PUBLIC ORDER AS A CATEGORY OF NATIONAL AND INTERNATIONAL PRIVATE LAW
Research article
Afanasyeva E.
Senior lecturer of the Tomsk State University (Russia), researcher of the University of Turin (Italy)
PUBLIC ORDER AS A CATEGORY OF NATIONAL AND INTERNATIONAL PRIVATE LAW
Annotation It has already been accepted that the fundamental civil law principle of freedom of contract is greatly restricted. Such restrictions play the role of legally invalidating contracts that contradict public order requirements (public order, public policy). The focus of this article is such legal phenomenon as public order from the point of view of national and international private law. Key words: public order, freedom of contract, restriction, legislation. The concept of 'ordre public' was used for the first time in article 10 of the Declaration of the Rights of Man and of the Citizen (1789-1791): “No one should be oppressed for their views, and even religious, provided that the expression does not violate public order established by law”. The German scientist F. K. Savigny[1] made a great contribution to the development of this document. All independent States, in his opinion, form an integrated international community and, therefore, are obliged to insert foreign laws in their own legal system. At the same time, a whole number of local acts have a peculiar nature and, therefore, ought to be applied, regardless of the grounds for the application of foreign law – this explains the origin of the public order category enshrined in the laws. Before delving into the study of the concept of public order, it is necessary to stress the dual understanding of the public order category in legal literature: domestic public order (which is unique to every state) and international public order[2]. As Ch. S. Gibson noted, a trend toward delocalization of arbitral law has been underway for the last 50 years, starting with the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). This shift has increased the focus on public policy as a potential means of control by national courts over international arbitration. At the same time, however, many courts recognizing the merits of arbitration have continued to exercise significant deference toward arbitral awards. So, there is a call for recognition that the liberalization of arbitrable subject matter “comes necessarily at the price of some increase in judicial ex post control of the compatibility of the arbitrators’ product with public policy”[3]. By the XIX century the famous Swiss researcher Charles Brocher had made mention of the necessity to distinguish the application of public order rules concerning civil law and concerning relations which contain some foreign element. In accordance with his theory, “ordre public” is divided into two types: “ordre public interne” and “ordre public international”[4], i.e. domestic and international public order. On the basis of scientific research of legal rules, dedicated to public order stipulations in Italian and French legislation of the XIX century, Brocher concluded that there were differences between the category of public order in relation to Civil law, and the category of public order in relation to the conflict of laws. Brocher came to this conclusion after analysing and comparing article 3 (paragraph 1) of the Italian civil code (1865) and art. 6 the French civil code (1804). According to article 3 of the Italian Code "legal rules about police and security oblige all the people, living on the territory". This directive, in Brocher’s opinion was intended to limit the application of foreign laws. Consequently, in this case, we are dealing with international public order. The second type of public order is “ordre public interne” (internal public order), which mentioned in art. 6 of the French civil code (1804): "It is inadmissible for private arrangements to retreat from the laws of public order and good morals". Thus, legal rules about domestic civil law status must respect public order: individual will is placed under the authority of the legislative will. The parties to a contract cannot, through such a private act, circumvent public order rules. In the field of private international law, the complete opposite situation is true: under traditional doctrine priority is given to the law of citizenship (lex patriae) or to the law of the domicile. Nevertheless, this rule may be abrogated in case of lack of correspondence between foreign law and national interests or “higher range principles” [5]. Thereby, the theory of “ordre public interne” presupposes the protection of public interest by restricting the actions of the individual who enters into a contract on the territory of the given state. The application of this principle extends to national citizens and national corporations (artificial persons) as well as to foreign citizens and foreign corporations (artificial persons), who, in most cases, possess identical rights and obligations. This kind of protection acts as a counterbalance to the principle of party autonomy (in this case, the principle of freedom of contract). The State is thus entitled to limit private interest in order to protect public interest according to the Brocher theory; in this case the notion of “ordre public interne”[6] should be applied. French researchers H. Batiffol and P. Lagarde also distinguish between domestic public order, consisting of laws from which parties may not derogate by contract, and international public order, which opposes the application in France of a foreign and repugnant law that would otherwise apply under French conflicts rules[7] (they also discuss “transnational” public order, based on international conventions and general sources of law such as the lex mercatoria, which we will discuss further on). The consequence of this is to allow French courts to disregard foreign laws deemed incompatible with “ordre public”, even when such laws are rendered applicable by treaties. Y. Loussouarn and P. Bourel also see public order in private international law as a mechanism to control the application of an otherwise applicable foreign law, which is quite distinct from domestic public order. They argue that international public order embraces both Western notions of morality and justice, and also certain moral, social and economic purposes flowing from French legislative policies[8]. The Québec Civil Code 1991 also distinguishes the concepts of domestic public order and international public order when faced with the choice of which law should be applied in private international law at art. 3081: “The provisions of the law of a foreign country do not apply if their