Nothing in these Principles shall restrict the application of mandatory rules, whether of national, international or supranational origin, which are applicable in accordance with the relevant rules of private international law.
1. Mandatory rules prevail
Given the particular nature of the Principles as a non-legislative instrument, neither the Principles nor individual contracts concluded in accordance with the Principles, can be expected to prevail over mandatory rules of domestic law, whether of national, international or supranational origin, that are applicable in accordance with the relevant rules of private international law. Mandatory rules of national origin are those enacted by States autonomously (e.g. particular form requirements for specific types of contracts; invalidity of penalty clauses; licensing requirements; environmental regulations; etc.), while mandatory rules of international or supranational origin are those derived from international conventions or general public international law (e.g. Hague-Visby Rules; UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects; United Nations Convention against Corruption; United Nations Universal Declaration of Human Rights, etc.) or adopted by supranational organisations (e.g. European Union competition law, etc.).
2. Broad notion of “mandatory rules”
The mandatory rules referred to in this Article are predominantly laid down by specific legislation, and their mandatory nature, may either be expressly stated or inferred by way of interpretation. However, in the various national legal systems restrictions on freedom of contract may also derive from general principles of public policy, whether of national, international or supranational origin (e.g. prohibition of commission or inducement of crime; prohibition of corruption and collusive bidding; protection of human dignity; prohibition of discrimination on the basis of gender, race or religion; prohibition of undue restraint of trade; etc). For the purpose of this Article the notion of “mandatory rules” is to be understood in a broad sense, so as to cover both specific statutory provisions and general principles of public policy.
3. Mandatory rules applicable in case of incorporation of the Principles as terms of contract
Where, as is the traditional and still prevailing approach adopted by domestic courts with respect to soft law instruments, the parties’ reference to the Principles is considered to be merely an agreement to incorporate them in the contract (see Comment 4 lit. (a), third paragraph, to the Preamble), the Principles and the individual contracts concluded in accordance with the Principles will first of all encounter the limit of the principles and rules of the domestic law that govern the contract from which parties may not contractually derogate (so-called “ordinary” or “domestically mandatory” rules). Moreover, the mandatory rules of the forum State, and possibly of other countries, may also apply if the mandatory rules claim application irrespective of what the law governing the contract is, and, in the case of the mandatory rules of other countries, there is a sufficiently close connection between those countries and the contract in question (so-called “overriding” or “internationally mandatory” rules).
4. Mandatory rules applicable in case of reference to the Principles as law governing the contract
Where, as may be the case if the dispute is brought before an arbitral tribunal, the Principles are applied as the law governing the contract (see Comment 4 lit. (a), fourth paragraph, to the Preamble), they no longer encounter the limit of the ordinary mandatory rules of any domestic law. As far as the overriding mandatory rules of the forum State or of other countries are concerned, their application basically depends on the circumstances of the case. Generally speaking, since in international arbitration the arbitral tribunal lacks a predetermined lex fori, it may, but is under no duty to, apply the overriding mandatory rules of the country on the territory of which it renders the award.
In determining whether to take into consideration the overriding mandatory rules of the forum State or of any other country with which the case at hand has a significant connection, the arbitral tribunal, bearing in mind its task to “make every effort to make sure that the Award is enforceable at law” (so expressly e.g. Article 35 of the 1998 ICC Arbitration Rules), may be expected to pay particular attention to the overriding mandatory rules of those countries where enforcement of the award is likely to be sought. Moreover, the arbitral tribunal may consider it necessary to apply those overriding mandatory rules that reflect principles widely accepted as fundamental in legal systems throughout the world (so-called “transnational public policy” or “ordre public transnational”).
5. Recourse to rules of private international law relevant in each given case
In view of the considerable differences in the ways in which domestic courts and arbitral tribunals determine the mandatory rules applicable to international commercial contracts, this Article deliberately refrains from stating which mandatory rules apply and the Article refers instead to the relevant rules of private international law for the solution in each given case (see e.g. Article 9 of EC Regulation No. 593/2008 (Rome I) (replacing Article 7 of the 1980 Rome Convention on the Law applicable to Contractual Obligations); Article 11 of the 1994 Inter-American Convention on the Law Applicable to International Contracts; Articles 28, 34 and 36 of the UNCITRAL Model Law on International Commercial Arbitration; and Article V of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards).