Party Autonomy

Party Autonomy

Outline of Choice of forum and law

In order to figure out what law will be applicable, need to know what the forum is à forum will determine what choice of law rules will be applied

Basic Framework for Determining Applicable law
– Determine the forum
o Is there a forum selection clause?
o Is there arbitration agreement?
– Determine forum’s choice of law rules
o Is there an applicable choice of law provision
§ Applicable party autonomy principles/law
§ Are there conflicting mandatory rules?
o If not, what approach does forum take to determining applicable law?
§ Three basic approaches
· “Closely connected” test in Art. 4 of 1980 Convention
· “Substantial relationship” test in US Restatement
· “Governmental interest” test

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Party Autonomy
– CISG
o Art 6 à “The parties my exclude the application of the Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.”
§ May exclude application entirely by choosing another law to govern contract
– UNIDROIT Principles
o Art. 1.1 à “The parties are free to enter into a contract and to determine its content”
o Art. 1.4. à “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 intl law.”
§ Does not discuss whether, in addition to mandatory rules of the forum and of the lex contractus, those of third States are also to be taken into account and if so, to what extent and on the basis of which criteria.
§ Comment says these questions are to be settled in accordance with the rules of private intl law which are relevant in each particular case (i.e. Art 7 of Rome Convention)
o Art. 1.5 à “The parties may exclude the application of these Principles or derogate from or vary the effect of any of their provisions, except as otherwise provided in the Principles.”
§ Exclusion/modification may be express or implied
§ Mandatory provisions to be found in the Principles
· A few provisions of the Principles are of a mandatory character
o Art. 1.7 on good faith and fair dealing
o Ch. 3 provisions on substantive validity, except insofar as they relate or apply to mistake and to initial impossibility (Art. 3.19)
o Art. 5.1.7(2) on price determination
o Art. 7.4.13(2) on agreed payment for non-performance
o Art. 10.3(2) on limitation periods
· Exceptionally, the mandatory character of a provision is only implicit and follows from the content and purpose of the provision itself à Arts. 1.8 and 7.1.6
– 1980 Rome Convention ( Convention on the Law Applicable to Contractual Obligations )
o Article 3.1 says contract shall be governed by the law chosen by the parties
§ No reasonable basis qualification
o But see Art 3.3 on mandatory rules page 143

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Party Autonomy in International Collective Labor Agreements

Agreement on Choice of Law

The first connecting factor in individual employment contract matters is party autonomy. However, it should be noted from the outset that this only plays a residual role in the case of seafarers.155 The internationalisation of the maritime and fishing labour markets allows shipowners to resort to other mechanisms that bring about identical results, such as registering vessels in states with poor working conditions or contacting employment and placement agencies in countries with significantly lower labour costs than those shipowners would have incurred by recruiting seafarers at company headquarters. In both situations the issue of the choice of law applicable to the contract is relegated, in the second because the real chances for seafarers or fishermen to file complaints are restricted to the state where they were recruited.

This does not mean, however, that the possibility of selecting the applicable law is not welcome; on the contrary, it has become even more interesting in the current context of the relocation of shipping and fishing businesses.156 Indeed, against the present background of international mobility, being able to decide on the law governing contracts provides legal certainty as it avoids unforeseeability regarding the applicable law in cases in which employees discharge their duties to their employers in more than one country. In addition to this, parties to a contract are in a better position to decide which law is most closely connected with their relationship. This also applies to seafarers and fishermen, although some kind of limitation on the exercise of party autonomy is unavoidable given the inherently unequal balance of power between the parties to employment contracts. Party autonomy is thus admitted as a connecting factor but also is subject to a serious restriction, namely, that the chosen law will only be applicable as long as it is more favourable than the law that would govern the contract in the absence of such a choice.

The conditions the choice of law clause has to meet to be valid and effective are established in Article 8 of the Rome I Regulation—or 6 of the Rome Convention—by reference to Article 3(1) of the Rome I Regulation, which in turn refers to Articles 10, 11 and 13 laying down respectively the law governing its substantive validity—the law chosen by the parties to the same agreement on choice of law; its formal validity—dependent on the alternatives offered by Article 11; and the capacity to contract, at least among parties located in the same country. This is because, as mentioned above, this issue is generally not governed by either the Rome I Regulation or the Rome Convention and depends on the respective applicable law according to national conflict rules, for example referring the issue to the national law of the person in question, as both Spanish and German laws do. In addition, it is important to emphasise that the choice is always between legal systems, that is, Article 3 does not admit agreements that opt for non-state systems such as the labour rules enshrined in ILO conventions. In such cases, the agreement is characterised as a substantive covenant whose validity depends on the relevant applicable law, but not as a choice of law clause.