application would be manifestly inconsistent with public order as understood in international relations”, and at art. 3155(5): “the outcome of a foreign decision is manifestly inconsistent with public order as understood in international relations”. The Louisiana Civil Code has also a domestic public order provision at art. 7 27 and public order provisions on choice of law for private international law at art. 3520 (marriage), art. 3538 (form of the contract) and art. 3540 (freedom of the parties to choose in contract). In each case, the applicable foreign law must be considered. In the same way the U.K. Law Comissions’ Report on Choice of Law in Tort and Delict, 1990 recognizes that international public policy of the forum differs from domestic public policy of the forum, accordingly, the international public policy rule is retained in the U.K. Draft Tort & Delict Bill 1990, sect. 4(1) which provides: “Nothing in this Act shall authorize the courts of any part of the United Kingdom to give effect to the law of any country or territory outside the United Kingdom, in so far as to do so would conflict with the principles of public policy which are taken into account by those courts in applying rules of private international law”[9]. The well-known Russian specialist of private international law, M. I. Brun, drew up an even more precise distinction between these two types of “ordre public”. When analysing the statutory provisions of the French civil code, he pointed out that: "...we should not make up for a deficiency of article 3 of the French civil code by means of the article 6: all those restrictions, which the law imposes on the individual freedom, binding subjects of law to obey the undeniable will of the legislator, have nothing in common with the borders, conducted by the article 3 (paragraph 1) concerning sovereignties"[10]. Current judicial practice demonstrates that the practical relevance of the division, drawn by Brocher, lies on a softer and more preferential regime for legal relations based on the second type of public order (ordre public international). The Supreme court of appeal of Paris (cassation) called the effect of such a principle – “effet attenue” ("softening effect"), applying it to the recognition and enforcement of foreign court decisions and arbitral awards[11]. As a matter of fact, the majority of European states welcomed this principle in their own judicial practice. Thus, the Court of appeal of Venice, when faced with the question of the recognition ad hoc of an International commercial arbitration judgement, did not accept arguments based on a violation of Italian public order. The debtor (S.a.S. Filmo) referred to the fact that the case was considered by a single arbitrator, nominated by the claimant, a situation that does not correspond to the ordre public of the country of recognition. However, the court found no violations of international public order, thus considering that contradictions with domestic ordre public should not be considered as grounds for the refusal of a court decision execution[12]. In one of the decisions Bundesgerichtshof has emphasized, that contradictions between foreign arbitration procedures and German mandatory rules do not constitute sufficient basis refuse to recognise and enforce a foreign award. [13]. For such refusal to be granted, a violation of German international public order must be demonstrated. We can cite yet another example of a Swiss debtor, who had partially performed a contract, and referred to the possibility of a violation of “ordre public”, when the Federal court of Switzerland considered the question of recognition and enforcement of decisions. The defendant argued that the question of the issued guarantees validity had been considered under German law, whereas according to Swiss law notarization of the contract would have been urgently required. The court accepted that the provisions concerning the form of the transaction referred to the internal public order of Germany, and therefore there was no reason to reject this decision by reference to a violation of Swiss public order [14]. In Brandeis Instel Ltd v. Calabrian Chemicals Corp (heard in American court)[15], the defendant unsuccessfully tried to resist the arbitral award execution on the grounds of the art. V of the "Convention on the Recognition and Enforcement of Foreign Arbitral Awards" (New York Convention 1958); he alluded to a violation of public order in connection with the fact that the arbitrator made an award ignoring provisions of an English law – The Sale of Goods Act 1979. The court pointed out that such an approach would entail a need to resolve the issue of whether foreign arbitrators had violated the applicable foreign law or not: “To ask an American judge to expose American arbitrators in obvious neglect to American laws – is one thing; but completely another thing – is to estimate whether foreign arbitrators disregarded foreign internal substantive law or not. Is seem to me a tricky subject, which should be avoided by American judges by means of an explicit public order notion restriction under the Convention”[16]. The soft (weakened) effect of international public order is conditioned by a close connection between a legal relationship and a foreign state, not only because of the nationality of the participants, but also owing to the fact that judicial processes and judicial bodies of foreign States are interconnected. The state has the task to find a fair ratio between private and public sectors on its territory as well as on an international level. When striking this balance, it is important to take into account that interstate relations presuppose the objective cooperation of States, due to which the process of national values approximation (harmonization) begins inevitably. It is possible to highlight some stable relations, ensuring the existence of a world-wide community of States. As manifestations of such connecting links, some scholars single out local, or regional, public order[17]. In the modern period it occurs that the “ordre public” of the European Union acts as the local public order[18]. It is understandable that in countries that share similar cultures and ideologies, a more regional interpretation of public order is accepted with regards to legal standards, the free movement of persons, capital and labour force. This more regional approach to public order was reinforced with the introduction of the single currency and uniform rules of antimonopoly and customs regulation. A guarantee of observance of the uniform public policy is ensured through the existence of the European court of justice