CHANAKYA NATIONAL LAW UNIVERSITY

Exclusion of Foreign Law : Mandatory Rules

Submitted By :-
Amit Kumar,
[Link] ,
Semester-IX, Roll-1007

Submitted To:-

Dr. P. P. Rao

(Final Project submitted for subject Private International Law)

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 ACKNOWLEDGEMENT

Writing a project is one of the most significant academic challenges I have ever faced.
Though this project has been presented by me but there are many people who remained
in veil, who gave their all support and helped me to complete this project.

First of all I am very grateful to Dr. P. P. Rao sir , without the kind support of whom
and help the completion of the project was a herculean task for me. He donated his
valuable time from his busy time to help me to complete this project and suggested me
from where and how to collect data.

I am very thankful to the librarian who provided me several books on this topic which
proved beneficial in completing this project.

I acknowledge my friends who gave their valuable and meticulous advice which was
very useful and could not be ignored in writing the project.

Amit Kumar

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 Table of Contents

 Introduction............................................................................................04
 Doctrine of Public Policy
 Comity vs Public policy...............................................................06
 Scope of Doctrine of Public Policy.............................................07
 Judicial Interpretation in India..................................................08
 Exclusion of Different Types of Foreign Laws
 Penal Laws....................................................................................10
 Foreign Revenue Laws.................................................................11
 Foreign Expropriatory Laws.......................................................11
 Mandatory Rules....................................................................................14
 Conclusion...............................................................................................15
 Bibliography............................................................................................16

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 Introduction

In the resolution of legal disputes containing supranational elements national courts utilise the
rules of private international law to identify the appropriate governing legal prescription. On
some occasions, however, when foreign law is thus found to be prima facie applicable to the
situation, it is not applied; instead, for certain reasons of policy, it is rejected by the forum.

In any system of conflict of laws including India, the courts retain an overriding power to
refuse to enforce and sometimes even refuse to recognise, rights acquired under foreign law
on grounds of public policy. The scope and extent of exclusion varies in different countries.

English courts invariably apply English domestic law in many types of family proceedings
such as involving divorce, maintenance or adoption. So, foreign law in many departments of
family law is inapplicable and it is frequently excluded on the ground of public policy.

Research Methodology
The researcher has primarily relied on the “Doctrinal Method”. The research is based on
comprehensive study of sources which are primarily study of various books, other web
resources, news articles etc. Analytical, critical and Comparative methods are used as major
tools of study in support of the arguments.

Objectives of Study:
 To study in detail the concept of exclusion of foreign law.
 The foreign mandatory rules..

Hypothesis:

The researcher hypothesizes that the mandatory rules when applied exclude the operation of
choice of law having an overriding effect.

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 Doctrine of Public Policy

In private international law, the public policy doctrine or ordre public concerns the body of
principles that underpin the operation of legal systems in each state. This addresses the social,
moral and economic values that tie a society together: values that vary in
different cultures and change over time. Law regulates behaviour either to reinforce existing
social expectations or to encourage constructive change, and laws are most likely to be
effective when they are consistent with the most generally accepted societal norms and reflect
the collective morality of the society.

In performing this function, it has been suggested that the critical values of any legal system
include impartiality, neutrality, certainty, equality, openness, flexibility, and growth. This
assumes that a state's courts function as dispute resolution systems, which avoid the violence
that often otherwise accompanies private resolution of disputes. That is, citizens have to be
encouraged to use the court system to resolve their disputes. The more certain and predictable
the outcome of a court action, the less incentive there is to go to court where a loss is
probable. But certainty must be subject to the needs of individual justice, hence the
development of equity.

A judge should always consider the underlying policies to determine whether a rule should be
applied to a specific factual dispute. If laws are applied too strictly and mechanically, the law
cannot keep pace with social innovation. Similarly, if there is an entirely new situation, a
return to the policies forming the basic assumptions underpinning potentially relevant rules of
law, identifies the best guidelines for resolving the immediate dispute. Over time, these
policies evolve, becoming more clearly defined and more deeply embedded in the legal
system.