More specifically, Article 3 admits both express and tacit choice of law.158 Here, it is important to highlight that the choice of law clause may also be contained in a collective agreement.159 In such cases, the choice of law is not among the terms of a particular individual employment contract, but a collective agreement applicable to the industry, business or establishment in question, so that the choice of law contained there reaches all employment contracts within its scope of application.160 This approach raises doubts as to whether it should be the other way around, i.e., first, ascertaining the law applicable to the contract and, second, assessing whether the relevant collective agreement is part of this law.161 Nevertheless, doubts as to the binding effect of these clauses on particular contracts are dissipated by the fact that a collective agreement is an expression of private autonomy as well.162 Fewer doubts have been expressed with respect to the choice of law clause included in general terms, as long as the legal conditions arranged to guarantee that the terms are not unfair are met.

The choice of law may also be ‘clearly demonstrated by the terms of the contract or the circumstances of the case’. The way in which a tacit choice is asserted is a different matter that may adversely affect the worker, for which reason legitimate doubts arise as to whether it ought to be permitted in employment contracts. The fact that the mandatory provisions of the default law governing the contract are to be applied supports a choice implied from the circumstances as a whole, which at any rate must be ‘clearly demonstrated’.164 In this sense, it is not enough to simply point to some indication that the parties prefer one legal system over others, but rather the terms of the contract or circumstances of the case must point unequivocally to a given legal system.

Recital 12 of the Rome I Regulation is a reminder that choice of forum clauses are relevant when assessing whether a choice of law may be implied from the terms of the contract. The operability of choice of forum agreements is certainly restricted in employment contract matters to the benefit of workers.165 For that very reason, they should be deemed to be significant indicators that the parties to the contract intended to apply the law of the designated forum while simultaneously contributing to the objective of establishing concurrence between forum and ius, thus avoiding the costs of proof of foreign law.

Other relevant factors emerge when, for example, an employee seeks the payment of claims arising from a particular law167 or, more generally, when the contract contains typical institutions of a given law and is also written in the language of the state concerned,168 when the parties settle their disputes in court in accordance with the law of the forum,169 when the services to be performed are restricted to one particular establishment and the worker’s social protection is provided for a given social security system170 and even in cases where the choice of law results from correspondence between the parties or is contained in a previous contract that has been renewed, without further evidence that modifying the contract has altered the relationship between the parties.171 Another powerful indication for the purposes of discerning a choice of law from the terms of the contract is any express reference to a collective agreement in the specified country.172 However, none of these indications in themselves can be considered conclusive evidence of a tacit choice of law. On the contrary, the very fact that there is no express choice reinforces the idea that only in circumstances that clearly point to a particular law is it possible to infer that the parties truly intended it to be applied.

Article 3 of the Rome I Regulation and the Rome Convention also admits a partial choice of law, applicable to just a few aspects of the contract, and provided that it does not compromise the contract’s consistency, for which reason the choice of law clause must address a severable part of the contract such as dismissal or certain benefits.173 The provision also addresses time issues by stipulating that the choice of law can be concluded at any time during the life of a contract and is therefore modifiable or replaceable. Employment contracts are no exception to this rule, and the applicable law may change during their lifetime. Since this is a long-lasting relationship, the issue arises as to when the new law chosen by the parties will be effective. The principle of party autonomy plays a part here, and so the parties may decide whether to apply the choice of law agreement ex tunc or ex nunc at the time it is entered into. Should they not explicitly address this issue, the bulk of doctrine rightly indicates that the choice of law ought to be interpreted as being operative from the outset of the employment relationship.

Limitations to Party Autonomy Based on the Principles of Proximity and Protection

Limitations to party autonomy may be classified according to the principles of proximity and protection, among other criteria.175 First, the choice of law is restricted to laws that have some relation with the case, that is, to laws connected with the contract whose law is to be established.176 A limitation of this type is set out in Sections 3 and 4 of Article 3 of the Rome I Regulation with the aim of avoiding the displacement of the mandatory provisions of the law that would have governed the contract had the choice of law not in fact been agreed on. Thus, Article 3(3), like Article 3(3) of the Rome Convention, establishes that when all relevant aspects of the situation are located in a country other than the one whose law has been chosen, ‘the choice of the parties shall not prejudice the application of provisions of the law of that other country which cannot be derogated from by agreement’, i.e., when an employment contract is concluded in Spain between persons domiciled there for the provision of services on board a ship flying the Spanish flag, the parties may choose to submit their relationship to a different law, but this will only govern the contract and its vicissitudes within the framework provided for by Spanish mandatory rules.177 To assess whether the employment contract is a domestic one, the time at which the choice of law is made has to be considered, although an exception to this rule deserves to be made if the contract is concluded with the aim of posting workers abroad.178 Finally, it is important to observe that if domestic law prevails, this can lead to an outcome that is contrary to the aim of applying the law that is most favourable to the worker. Accordingly, it has been rightly suggested that Article 8(1) of the Rome I Regulation ought to prevail over Article 3(3), meaning that the chosen law should be applied instead of the domestic law whenever it is more favourable to the worker.

Unlike Article 3(3), Article 3(4) of the Rome I Regulation has no equivalent in the Rome Convention. Formulated in a similar way to Section 3, it aims to avoid party autonomy being used to circumvent mandatory provisions enshrined in this case by EU law. The provision thus targets cases where all the relevant elements are located in one or more member states but where the choice of law has been concluded in favour of a third state. Accordingly, the choice of law is not a means to escape from ‘the application of provisions of Community law, where appropriate as implemented in the Member state of the forum, which cannot be derogated from by agreement’. The scope of this limitation is debatable,180 but it refers to provisions laid down in EU instruments that also deal with work at sea.

Nevertheless, the rule does not clash with others that determine the scope of application of EU law, that is, it does not prevent the respective directive from being applicable when not all the contacts in the case point to European Union territory, in other words, when its scope of application is broader than that provided for in Article 3(4).

Other limitations to party autonomy directly point to the protection of the weaker party by grading the effectiveness of the choice of law, depending on which legal system is more protective, whether it is the one that is chosen or the one that is otherwise applicable.181 The protection granted to employees relies on the provisions contained in the law that is applicable in the absence of choice of law and that cannot be derogated from by agreement, meaning all mandatory provisions provided for without exception, for example with regard to the underlying policy: whether they aim to protect workers or target other interests instead.182 It is important to note here that these provisions may be contained in collective agreements as well or in public law rules that have a certain impact on the employment relationship.

It is even more important to highlight the fact that Article 8(1) of the Rome I Regulation seeks to clearly differentiate between the provisions it refers to—those ‘which cannot be derogated from by agreement’—and those in Article 9 dealing with overriding mandatory rules, lois de police or lois d‘application immédiate. In fact, the provisions that Article 8(1) of the Rome I Regulation refers to are in line with those included in Sections 3 and 4 of Article 3 of the Rome I Regulation since all of them deal with mandatory rules. They are not to be confused with overriding mandatory rules, which are applied regardless of the law applicable to the employment contract, as they aim to preserve the forum’s core values and essential policy options. This distinction does not mean that the overriding mandatory rules contained in the lex laboris are not applicable through Article 8(1), but this rationale does not work the other way around, i.e., the provisions referred to in Article 8(1) cannot be applied via Article 9 of the Rome I Regulation.

The mechanism devised in Article 8(1) of the Rome I Regulation and in Article 6(1) of the Rome Convention for worker protection obliges more than one legal system to be taken into account, which may lead to a dépeçage on one hand184 and problems of proof of foreign law on the other, making it impossible to tackle the comparison of legal systems as required by the provision at stake.185 This rule includes a requirement according to which two laws must be compared so that the more favourable of the two can be applied to the worker.

In principle, the comparison should be comprehensive, given that the purpose is not to build an ad hoc scheme by picking out the most beneficial provision for the worker from each legal system. Nevertheless, the huge difficulties that the seized court faces in proceeding to such a comprehensive comparison preclude this approach186 and it has therefore been suggested that what has to be dealt with is the specific issue at hand, and not the rule under discussion, since that would lead to fragmentation of the applicable laws.187 There are many practical reasons for doing this, in particular that a court cannot be asked to compare all the legal systems involved to assess whether or not one protects workers better than another in general terms.188 The reasonable and sensible thing to do is to focus on the legal issue raised by the case at hand; more specifically, in assessing whether one legal system is more favourable than another, the comparison should be restricted not to the specific provisions for resolving the issue but to those regulating the institution in question.

The CJEU judgment Voogsgeerd v Navimer 189 offers an example of this kind of operation, as the employee claimed protection under Belgian law as the law applicable in the absence of choice of law; the contract was actually submitted to the law of Luxembourg, which sets a shorter time limit on dismissal claims than that established in Belgium and according to which the time limit had already expired. In dealing with the case, the CJEU did not discuss how to compare the two laws, but it is clear that the Court did not consider proceeding to a comprehensive comparative analysis possible. A comparison of the time limits for the opening of proceedings should not be sufficient either. In contrast, the two regulations on dismissal have to be subjected to careful assessment, including the grounds for dismissal, the consequences of a declaration of unfair dismissal and even the rules of evidence.190 The comparison must be carried out by the seized courts since they have the authority to determine which law is most favourable to the employee. In this regard, the arguments put forward by the worker are not sufficient for concluding which legal system should decide on the case at hand,191 although they cannot simply be ignored for practical reasons.

Source: Piñeiro L.C. (2015) International Maritime Labour Law. Hamburg Studies on Maritime Affairs (International Max Planck Research School for Maritime Affairs at the University of Hamburg), vol 34. Springer, Berlin, Heidelberg

Conclusion

Notes

See Also

About the Author/s and Rewiever/s

Author: admin

References and Further Reading

About the Author/s and Reviewer/s

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Mentioned in these Entries

Convention on the Law Applicable to Contractual Obligations, Private International Law, Rule of law, State law, country.

Party Autonomy in Private International Law

This section contain conflict of laws information and cross references related to party autonomy on some major countries and additional jurisdictions. It covers key issues involved when citizens face international situations. Information on private international law cases and courts related to party autonomy is provided here. Details on private international law books are available here.

Resources

See Also

Further Reading

  • Horatia Muir Watt, “Party Autonomy”, Encyclopedia of Private International Law, Edward Elgar, 2017

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