of the European Union. The judgments of this court on the interpretation and the uniform application of the international treaties of the European countries are obligatory for the national courts. This is shown through the decision of the European court of justice on the case of "Eco Suisse", where the court found that the rules on invalidity of agreement (contrary to the competition laws of the Community) represent the norms that constitute both regional and national public order "on the grounds of great significance of these provisions"[19]. One of the most important documents in this field is the Rome Convention 1980, in which the concept of public order of the forum in art. 16 would refer to the “international” public order of the forum, and therefore would reflect the well-established distinction in conflict law and theory between “international” and “domestic” public order[20]. During the mid - XX century jurists recognised[21] the formation of the "transnational" – international in the proper sense or "international indeed" public order – real international public order[22]. In the opinion of the well-known French jurist Racine J.B., the concept of transnational public order represents a narrower and more restrictive interpretation of the examined category: it is of universal application and covers the fundamental rules of natural law, jus cogens, and the basic norms of morality accepted by civilized Nations. The author notes: "On the first place among the public sources jus cogens is located. It is ensured by means of peremptory norms, imposed on all the States in the ordre international. Article 53 of the Vienna Convention 1969 introduced a definition of this concept. Jus cogens is a category of public system, applicable for the international law subjects relations regulation, it is 'the international public order' for the law of nations (jus gentium) management"[23]. Twenty years earlier, Lew J. mentioned that the backbone the values of the world community are the global concept and rules of “universal justice”, which are generally accepted values, ideals, goals and principles. Jus cogens, in international law, and the principles of international business practice[24], are made up of the fundamental rules of natural law[25]. It is difficult to find examples of an exact application of this transnational concept of public order. The ruling of the Corte d’Appello di Milano 1992, does however demonstrate the reference to the given concept, by considering international public order as "a set of universal principles, common to a number of allied nations, aimed at the protection of some fundamental individual rights and, often, authorized by international declarations and conventions"[26]. The Swiss Federal court (Tribunale Federale svizzero) spoke in 1994 of "the universal concept of international public order, on the basis of which the decision of arbitration can be inadmissible, if shows contradictions with the fundamental moral principles or legal regulations, recognized by all civilized Nations"[27] was also taken into consideration. The concept of the “real” international or transnational public order serves the international commercial arbitration (arbitration court): some members of legal doctrine believe that the arbitrator (arbitral Tribunal judge), in addition to respecting the public order of his own State and the States of the exequatur (court order on execution of the decision of a foreign court), ought also apply the concept of transnational public order, which "theoretically" differs from the traditional interpretation of the "state public order " and “international public order”[28]. As arbitrators have no court in its’ traditional definition, the concept of the "real" international public order originates from the need to give the Arbitration tribunals (Tribunali arbitrali) a special mechanism, allowing them to exclude the application of certain legal norms, infringing upon fundamental values and principles[29]. In the opinion of Rigaux and Lord Mustill, the category of transnational public order remains an illusion, and the need to establish a truly non-national (anazionale) private arbitration system, free of any state (government) remains. In such a case, if a decision taken by an arbitrator differs completely or partially from the application of transnational norms, such as the lex mercatoria and the Principles of UNIDROIT, this difference will be of no great importance, as it would be an advantageous to diversify proceedings, which can be repeated by different Conventions, ignoring their nationality. These arguments are completely supported by A. Briguglio, because in his opinion "a private arbitrator, and the subsequent decision of the arbitration are non-national in the strict sense, and, therefore, completely free from any affiliation to a national system: the so-called “floating arbitration” and “floating award”"[30]. In accordance with the theory of transnational public order and in the opinion of L. Matray, regional and multinational public orders have finally transformed into a unifying (comunitario) public order, where the phenomenon of transnationality predominates over the regionalism[31]. If we consider that for an arbitrator, lex mercatoria (standard trade law) and the Principles of UNIDROIT are some kind of lex contractus, we must ask ourselves which norms of application are suitable for the creation of effective restrictions in the transnational area". These can be only national, supra-national or international legal sources, which are not included in lex mercatoria: "the nature and purpose of the application norms is considered in the light of the political situation in the state or an intergovernmental agreement, concluded under the pressure of the international economic system"[32]. Nowadays international public order can be determined during the elaboration of international documents. For example, universal peace and security, equality, justice and international legal order are recognized as highest human values (provided by the Charter of the United Nations). A number of provisions can be found in the human rights Covenants 1966, in the UN Convention on the Rights of the Child 1989, Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime 1990. Most of its components has been reflected in the Convention for the Protection of Human Rights and Fundamental Freedoms 1950, establishing the utmost protection of the fundamental rights of private persons. Some elements of “ordre public” are also contained in the decisions of international courts[33]. In our opinion, the differentiation between “ordre public interne” and “ordre