 
  According to Jaffey, evasion of an English mandatory rule may result in an English court’s refusal to apply the foreign law expressly chosen by the parties, if the closest connection was with English law.
  

• 
  English courts will not directly refuse to uphold a contract because the public policy of a foreign state is violated; English public policy must have been offended (similar to U.S.). However, English public policy has been invoked to prevent the enforcement of English contract law where such enforcement would have violated the law of friendly states, even where English law was chosen or the proper law of the contract.
  

• 
  English courts have recently recognized foreign mandatory rules.
  
• 
  Vita Foods may provide an opening to evasion when Lord Wright says that parties are free to choose the governing law, as long as the intention expressed is “bona fide” and the law chosen is not against public policy. Some authorities say that “bona fide” should be interpreted to mean no evasion of a mandatory law.
  
• 
  Fawcett notes that the traditional approach to evasion is ad hoc and approvingly noted that the UK adopted the Rome Convention, whose arts 3(3), 5, 6 and 7 deals with evasion, despite the fact that it reserved with respect to 7(1). The application of a foreign law would be subject to the proviso that it is without prejudice to the application of rules of English law which are mandatory (rules of socio-economic performance that should apply regardless of the wishes or actions of the parties).
  

• 
  Evasion has been deemed applicable in Canada, four judgments have accepted the bona fide requirement expressed in Vita, where bona fide means not evading a mandatory provision of law, while two use the term bona fide, without defining it.
  
• 
  Canada is not a party to the Rome Convention 1980
  
• 
  According to Macleod, in Canadian law, the onus is on the person seeking to uphold an impugned choice to show that it was made for practical purposes.
  

• 
  Despite its common law heritage, the concept of evasion of the law was explicitly acknowledged in Golden Acres on basis of bona fide and legal limitations and public policy limitations on autonomy in contract from Vita.
  
• 
  Statutes have also been used for this purpose, but it has been suggested by the Law Reform Commission that this be replaced by specific rules on when this can or can’t be done.
  
• 
  Mandatory rules of the most closely connected country should apply in international contract conflicts.
  

• 
  General rule is that parties can choose the proper law of the contract, but that their intention in so choosing must be bona fide, not contrary to public policy, not contrary to an applicable mandatory law. Evasion often results if the choice was not freely negotiated between parties of equal bargaining power.
  
• 
  Evasion is rare with charterparties – the consequence of the clause must not violate pubic order/policy or mandatory rules.
  
• 
  Most bills of lading clauses that invoke a carriage of goods by sea law other than the mandatorily applicable Hague/Visby Rules of the place of shipment are evasion/fraud unless a higher limit of responsibility of the carrier is invoked (arts. 3(8), 4(5) and 5). The rationale is that the bill of lading is an adhesion contract (standard form contract).
  
• 
  In the sale of a ship, can avoid the law of one jurisdiction by traveling to another and signing the contract there, or you may sign “as of” the new jurisdiction, or you may invoke the law of the new jurisdiction as solely applicable to the contract, or you can transfer the flag and registry of the ship before signing. If the ship or parties are not subject to the mandatory law of the first jurisdiction, then the choice of law and the entering of a contract in the second jurisdiction is not evasion, provided the purpose was proper, and not contrary to public policy.
  
• 
  In marine insurance policies, evasion may be promoted by the stipulation of a law with little relation to the assured object or the risk, thus circumventing the properly applicable law of the contract – unnecessarily favorable to the insurer and unfavorable to the assured. In commercial and marine insurance, the policy is negotiated and the assured is represented by brokers, so evasion cannot be invoked, unless it was carried out by both parties to the detriment of a third party (creditor, bank, etc.). The Restatement Second limits the choice of law by the parties only in cases of life, fire, surety or casualty insurance contracts. Could argue that the choice of a jurisdiction, for example London, was because of acknowledged expertise and skill of the market there, which benefits all parties.
  
• 
  Floating law clauses that allow one party to a contract to choose the applicable law after the event, lend themselves to evasion, and are invalid as being contrary to public policy – no contract can exist in a legal vacuum. Same thing for “service of suit” clauses.
  
• 
  The hiring of seamen can result in evasion since employers often wish to enter into shipping articles under the laws of a particular nation, or under laws which permit lower wages and benefits. In Rivadeneira contract specified Norwegian law with respect to the employment of a seaman on a Norwegian ship, time chartered to a Nassau company. Norwegian law was held to apply, and was not found to be repugnant to the laws or public policy of the US.
  
• 
  Today, flags of convenience are deemed evasion of the law, because the flag state has neither control over nor real link with the ship-owner. There is considerable flag shopping to choose states that favor the ship-owner with respect to crew pay, comfort and safety, taxes and ship safety.
  
• 
  When courts lift (to determine the true control or genuine link) or pierce the corporate veil (to find the shareholders responsible for the liabilities of the company), they demonstrate that flags of convenience are considered evasion of the law.
  
• 
  Amiable compositeurs decide question without necessarily following the strict exigencies of the law are permitted under the civil law and UNCITRAL Model Law, and are an example of avoidance of the law.
  

• 
  A jurisdiction clause in charterparty which calls for suit in other than most convenient jurisdiction is not evasion because it is between two equal bargaining parties, assuming there is no evasion of public policy or mandatory rules.
  
