Ibrahim Shehata

International commercial arbitration straddles private international law and party-driven dispute resolution. A core challenge is how “overriding mandatory rules” (laws a state insists apply regardless of chosen law) should be treated by arbitral tribunals. If arbitrators ignore these rules, their awards risk annulment or non-enforcement; yet excessive deference may undermine the doctrine of party autonomy. This tension motivates the thesis’s twin research questions:

1. Under what conditions should arbitrators apply overriding mandatory rules?
2. How do national courts review tribunals’ treatment of those rules?

Answering these questions aims to provide practical guidance that balances state interests, party autonomy, and award enforceability.

2. Objectives and Significance of the Thesis:
- Clarify thresholds and best practices for arbitrators when confronting overriding mandatory rules.
- Ensure enforceability by anticipating national court scrutiny.
- Sustain arbitration’s legitimacy by maintaining state support.

Given the proliferation of such rules and occasional state hostility to arbitration, the thesis offers timely, practitioner-oriented recommendations.

3. Methodology of the Thesis:
A mixed comparative and empirical approach:
- Theoretical groundwork on party autonomy, conflict-of-laws, and overriding mandatory rules.
- Empirical analysis of published arbitral awards to observe real-world tribunal practices.
- Comparative survey of four jurisdictions (France, Switzerland, England, Egypt) covering their private international law instruments and arbitral seat laws.
- Case law analysis of how courts in those jurisdictions review awards on set-aside or enforcement grounds.

This blend ensures both doctrinal clarity and practical grounding in actual awards and judicial decisions.

4. Thesis Structure:
- Part I – Introduction: research questions, scope, and methods.
- Part II – Theoretical Framework: party autonomy and its limits, hierarchy of public policy vs. mandatory rules, precise definition of overriding mandatory rules, distinction from public policy.
- Part III – Arbitration’s Interface with Conflict of Laws: localization vs. delocalization debate; arbitration’s broader party autonomy; arbitrators’ enforceability duty as a bridge to national legal norms.
- Part IV – Choice-of-Law Analysis: indirect (voie indirecte), direct (voie directe), and cumulative approaches; empirical findings favoring a cumulative, multi-lens method.
- Part V – Overriding Mandatory Rules in Arbitration: sources of tribunal authority (party autonomy, enforceability duty), empirical guidelines for applying or considering such rules, handling conflicting mandatory rules.
- Part VI – Courts’ Review: comparative case studies of France, Switzerland, England, and Egypt; illustrated by the “Alstom Saga.”
- Part VII – Conclusion: answers to research questions and normative recommendations.

5. Theoretical Foundations of the Thesis:
- Party Autonomy vs. Mandatory Limits: While parties choose governing law, absolute autonomy yields to public policy doctrines. Overriding mandatory rules—“imperative norms protecting crucial state interests”—sit between simple mandatory rules and public policy.
- Definition of Overriding Mandatory Rules: “Imperative rules designated by a legislature to apply to all cases within their scope, even when a foreign law governs the contract.”
- Distinction from Public Policy: Public policy is a reactive, high-threshold filter; while, overriding mandatory rules apply proactively without conflict analysis.
- International Recognition: EU’s Rome I Regulation (Art. 9), Swiss PIL Act, English conflict-of-laws rules, and analogous doctrines worldwide acknowledge the concept of overriding mandatory rules with some variations.

6. Arbitration and Conflict-of-Laws:
- Localization vs. Delocalization: The thesis endorses localization—anchoring arbitration to the seat’s law—enhancing predictability and state confidence.
- Arbitrators’ Discretion: While free to choose applicable law, tribunals must heed their duty to issue enforceable awards, effectively aligning arbitral decisions with national mandatory norms when necessary.

7. Choice of Law in Arbitration (Part IV):
- Approaches:
- Voie Indirecte: apply seat’s conflict rules to identify applicable law.
- Voie Directe: tribunal directly selects the law most closely connected.
- Cumulative: validate the same outcome under multiple conflict-of-laws systems.
- Empirical Insights: The cumulative method increasingly prevails, combining predictability with enforceability. It reassures parties and courts by demonstrating consistency across legal systems.
- Practical Advice: Arbitrators should follow institutional or lex arbitri mandates, then—where permitted—adopt a cumulative analysis to bolster their awards against future challenges.

8. Overriding Mandatory Rules in Arbitration (Part V)
- Arbitrability and Historical Shift: Pre-Mitsubishi (1985), many public-law issues were non-arbitrable; post-Mitsubishi, tribunals routinely confront antitrust, sanctions, and other state-driven statutes.
- Tribunal Authority:
1. Party Autonomy of Second Order: parties may mandate compliance with specific mandatory laws.
2. Enforceability Duty: embedded in most arbitration laws/rules, urging tribunals to consider mandatory norms to avoid unenforceable awards.
- Empirical Guidelines:
1. Apply Overriding Mandatory Rules of the governing law (lex causae) as a matter of course.
2. Consider or apply Foreign Overriding Mandatory Rules (e.g., seat’s law, place of performance) where ignoring them risks unenforceability of the award.
- Resolving Conflicts: Prioritize seat’s overriding mandatory rules first (risk of annulment), then other key jurisdictions (enforcement risk). Clearly reason in the award to demonstrate consideration.

9. Comparative Court Review (Part VI)
- France: Courts enforce awards unless a breach of “international public policy” (narrowly construed) occurs, often overlooking non-French mandatory rules.
- Switzerland: Federal Tribunal checks that arbitrators considered all invoked mandatory rules (domestic or foreign) but intervenes substantively only for core public policy violations; allows revision on new evidence.
- England: Treats foreign and domestic overriding mandatory rules equally under public policy; awards enforcing illegal contracts (by any relevant law) will be refused.
- Egypt: Limited jurisprudence suggests deference to tribunals; intervention only for “manifest disregard” of obligatory norms, aligning broadly with the UNCITRAL Model Law ethos.
- Alstom Saga: A single award’s fate in Switzerland, France, and England highlights these doctrinal variances and underscores the need for tribunals to anticipate the strictest review standard among key forums.

10. Conclusions and Recommendations (Part VII)
- Threshold for Arbitrators Action:
1. Overriding Mandatory Rules of lex causae must be applied.
2. Foreign Overriding Mandatory Rules should be considered/applied if enforcing the award demands it.
- Ideal Judicial Model: The Swiss procedural-focus approach—requiring tribunals to demonstrate consideration of all relevant mandatory rules—should become part of the “international public policy” standard globally. This procedural check fosters state confidence without undermining arbitration’s finality.
- Implications:
- Arbitrators adopt a checklist to identify all pertinent mandatory norms and document their analysis.
- Counsel proactively flag mandatory rules during drafting and arbitration.
- Courts refine review to verify tribunals’ consideration rather than re-decide merits, reserving substantive intervention for core public policy breaches.
- Final Reflection: By balancing autonomy with responsibility, arbitration can preserve its “grand bargain” with states—namely, enforceability in exchange for respect of vital mandatory laws—thereby remaining a robust, credible mechanism for resolving cross-border disputes.