public international” is quite relative. Brocher believed that there is a uniform public order in every State, which "dominates in international private law from the foot to the top"[34] –"ordre public national" – as Bartin called it[35]. Thereby, despite its "internationality", the roots of “ordre public international” have national character[36]. Obviously, any dispute over the priority of the national or the international character of public order is not relevant in this context. Firstly, the implementation of international standards is impossible without the introduction of suitable rules in the fabric of national legislation; secondly, the very national legislation, despite a certain identity, originality and cultural isolation, is formed under the influence of the international political, economic and legal situation. However, the "specific weight" of interest shown by legislators and theorists for the category of public order is very inconsistent: in many respects the level of interest depends on the particular State, the historical period and the political situation. According to this research, there do not appear to be plausible explanations for such inconsistency. In the long run we are interested in this category as an incarnation of mandatory legislative rules of law (including rules of national and international private law), that are able to restrict the freedom of contract in certain cases. In the light of the issue, it is impossible to ignore such an important document as The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, signed in New York, 10 June 1958 (the New York Convention)[37]. In conceptual terms, we are interested directly in the norm of article V (paragraph b) part 2) of the Convention: “Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: … (b) The recognition or enforcement of the award would be contrary to the public policy of that country”. In effect the New York Convention does not mention the notion of public order (public policy), but this document has been signed by more than 140 nations, all these nations have admitted the necessity and significance of existence of the category of public order for their own legislative systems. As Ch. S. Gibson noted, a trend toward delocalization of arbitral law has been underway for the last 50 years, starting with the 1958 New York Convention. This shift has increased the focus on public policy as a potential means of control by national courts over international arbitration. At the same time, however, many courts recognizing the merits of arbitration have continued to exercise significant deference toward arbitral awards[38]. So, there is a call for recognition that the liberalization of arbitrable subject matter “comes necessarily at the price of some increase in judicial ex post control of the compatibility of the arbitrators’ product with public policy”[39]. Consequently, it is necessary to conduct further studies at the level of national legislation of different States, and to identify it's true use. Nevertheless, it is interesting to understand why the public order issue arises most often (and, accordingly, is studied more carefully) in the framework of international private law? This is most likely due to the presence of the foreign element in legal relations (including the necessity to execute the foreign courts judgments on the territory of their own state), and by the division of legal systems in the public branch and the private branch[40]. It is precisely this fact that explains the essence of many of the problems, related to lawmaking and law enforcement. The confrontation of individual interests and of the interests of the state, the society, the law and order in which it exists, compel us to explore this legal phenomenon. The task of the modern legislator is to draw the line, to help society understand what is allowed and what is not. However, the task of creating 'the balance between public and private' is very difficult to establish. The State, as the only ruler of the special apparatus of coercion (which was entrusted by the people), must use it for the benefit of nation and not against it. It therefore goes without saying that priority will be given to the public rather than the private. Private interest refers only to the satisfaction of the selfish interests of the individual, whereas public interest benefits all people. One cannot help but recall the words of the Roman lawyer Regent Ulpian (D.1.І.1.2.): «Public law, which refers to the status of the Roman state, private, which (is) to the benefit of individuals; there is useful in the public relations and useful in the private area». Thus, when society has entrusted the State, as a created sum of individuals, to create public order norms, every member of this society must respect and comply with the norms set out by the State. It is here that matters can get complicated, as one searches for a fair and reasonable boundary between permission and permissiveness. In one of his works Professor Ole Lando stated: “The arbitrator, applying lex mercatoria, is considered to be more creative than when applying national law, which is more more stringent unto the party of market relations (merchant). Therefore, the arbitrator has to create its own sources in most legal systems, and if a collision arises – to find a new solution…”[41]. For the sake of justice, the very recognition (acceptance) of such a category as public order, its introduction in the legislation, and its accession to the New York Convention, is already a considerable step, worthy of respect and approval. As a Russian researcher I. Tarasov noted: “ … the very existence and use by the state of such category as "public order", is a sign of maturity of the state, because public order represents the search for a compromise (trading), balance between the public interest and the interest of the private. It is through this concept the state shall regulate disagreements between the will of individuals and the will of the public, between the freedom of trade and this freedom limitations. The clearly defined public order notion ensures respect and the realisation of the rights and freedoms of man and citizen, to observe the interests of society as a whole, as well as to fight with arbitrariness” [42]. Unfortunately I. Tarasov doed not provide a clear definition of public order, perhaps because of the complexity of the notion. Perhaps even because it is impossible, irrational even, to try to give a rigid definition of public order. We will adress this issue among others in the course of the study.Bibliography
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