Books Developments in PIL Scholarship

Kronenberg on Taking Account of Foreign Overriding Mandatory Provisions

In his PhD thesis Normen als tatsächliche Umstände (Rules as factual circumstances), published in 2021, Alexander Kronenberg analysis how overriding mandatory provisions (OMPs) can be considered at the level of substantive law and how this practice relates to Article 9 of the Rome I Regulation. The thesis examines this question against a comprehensive evaluation of case law and literature. It offers its own explanatory approach as well as a method for the consideration of OMPs within substantive law.

The question how non-forum OMPs should be dealt with has been keeping courts busy for quite some time. The highest judicial ruling on this issue came from the CJEU in Nikiforidis. A more recent case, decided by the Higher Regional Court of Frankfurt (16 U 209/17), concerned an airline’s refusal to carry an Israeli national through a Kuwaiti airport, which it the court’s view was not a breach of contract given the Kuwaiti boycott against Israel. The war in Ukraine and the accompanying sanctions imposed by various states equally raise the question of the extent to which sanctions adopted by other, friendly states can be taken into account under the applicable contract law.

The thesis is thus highly topical. The author describes the content as follows:

Foreign OMPs have been subject to academic debate for a long time. Under the regime of the Rome I Regulation on the law applicable to international contracts, the CJEU’s Nikiforidis judgment of 18 October 2016 (C-135/15) was an important milestone with respect to the interpretation of Article 9 Rome I Regulation, the central provision on OMPs in international contract law. The Court held that Art. 9(3) of the Rome I Regulation is to be interpreted as meaning that OMPs other than those of the forum or those of the lex loci solutionis can neither be applied nor be given effect, as legal rules, by the court of the forum. However, this does not preclude a Member State court from, in the words of the Court, taking such other OMPs “into account as matters of fact in so far as this is provided for by the [applicable] national law”.

This “substantive law level consideration” (“sachrechtliche Berücksichtigung”) is the subject of this dissertation. The CJEU did not deal with the issue in further detail, as it concerns the substantive law of each state and not the European private international law rules. The dissertation develops an overall concept for taking foreign OMPs into consideration as a matter of fact within German substantive contract law.

The book first gives a brief overview of the phenomenon of OMPs and of the provisions and interpretation of Art. 9 of the Rome I Regulation and then moves on to establish that the CJEU was right in considering that Art. 9(3) of the Rome I Regulation bars foreign OMPs not enacted by the state of performance from being taken into account on the conflict-of-law level.

Having stated that a conflict-of-law level consideration of these OMPs is not possible, the book then deals with the possibility of taking them into account as matters of fact on the substantive law level. This type of consideration is in a first step described as being aimed exclusively at the factual circumstances caused by the OMPs in question. These can consist in their enforcement by the enacting state, in third parties essential to the performance of the contract respecting them, or in the influence on the freedom of action of the parties themselves. Because of the factual nature of the consideration, these OMPs cannot influence the legal outcome of a given case in a normative way. It is then demonstrated what this means from a methodological perspective: While applying the substantive law designated by the Rome I Regulation with recourse to the legal syllogism, the OMPs may only form part of the minor premise, which is factual in nature, and must be excluded from the, normative, major premise.

Construed in this factual sense, the taking into consideration of OMPs within the applicable substantive law is not prohibited by the European Rome I Regulation. This is, inter alia, substantiated with the consideration that the opposite approach, i.e., outright ignoring the existence and factual consequences of foreign OMPs while applying the substantive law would violate European fundamental rights.

The work then goes on to show that although the Rome I Regulation neither prohibits nor imposes the substantive law level consideration, this consideration nevertheless is required from the perspective of substantive law. Ignoring factual circumstances exclusively because they are the result of foreign OMPs would lead to an impairment of the functioning of the abstract and general provisions of substantive civil law, and thus, ultimately, to a violation of the principle of equality (Gleichheitssatz). Also, it would violate the fundamental rights of the German Grundgesetz.

Following these considerations, the book develops how the substantive law level consideration is carried out. To achieve this, German case law from the period before the Rome I Regulation came into force is analysed in depth. German courts had already previously resolved cases involving foreign OMPs by taking these OMPs into account within provisions of the applicable contract law. For example, they held that the factual consequences of OMPs could amount to a liberation of the debtor from his obligation due to impossibility, or that a contract which can only be performed by violating a foreign OMP can be void due to immorality.

The dissertation then analyses the so-called datum theory and shows that it is conceived as a way of taking into account unapplicable foreign law provisions as such, i.e., as norms. This theory is therefore discarded as a possible theoretical basis for the substantive law level consideration of OMPs, as this consideration must be exclusively factual.

The analysed case law is then examined for transferability to the Rome I regime. It is shown that the consideration via the immorality provision (§ 138 of the German Civil Code) is in fact a normative consideration of foreign OMPs and can therefore not be applied in cases under the Rome I Regulation. Therefore, alternative ways of resolving these cases under today’s law are developed. The work concludes with the presentation of additional provisions of German contract law that are suited for the substantive law level consideration and, until now, have not been present in German case law.

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