At the same time, however, it must be noted that the operation of public policy tends to be a
negation of the co-operation of national institutions which lies at the base of effective
enforcement of foreign prescriptions. "Generally speaking," says one commentator, "the
doctrine of ordre public international is the negation of private inter- national law, it is the
triumph of nationalism over internationalism, of policy over uniformity or harmony."1 Yet
the rules and exceptions paying homage to such nationalism have not dwindled; Savigny's

1
[Link]

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prognosis that " it is to be expected that these exceptional cases will gradually be diminished
with the natural legal development of nations" has not eventuated.2

The concept of the 'Public Policy' denotes that what is good for the public or in public Interest
or what would be injurious or harmful from time to time. Anything that hurts collective
consensus is against the 'Public Policy.' Hence the Acts in violation of law shall be
considered against the 'Public Policy.3 Public policy is one of the most important factors for
all countries that regulates the acceptance and application of the general as well as particular
rule of conflict of laws. It is also one of the most important criteria for acceptance or
exclusion of foreign legal proceeding in any country.4 Under English law it is a well
established principle that any action brought in the country is subject to English doctrine of
public policy.

Comity Vs Public Policy

The whole idea of domestic rule of conflict of laws is to establish the criteria to resolve the
dispute involving the elements of two or more different judicial systems. Comity specifically
refers to legal reciprocity, the principle that one jurisdiction will extend certain courtesies to
other nations, or other jurisdictions within the same nation. Doctrine of Comity of nations is
the basis for applying the principles of conflict of laws, the better view appears to be that the
basis is the need to do justice to the parties. Comity means the accepted rules of mutual
conduct between the State and the State which each state adopts in relation to the other States
and expects other States to adopt in relation itself.5 This is particularly done by recognizing
the validity and effect of their executive, legislative, and judicial acts. The term refers to the
idea that courts should not act in a way that demeans the jurisdiction, laws, or judicial
decisions of another jurisdiction. A presumption that other jurisdictions will reciprocate the
courtesy shown to them is a part of comity. Many statutes relating to the enforcement of
foreign judgments require that the judgments of a particular jurisdiction will be recognized
and enforced by a forum only to the extent that the other jurisdiction would recognize and
enforce the judgments rendered by that forum.6

2
Nussbaum, " Public Policy and the Political Crisis in the Conflict of Laws" (1940) 49 Yale L.J. 1027, 1038
3 O.P GUPTA, Laws on Public Policy of India and its Impacts on Arbitration Awards in Construction Industry
4
KB Agrawal & Vandana Singh, Private International Law in India, 78, Aisa Law House, Hyderabad
5
ATUL M SETALVAD, Conflict of Laws, p5, 2nd Ed., Lexis Nexis Butterworths Wadhwa Nagpur
6
COMITY, available at, [Link]

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Where the doctrine of comity of nations puts and obligation over the nations to respect the
laws of other nations, which extends to application of foreign laws in matter involving
foreign element to the execution of a foreign judgment, doctrine of public policy is an
exception to it. Nothing can be adopted by a State which is derogatory to the principles
formulated and adopted by it since time immemorial. The object of doctrine of comity is to
give the party under dispute justice which would not be possible without application of the
law related to the foreign element. But such compromise cannot be done overlooking the
matter of public policy. Nothing can be accepted and executed by the State which opposes its
principles. Thus Policy is kept at the higher place as compared to any other matter.

Scope Of Dotrine Of Public Policy

The term public policy is general in nature and is entirely dependent on its interpretation
whether accepted in narrower sense or wider sense. If the interpretation is liberalized then it
would undermine the principle of comity of nation as it would turn widely inclusive. In
Renusagar Power Co Ltd. v General Electric Co. Ltd 7, the Supreme Court has observed while
applying the rule of public policy between a matter governed by domestic law and a matter
involving conflict of laws. The court suggested that the application of doctrine of public
policy in the field of conflict of laws is more limited. Courts are slower to invoke the public
policy in cases involving a foreign element on the ground that ‘transactions containing a
foreign element may constitute a less serious threat to municipal institutions than would
purely local transactions.8 Public policy does not have any specific definition. Whatever tends
to result in injustice of operation, restrain of liberty, commerce or natural right or legal rights
whatever tends to the obstruction of justice or to the violation of the statue and whatever is
against the moral standards when made the object of contract is against the public policy and
therefore void not susceptible to enforcement.9 The role of judge Justice C Reddy of Andra
Pradesh High Court observed,’ The twin touch stone of public policy are advancement of
public good and prevention of public mischief and these questions have to be decided by

7
AIR 1994 SC 860
8
Private international law in india adequacy of principles in comparison, FE Norohna80
9
Kolaparti Venkattareddy v Kolapartipeda venkatachalam AIR 1964 AP 465

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judges not as men of legal learning but experienced and enlightened members of the
community respecting the highest common factor of public sentiment and intelligence.’10

The Indian courts too have specifically determined that any rule or decision of a foreign law
cannot be accepted in India if it is against the public policy of the nation. It has also been
accepted that the public policy is not a static concept. Public policy connotes some matter that
concerns public good or is in public interest, also what would be harmful or injurious to the
public good or public interest has varied from time to time.11 The SC has added that going by
prevailing social circumstances, an agreement having tendency to injure public interest or
public welfare is opposed to public policy.12 The courts have come to regard the doctrine of
public policy as extending also to harmful tendencies. If the object of any contract has
harmful tendencies, the contract would be void as contrary to public policy.13

Judicial Interpretation Of Doctrine Of Public Policy, Indian Cases

Succession:

It is a settled rule in Indian domestic law that no person can benefit from a crime committed
by him, consequently no person can inherit from a person whose death he has caused, this is a
rule of justice, equity and good conscience.14 The question does not seem to have arisen in
conflict of laws situation, but prima facie, where an Indian court is applying a foreign law in
a case of succession of a person, it would not, it is submitted, allow a murderer to succeed to
the estate of his victim whatever the rule of that foreign law may be on the grounds of public
policy.15

Contracts

In Hakam Singh v. Gammon (India) Ltd16 the Supreme Court of India added legal clarity to
the jurisdiction of courts. It held that it is not open to the parties by agreement to confer
jurisdiction on a court which it does not possess under the Code. However, it clarified that in
a scenario where two courts or more have jurisdiction under the Code to try a suit or

10
Ratanchand Hirachand v Ashok Nawaz Jung, AIR 1976 AP 112
11
Central water inland transport corporation ltd v Brojonath Ganguly, (1986) 60 Comp. Cas 797 (SC)
12
Rastanchand Hirachand v Ashok Nawaz Jung, AIR 1976 AP 112
13
Gulabchand Gambhirmal v Kudilal Govindram, AIR 1959 MP 151
14
Kenchava v Girimalappa Channapa, AIR 1924 PC 209
15
ATUL M SETALVAD, Conflict of Laws, P. 113, 2nd Ed., Lexis Nexis Butterworths Wadhwa Nagpur
16
Hakam Singh v. Gammon (India) Ltd, AIR 1971 SC 740

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proceeding, an agreement between the parties that the dispute between them shall be tried in
one of such courts is not contrary to public policy. Such an agreement does not contravene
Section 28 of the Indian Contract Act, 1872 (the Act).

The Supreme Court of India in British Steam Navigation17 had further interpreted Section 28
of the Act as applied to cross border transactions. It held that the term “absolutely” in Section
28 is critical. The apex court considered that clauses which are in restraint of judicial/ legal
proceedings are void only if the restraint is absolute in nature. However, in such a case the
specific court referred to in the contract should have jurisdiction. Since partial restraint of the
party to limit its legal relief to one court is not against public policy, waiver of private rights
under a contract is lawful as long as such waiver is not against public policy, the clause will
be enforceable.

Delhi clothes & General mills co ltd v Harnam Singh18 the Supreme Court held that the
evacuee property law passed in Pakistan, which governed the debt, could not be regarded as
opposed to public policy as India has enacted similar legislation. Further in Renusagar power
Co. Ltd v General Electronis Co. Ltd.19, the Supreme court has cited with approval English
decision and set out a rule in a leading English text book that if a contract is governed by a
foreign law, English courts would give effect to the exchange control laws of that country and
that enforcing such laws is not opposed to the public policy. The court also held that an award
which was contrary to Indian Exchange control laws would not be enforced in India as being
opposed to public policy.

17
British Steam Navigation, 1990 2 Comp LJ1 SC
18
Delhi clothes & General mills co ltd v Harnam Singh, AIR 1955 SC 590
19
Renusagar power Co. Ltd v General Electronis Co. [Link], 1994 SC 860

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 Exclusion of Different Foreign Laws

Penal Laws:

If foreign legislation is categorised as penal it will not be enforced. For, says Cheshire, “ It is
well settled that an English court will not lend its aid to the enforcement, either directly or
indirectly of a foreign penal law.” This rule is one of the progeny of the principle of
territoriality, which has universal acceptance and respectable judicial support20. Further
justification is sought in sovereignty, for (so the claim proceeds) it is an obvious principle
that an act of sovereignty can have no effect in the territory of another State. Indeed,
application of the foreign law, it is said, would be contrary to the sovereignty of the forum.21

Such strong statements are misleading. While territoriality of jurisdiction is a fact of

international life this does not mean that national prescriptions will not be applied by other
national courts. Indeed, such is the very fabric of private international law; there is no
infringement of sovereignty of the forum when the forum decides to apply foreign law. Posed
in this form, the function of the exclusionary penal rule as one of policy is sharpened.

The key question becomes: When will foreign law be characterised as penal? In a less
complex world community, the rule related to criminal law in the strict sense; to cross the
border was to leave behind the pursuing jurisdiction. Courts refer nostalgically to Lord
Mansfield's simple dichotomy; that "there is no distinction better known than the distinction
between civil and criminal law."22 These days the search for an adequate definition usually
goes back to Huntington v. Attrill,23 in which the Privy Council, after indicating that the
process of classification as penal was for the forum, included in a penal action crimes "in all
breaches of public law punishable by pecuniary mulct or otherwise, at the instance of the
State Government or someone representing the public." Admitting that the phrase "penal
action " was "calculated to mislead," yet the application of foreign law was to be prevented
"to all suits in favour of the State."

Later cases have endorsed this broader delineation of what is penal. Thus it has been held
that the taking of property by the State for its own benefit may be penal24; the deprivation of a

20
[Link]
21
Oppenheim, International Law, Vol. I (8th ed., 1955)
22
Atcheson v. Everitt (1775) 1 Cowp. 382, 391
23
[1893] A.C. 150
24
Banco de Vizcaya v. Don Alfonso de Borbon y Austria [1935]

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valuable interest indefinitely may be penal; a law of "police and order is penal."25 But it
should be remembered that, as Lord Evershed M.R. recently said, " There is no magic in the
word penal.”26

Foreign Revenue Laws:

Revenue laws of another State, likewise, will not be applied, being equated with criminal
penalties and confined territorially. "No country ever takes notice of the revenue laws of
another," pronounced Lord Mansfield,27 and since that time the rule has been generally
accepted to prevent the application of foreign law. The formulation of Rowlatt J. that:-

“It is perfectly elementary that a foreign government cannot come here nor
will the courts of other countries allow our government to go there-and sue a person found in
that jurisdiction for taxes levied and which he is declared to be liable in the country to which
he belongs.”28

has found approval.

Recent cases show cogent application of the principle. Branded as penal, a levy for street
improvements by a municipality abroad was not recoverable.29 Courts denied both a claim by
the Dutch Government to succession duties imposed on property in England30 and a claim by
India in “Gov. of India v. Taylor”31 for back-taxes incurred during operations there of an
English company later in liquidation. It was unanimously held that tax gathering is not a
matter of contract but of authority and administration as between the state and those within its
jurisdiction and it is settled principle that English court refuse to enforce any claim which in
their view is a manifestation of foreign state sovereign authority.

Foreign Expropriatory Legislation:

National need of control and utilisation of national resources has led to a variety of taking of
property in recent decades." Will these governmental edicts be recognised and applied by
foreign courts? Will personal rights, acquired on the basis of such legislation, be upheld? Or

25
Lecouturier v. Rey [1910] A.C.
26
Re Langley's Settlement(1962)
27
Holman v. Johnson (1775)
28
King of Hellena v. Broston (1923)
29
Municipal Council of Sydney v. Bull (1909)
30
Re Visser (1928)
31
[1955] A.C. 491, per Lord Simonds

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will the reserve principle of public policy be utilised to prevent such application of the
foreign law? English decisions have enunciated a number of crystallised and overlapping
rules, responses to various contextual situations, which will govern the applicability of the
foreign law. While demonstrably interacting with public policy considerations, public policy
is again not in the forefront of argument: functionally equivalent rules take its place.

A preliminary step in the judicial process, interpretation of the foreign legislation, may be
determinative. If the court finds that there is no intent of the legislation to have extraterritorial
effects, and the property in contest was outside the jurisdiction at the time of the taking, no
effect is accorded the foreign law. Thus in one case Hill J. found no intent of a Russian
confiscatory decree to affect movable property outside the country.32 This was one of the
grounds, also, in Lecouturier v. Rey33 where the House of Lords found a French decree
limiting the manufacture of "chartreuse" to that country was not intended to extend to exiles
brewing in England.

If the foreign law is intended to be extraterritorial in effect the outcome in cases contesting
acquired rights will be dictated by the principle of territoriality, which operates according to
whether the property was within or without the jurisdiction of the foreign State at the time of
taking. If the property is within the jurisdiction at the time of the taking, English courts will
apply the foreign law to uphold rights acquired under it. Any doubts on this matter were
settled by the Court of Appeal in Luther v. Sagor. After all, demands of comity mean that,
once a government is diplomatically recognised, "the acts of that Government must be treated
by the courts of this country with all the respect due to the acts of a duly recognised foreign
sovereign State."

If the property was at the time of the taking situated outside the jurisdiction of the foreign
State, comity, however, requires no such recognition of the foreign law." Solidifying this
rule, Devlin L.J. said in the Bank voor Handel case34 " that

“There seems to me to be every reason, if the authorities

permit it, for giving effect to the simple rule that generally property in England is subject to
English law and no other.”

32
Luther v. Sager
33
[1910] A.C. 262
34
Bank voor Handel en Scheepvaart N.V. v. Slatford (1953)

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Thus there are three factors that should be looked into for the determination of effect of a
foreign expropriatory legislation which are:-

1. The interpretation of foreign legislation.

2. The situs of the property at the time of legislation.
3. The question whether the foreign sovereign was in actual possession or control of the
properties situated within the territories of the foreign state, the expropriatory law will
be recognised and given effect to in England, although the property in question was
later brought to England and was there during litigation.

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 Mandatory Rules

Overriding mandatory rules can be defined as mandatory rules that are crucial for the
countries' economic, social and political purposes, and their applications are required for the
disputes within their scope in order to implement the above-mentioned [Link] are
three categories of overriding mandatory rules: overriding mandatory rules pertaining to lex
fori; overriding mandatory rules pertaining to lex causae; and finally, overriding mandatory
rules of a third country.35

The concept of mandatory rules has only recently been introduced into English Law. The
statutory and EC rules on choice of law in respect of trusts, contracts, and torts all have rules
providing for the application of the mandatory rules of the forum.

Difference between Overriding Mandatory Rule and Public Policy:

Overriding mandatory rules are related to social and economic politics of the relevant
country, serving the general public interest, without regard to private law norms. These rules
usually serve the related external commerce, economic, defense, environmental, and social
politics of the country. These provisions are of such material importance to the country that
they require strict implementation thereof. Therefore, even if a foreign law governs a
given inter partes relation, these overriding mandatory rules shall apply. Similarly, when
public policy is concerned, a local provision may be preferably applied based on the positive
effect of public policy, even when a foreign law is applicable2. However, when an overriding
mandatory rule is concerned, such rule shall absolutely be applied, regardless of the results;
whereas, the results are taken into consideration for the implementation of public policy. In
other words, when a foreign law is applicable in a given case, public policy shall only
intervene if a result arises that would be unacceptable within the framework of the national
laws.

Article 7/1 of the Rome Convention is as follows: "When applying the law of a country under
this Convention, effect may be given to the mandatory rules of the law of another country
with which the situation has a close connection, if and insofar as, under the law of the latter
country, those rules must be applied, whatever the law may be that is applicable to the
contract. In considering whether to give effect to these mandatory rules, regard shall be had

35
[Link]

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to their nature and purpose, and to the consequences of their application or non-application."
The concept of mandatory rules is a positive one, the concern is to apply particular domestic
rule where the concern is that a foreign rule should not be applied, and that i.e. they are
negative concepts. However, the effect of application of mandatory rules of English law is
that a foreign domestic law which would otherwise govern under choice of law rules, is not
applied. To that extent application of mandatory rules can be regarded as an exclusionary
concept.

Conclusion

Public Policy could be defined as what is good for the public or in public Interest or what
would be injurious or harmful. Anything that hurts collective consensus is against the 'Public
Policy' or any Act in violation of law shall be considered against the 'Public Policy. Though
the term is not well defined the scope of the term is determined by the judicial interpretation
but the whole idea of the application of public policy seems to be blur in the present scenario,
where the social norms, the so called custom, tradition, moral principles are intermixing. In
this context the justifiability of the conflict of law rules is a major issue. In any matter the
rules governs the dispute between the two parties where one of them may have his or her
rights in certain state but these rights would be compromised just because certain state does
not recognize his or her right on the grounds of public policy. The parties of such in such
critical dispute then have to be cautious because the manner of justice by various courts
would vary. Various courts have considered public policy as unruly horse or untrustworthy
guide. Surely what would be the public policy is beyond codification, then it is mere a
principle or tool in the hands of the judiciary which has to be carefully used because the
fundamental purpose of judiciary is ‘justice’ and want of justice is the rights of the parties
under dispute which should not be under mined.

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 Bibliography

Books:

 JJ FAWEEET& PM NORTH, Cheshire & North’s Private International

Law, 13th Ed. Oxford University Press
 ATUL M SETALVAD, Conflict of Laws, 2nd Ed., Lexis Nexis
Butterworths Wadhwa Nagpur
 KB AGRAWAL & VANDANA SINGH, Private International Law in
India, Asia Law House, Hyderabad
 O.P GUPTA, Laws on Public Policy of India and its Impacts on
Arbitration Awards in Construction Industry.

Websites:

 [Link]
 [Link]
 [Link]
mandatory-rules-in-private-international-law/
 [Link]
div=50&id=&page=

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