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Hossein Fazilatfar

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Hossein Fazilatfar

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Hossein Fazilatfar

As one scholar states: “Few legal issues ignite such major debates amongst lawyers as the issue of mandatory rules of law.” Mandatory rules are the imperative provisions of law, which must be applied to a transaction involving a foreign element, irrespective of the law that governs that transaction. In other words, mandatory rules are laws that may not be derogated from or excluded by contracting parties. Article 9 of the Rome I Regulation refers to mandatory rules as overriding mandatory provisions: “provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organization, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract ….”

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Hossein Fazilatfar

This chapter discusses the nature, definition, categories, and function of public policy and mandatory rules of law. It also provides a legal framework for mandatory rules. In general, public policy reflects fundamental values and principles of every State, which based on its importance and sphere of application has various categories. Under the general term “public policy,” there appears to be other further narrow and highly important policies labeled as “domestic public policy,” “international public policy,” and even “transnational public policy.” The first parts of this chapter mostly define and distinguish these concepts from one another. The discussion then moves to “mandatory rules of law”: where they stand in a legal system; how they function differently from public policy; and their interrelation and applicability. Finally, since choice of law and party autonomy are raised in various parts of this research, the concept of mandatory rules in conflict of laws is also discussed here.

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Hossein Fazilatfar

This chapter focuses on whether mandatory rules, due to their public policy character and high importance to States, can be brought to arbitration for dispute resolution, or are reserved for courts under State laws. This chapter aims to clarify whether mandatory rules are capable of settlement via arbitration today. Before getting into issuing an award on the merits, a mandatory law dispute that is capable of settlement in arbitration must be discussed from the governing laws perspective first. This chapter provides observations on arbitrability as it distinguishes between arbitrability and the validity of the arbitration agreement. Then subjective and objective arbitrability are discussed as two types of arbitrability. What is focused on in this book, however, is the objective arbitrability (subject-matter of a dispute), as there are still areas of law where some skepticism exists regarding arbitrability. Approaches and reflections on arbitrability in national and international sources are also discussed.

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Hossein Fazilatfar

Analyzing how mandatory rules are dealt with in practice by arbitrators is necessary to provide a pragmatic approach regarding what measures arbitrators should take to limit the extent of the dilemma mandatory laws bring to arbitration. This chapter mainly deals with substantive mandatory laws before arbitrators. The first concerns the contractual source of authority of the arbitrator in applying the law applicable to the dispute, chosen by the parties, followed by a discussion on party autonomy. Later, the link between general mandates and concerns of an arbitral tribunal with regard to the enforcement of their awards, and laws that are overridingly mandatory and foreign to their source of authority is discussed. The chapter then shifts to the approaches taken by arbitral tribunals in dealing with mandatory laws applicable to the merits of a dispute, discussing both mandatory norms of the parties’ chosen law, the lex arbitri and those that are foreign to the law chosen by the parties.

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Hossein Fazilatfar

This chapter mainly deals with substantive mandatory laws before judges, and how arbitration awards – that have dealt with mandatory laws – are perceived by courts. At the end of the arbitration proceedings, courts are the only system that have authority to give legal effect to awards, with the vacatur, and with recognition and enforcement power granted to them exclusively by the legislature and under the New York Convention (1958). The main judicial control over awards is seen at this stage. In this chapter those grounds for vacatur, and the recognition and enforcement of arbitral awards with respect to mandatory laws, or mandatory law violations by the arbitration panels, are addressed. The chapter further deliberates on the role mandatory rules play before courts. In particular, the role of mandatory laws of the forum are given detailed consideration. Due to the importance of foreign mandatory laws, there is also discussion on the authority and criteria for applying foreign mandatory laws by courts. There is also a short reference to the role of comity in foreign mandatory law applications by judges.

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Hossein Fazilatfar

One issue with mandatory laws – which remains the subject of much controversy in arbitration – is what if the applicable mandatory laws conflict with one another and each call for a different solution. Basically, what is the arbitrator facing that dilemma to do? Prior to providing any suggestions for this problem, this chapter explores the various approaches to mandatory rules in international arbitration, including the foundation underlying such approaches and the provided solutions circulated in academia and in practice. Later, it is suggested that when there is a conflict between the applicable mandatory laws, the arbitrator may: (a) apply dépeçage to the transaction; (b) find a compromise between the solutions provided under the applicable mandatory laws; or (c) if the parties are cooperative, mediate between the parties and apply a law that suits both parties’ transactional concerns as well as the enforcement concerns of the arbitrator.

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Hossein Fazilatfar

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Hossein Fazilatfar

Overriding Mandatory Rules in International Commercial Arbitration discusses the applicability of mandatory rules of law in international commercial arbitration and addresses the concerns of the arbitrators and judges at various stages of arbitration and the enforcement of the award.