Public Order Considerations
Public Order – Concept and Contexts
A specific consideration, affecting the outcome of a process of legal interpretation in international commercial arbitration, is recourse to ordre public, understood as a transnational concept. A drive towards ensuring conformity of the adopted rendition of applicable rules with the demands of public international order has manifested itself in some arbitral awards to a modifying effect on the application of lex causae. In this sense, ordre public international can be seen as an interpretive directive, adopted in the practice of international commercial arbitration.
While present in the private international law regulations of some domestic legal systems, and indeed borrowed from national jurisprudence, in arbitration it is treated as a transnational principle of a presumably universal character. Its application is thus different from a domestic one, which aims at preserving specific public values, as seen through the lenses of the legal system of the adjudicating, national court (and is, as such, more territorially embedded in lex fori, even in regard to the international version of the concept, as discussed further in detail below). It should be also distinguished from national policies, taking the form of a domestic public order, the limits of applicability of which in arbitration are an object of a separate discussion.
The concept of public international order is also well established and widely commented upon in the literature of public international law, as one of the foundations of harmonious relations between States in a global context. The scope of public international order considerations, defined in the context of disputes of commercial character between private parties, is naturally different in character, as well as in content, from its public international law counterpart. Still, the discussion of implementation of such a modifying principle in a process of legal interpretation, vivid in public international case law and literature, can serve as a source of inspiration in determining the limits of discretionary powers of arbitrators and the consequences of application of a transnational version of this concept in ICA, oriented at private relations. It also affects arbitral legal interpretation of public international law instruments.
In the doctrine of public international law, the wording of Art. 53 of the Vienna Convention on the Law of Treaties (VCLT), referring to the ‘community of states as a whole’ in the context of peremptory norms of general international law (jus cogens), has led some authors to formulate a thesis ascribing to this community a growing, autonomous power of determination of ‘fundamental rules based on public policy, values, or public order (ordre public)’.1 The assumption of the superior status of such rules in the hierarchy of norms of public international law and their excessive application is nevertheless disputed, and lack of sufficient evidence supporting this claim in relevant case law and literature has also been criticized as destabilizing international legal order and undermining the credibility of international tribunals and commentators.2
Besides controversies related to the hierarchy of norms of public international law, the use of ordre public arguments in resolution of public international law disputes has also been treated with reserve due to the relative indeterminacy of this concept. The tension between advocates of flexibility of legal interpretation and ethical orientation of public international order-based arguments on one side and public international law textualists on the other has led to the formulation of different kinds of caveats in regard to interpretation of international treaties and conventions. As Gerald Fitzmaurice, representing legal textualist approach, remarked, in case of inconsistencies between the parties’ intentions and public order goals, where the latter were allowed to supersede the former in the process of interpretation,
[s]ince it is thus left to the adjudicator to decide not only whether there is such inconsistency but also what are the goals of public order (and of which public order) to be taken into account, it is evident that on this wideranging, indeed almost illimitable basis, the parties could never be sure how their treaty would be applied or whether it would be applied at all. The process would, in fact, confer on the ‘decision-maker’ a discretion of a kind altogether exceeding the normal limits of the judicial function, amounting rather to the exercise of an administrative role.[3
Ordre public considerations are thus treated with reserve as vague and too arbitrarily determined – as Fitzmaurice suggests, potentially filled with any content befitting the adjudicators (Jean-Marc Sorel characterizes them also as ‘short-lived and politically reversible’4). The predictability of interpretation is thus, from this perspective, inevitably compromised. Counterarguments to this approach, regarding legal uncertainty, point to the generally wide scope of discretion in construing treaties, based on the observation that the ‘plain reality is that the interpreter of a broad international agreement is operating in a largely indeterminate setting’.5 Analogically, the doctrine of interpretation of public international law agreements seems to have early embraced the realistic assumption that the activity of an adjudicator in this field always necessarily involves a process of selection from between competing visions of public order, the results of which will never be free from policy repercussions:
[s]ince there can be no ‘objective’ or ‘neutral’ application in the sense of applications devoid of Policy consequences for the contending systems of public order, it is inescapable that the authoritative appliers of international agreements make a choice, however implicit in what they decide, about the kind of world public order … they would establish and maintain.6
In the doctrine of private international law the notion of public order as a modifying element in legal interpretation is well established and may appear in the form of either internal, State-specific public policy or as international public order, barring the application of foreign law or its consequences. Besides numerous domestic legal systems, the ordre public exception has also been adopted in international instruments, such as the EC 1980 Rome Convention on the Law Applicable to Contractual Obligations (Art. 16) and the subsequent Rome I Regulation 593/2008. According to Art. 21 of the latter: ‘[t]he 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.’