• 
  Jurisdiction clauses in towage contracts are under US test, are evasion if they are unreasonable, unjust, invalid for fraud or overreaching or a violation of a strong (?) public policy of the forum.
  
• 
  Jurisdiction clauses in bills of lading, which specifies suit in a jurisdiction that has no real connection to the place of the contract or the ports of loading or discharge is usually an evasion of the jurisdiction, if favorable to the carrier who drew up the contract.
  
• 
  Such clauses are especially questionable when the jurisdiction is one which would not normally apply the properly applicable law of the contract.
  
• 
  In The Morivken the House of Lords held that a bill of lading clause which relieved the carrier of responsibility, and called for suit in Netherlands was void as contrary to the UK Carriage of Goods by Sea Act (the UK equivalent to the Hague/Visby Rules)
  
• 
  Lloyds Standard Form of Salvage Agreement contains a valid choice of law clause. The clause is not contrary to international salvage conventions, and is entered into by bargaining parties of equal power.
  
• 
  An arbitration clause is a jurisdiction clause which specifies the place of settling a dispute and stipulates that a hearing will be before arbitrators. It must be clear, and is usually valid because it is entered into freely by equal negotiating parties, but is evasion if the jurisdiction is not convenient to the shippee/consignee or the manner of arbitration is unfair, or the properly applicable law of the k is avoided. Must be specific.
  
• 
  Forum shopping in maritime liens is evasion and occurs when a ship is ordered to go to a port in one country to be arrested, rather than another, closer port to obtain application of the law of the first, and to avoid the properly applicable or contractually stipulated law of the second (Gulf Oil v. Creole Supply). Tetley feels that this is evasion.
  
• 
  Forum shopping to get higher limitation funds is common practice and should be opposed. (In Swibon Lim Procs., a Korean limitation fund was applied by a US court, to discourage forum shopping)
  
• 
  Floating Jurisdiction clauses are clauses that permit one party to choose the jurisdiction for suit after the suit arises, and promote evasion of the law and jurisdiction. They should be held invalid as contrary to public policy/order.
  
• 
  Passenger Tickets which contain forum selection clauses are not evasion unless they are unreasonable and unjust or result from fraud or overreaching or their enforcement would contravene strong public policy of the forum (Carnival Cruise Lines v. Shute). Party contesting the clause needs to satisfy a heavy burden of proof (Bremen). Valid connection is usual place of business of a company involved in the contract.
  

• 
  Evasion can be invoked to prevent a foreign judgment from being recognized: a) when a judgment was based on a law chosen for evasion reasons, or b) when the judgment was rendered as the result of jurisdiction arrived at for evasion reasons.
  

• 
  The Convention applies to all of the mandatory rules and public order with few exceptions, so that evasions/fraud is implied and even expressly prohibited in many cases.
  
• 
  3(1) provides that the contract is governed by the law expressly chosen by the parties to a contract, but this rule is subject to 3(3), which provides that mandatory rules of a country can’t be contracted out of by choosing a foreign law to govern a contract where all the elements of the contract, aside from that choice are connected to that country alone. Example of U.K. Contract Terms Act 1977.
  
• 
  5(2) makes applicable certain mandatory consumer laws of the consumer’s habitual residence, despite a contrary express choice by the parties.
  
• 
  6(1) protects employees in their employment contracts against express choice.
  
• 
  9(6) protects against evasion of mandatory rules of the situs of immovable property.
  
• 
  7(1) allows for the application of mandatory rules of a third country (country that is netiher the forum state nor the country of the assumed proper law), where there is a close connection, and where the law is mandatory no matter what law applies. However, the court is not obliged to apply mandatory rules but considers the nature and purpose of the law, as well as the consequences of non application. UK, Germany, Luxembourg, and Ireland all made a reservation with regards to this provision.
  
• 
  This could prevent evasion of international mandatory rules of a third state.
  
• 
  7(2) guarantees that the forum’s mandatory rules may be applied regardless of the law otherwise applicable.
  
• 
  16 permits the refusal of the law of any country if its application is manifestly incompatible with the public policy of the forum – uncertain connection to evasion.
  
• 
  21 states that the application of the Rome Convention shall not prejudice the application of international conventions to which a contracting state is or becomes party.
  

• 
  This principle is an exception to an otherwise valid choice of the proper law and may be invoked in cases of jurisdiction and recognition of foreign judgments.
  
• 
  Evasion is the intentional manipulation of connecting factors to improperly circumvent the mandatorily applicable law of a juridical act or to elude the most appropriate jurisdiction. It can also lead a forum court to refuse to recognize a foreign judgment which has been reached improperly.
  
• 
  Evasion depends on the facts of the case. It is most likely to happen where there is unequal bargaining power (adhesion K’s, passenger ticket K’s), where the impugned clauses were not freely negotiated. Also in standard form contracts such as bills of lading or other insurance K’s. Where they create additional expenses, or deny a remedy or defense to the adhering party that would normally be available this doctrine cal be used.
  
• 
  Avoidance is the acceptable arrangement of connecting factors for a legitimate purpose in an agreement, usually between equal parties to select a law or jurisdiction.
  
• 
  Whether there has been evasion should be considered whenever the proper law is being determined in a conflict problem and in every case of recognition of a forum judgment.
  

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