The internal public order was, arguably, the earlier and more commonly applied version of the ordre public argument in private international law cases. It has been characterized as the fundamental principles of the domestic legal order of the State of the court resolving the case. Their application in a private international case prevents the adoption of an interpretation of proper, foreign law in a way that would be inconsistent with those fundamental norms. As a consequence, the ordre public argument has been characterized as a ‘safety valve’, protecting the consistency and integrity of adjudication in a given State, so as to avoid legal effects incompatible with most rudimentary rules of legis fori7 (observable, for example, in family law cases with an international element, where the application of provisions on family life institutions not recognized by the legal system of forum might be prevented due to an ordre public defence). Analysed from the point of view of legal interpretation in an international commercial context, such modifying use of the public internal order argument can be thus perceived as enhancing the domestic particularities of legal interpretation and preserving the territorial orientation and fragmentation of the application of law, rather than its uniform rendition worldwide – as public policy of the forum prevails over foreign substantive law determined as lex causae.
Despite long and widespread tradition of the use of this concept in domestic adjudication in private international law cases, the limits of ordre public international (while perhaps free from many of the political connotations of its public international law counterpart) remain imprecise and open. The problems with exact definition of this concept have led French legal doctrine to the formulation of a general characteristic of public international order as a set of superior and inviolable values, combining such interests of general character as political, moral, social and economic ones – perceived as a field narrower than that of internal public order.8 Also, in this variation, the argument of inconsistency of an otherwise applicable foreign rule with public international order is treated by the court as an exception, validating non-application of such rule.
As Adi Chen observes:
[t]he content and composition of international public order run the full gamut of standards, values, considerations and policy. But these are not defined by statute. And to the best of my knowledge, no legislature … has defined international public order, although they occasionally refer to it. The definition has been left to the courts. International public order does not have the obligatory force of normal legal precedent and no formal procedure is required to change it.9
It is, then, not only the current content of this concept that is relatively vague and has to ascertained on an a casu ad casum basis. It is also its adaptability to changed, global circumstances, which fluctuates over time, that makes this notion even more open and its impact onto legal interpretation increasingly uncertain.
Another important feature of the ordre public international argument in private international cases resolved by the domestic courts is its localized character: while the domestic connotation is more subtle than in case of internal public order, it is still reflecting the perception of rules fundamental for public order from the perspective of the legal system of the court resolving the case. As the French Cour de Cassation declared, the otherwise applicable provisions of foreign law, which are contrary to the ‘French conception’ of international public policy cannot be given effect in France.10 Formerly, the doctrine of public international order has been formulated by the Court as all the principles of universal justice, to which French public opinion ascribes absolute, international value.11
The distinction between the scope of application of French conceptualizations of ordre public interne and ordre public international is based not on the character of the dispute (entirely domestic or containing an international component), but on a substantive system of rules determined to be the proper law of the case. While the former of the orders is considered binding ‘when the legal relationship or transaction is governed by French law or otherwise centered in France’,12 the latter shall be applied to all cases resolved by French courts, including those that are governed by the rules other than the French law.13
Thomas G. Guedj remarks that giving effect to the ordre public exception requires a performance of a value judgement on the content of foreign law, determined as lex causae.14 In practice, it takes a form of a remarkably far-reaching, soft standards-based intervention of an adjudicator into what would otherwise be a regular outcome of the process of legal interpretation. As a consequence, admissibility of this type of argument can be perceived as a manifestation of mistrust, or even, as Guedj further puts it, hostility towards the application of foreign law. This hostility is expressed in the conditions of what a court perceives as a clash between the competing legislative policies of the two domestic legal systems: that of the forum, and the one that has been determined as governing the case. This hostility is somewhat mitigated by the defensive character of the ordre public exception and its impact, traditionally assumed to be limited to a negative effect (derogation of foreign rules determined as proper law). An alternative doctrine, seeking broader effects of this exception (including positive ones), argued for by Paul Lerebours-Pigeonnière,15 has not been followed by the mainstream of continental legal doctrine and case law.
This, however, does not alter the fact of far-reaching, interfering, corrective effects of legis fori over lex causae when the exception is being applied. Interpretation of substantive law in such cases is thus a two-layered one: the ‘neutral’ construction of relevant rules of foreign law is subsequently modified by the application of principles, considered by lex fori to belong to the sphere of public international order. It can also be possibly argued that the dominance of lex fori is ascertained also in the cases where the exception is not applied, due to its sole existence and possibility of use – as any interpretation of foreign lex causae is (potentially) performed through the lenses of the law of the forum, and with a regard to consistency of the former with public policy values sought by the latter.
The public policy values, fundamental for the legal system of the forum, have also been found as a single possible ground for overriding decisions based on extralegal standards: as Ole Lando noted in his 1985 review of the use of lex mercatoria in international arbitration, a number of Swiss and German commentators agreed on a possibility of setting aside an ex aequo et bono award only in a case when giving an effect to it would violate a principle of German public policy.16 A similar view has been expressed by authors from other legal traditions, commenting further on practical implications for arbitrators acting as amiables compositeurs, who should not disregard substantive and procedural norms of public policy, arguably not only of legis loci arbitri, but also of the States, in which the enforcement of an award is likely to be sought.17
The issue of public order considerations in international commercial arbitration has two aspects. The first one is a regard, recommended for arbitrators to retain, for ordre public rules of the place of the potential award enforcement (as described above on the example of amiables compositeurs) due to what has been defined as an obligation of the tribunal to rendering an award that will be enforceable.18 Pierre Mayer characterizes this duty by pointing out that,
[a]lthough arbitrators are neither guardians of the public order nor invested by the State with the mission of applying its mandatory rules, they ought nevertheless have an incentive to do so out of a sense of duty to the survival of international arbitration as an institution … They should consider that if they do not apply a mandatory rule of law, the award will in all likelihood be refused enforcement in the country which promulgated the rule.19
While these considerations can be seen as secondary and corrective to the main process of legal interpretation performed by the tribunal, they may strongly affect the final outcome of the decision-making process.
The second aspect is a concept of public international order as a transnational principle, administered within the process of arbitral decision-making and serving the function of an exception to the application of proper substantive law, comparable to its domestic conflict of laws counterpart. The difference lies in the lack of direct embedment of the ICA-related notion of ordre public international in the legal system of the place of arbitration. Unlike the domestic courts, which render decisions in the name of the State, arbitral tribunals do not bear the same kind of close relationship with lex loci arbitri, for legal and institutional, but also personal reasons. The arbitral tribunals, unlike the domestic courts, do not act as the organs of the State:20 but also, due to the increasingly cosmopolitan character of ICA, arbitrators frequently are not primarily trained in the law of the place of arbitration. While they can be (more or less consciously) prone to fill the concept of public international order with preconceptions grounded in their own legal systems, these are not necessarily identical with the vision of ordre public promoted by lex loci arbitri.
The question of the scope of the concept of ordre public in arbitration was also raised in the context of discussions as to whether it is limited to substantive law issues only (in those cases where they are irreconcilable with public order principles), or whether it also encompasses the cases of misapplication of conflict of laws rules of the place of arbitration. The latter, leading to a determination of specific legal system, other than the presumable lex causae, as the proper law of the dispute, can significantly affect the outcome of the dispute resolution. An inclusive approach in this regard has been represented by several Swiss commentators, pointing to the parties being denied a hearing as to the content of their rights and obligations under the law that should have been applied by the tribunal.21 Another situation, considered by Dutoit to be falling within the limits of a violation of ordre public, is a disregard of the parties’ explicit choice of law governing their relationship.22
This view is not commonly shared by the doctrine of arbitration though, and the dominant perspective connects the violation of ordre public with the outcome of the case, understood, after Dasser,23 as the
decision on the merits, and not on the preliminary question about the applicable law … When arbitrators reach a result that does not violate the fundamental moral convictions of a legal system, there is no violation of ordre public, regardless of whether they have applied the ‘right’ or the ‘wrong’ law.24