Finally, it is worth noting that Arts 3 and 4 present no particular problems for commercial contracts that are concluded by electronic means. They avoid tiresome analysis of the place of performance (or indeed the place of contracting) by focusing instead on the residence of the characteristic performer.

Particular issues

The Rome I Regulation takes pains to make clear that most types of issue relating to a contract are governed by the proper law. Thus, by Art 10(1), the existence and validity of a contract, or of any term of a contract, must be determined by the law that would govern it under the Regulation if the contract or term were valid, and Art 11 makes it sufficient for a contract to satisfy the formal requirements of the proper law. By Art 12(1), the proper law governs ‘in particular: (a) interpretation107; (b) performance; (c) within the limits of the powers conferred on the court by its procedural law, the consequences of a total or partial breach of obligations, including the assessment of damages in so far as it is governed by rules of law; (d) the various ways of extinguishing obligations, and prescription and limitation of actions; and (e) the consequences of nullity of the contract’. In addition, by Art 18(1), the proper law applies to the extent that, in matters of contractual obligations, it contains rules which raise presumptions of law or determine the burden of proof. But the Regulation does specify a number of exceptions, by which an issue may be affected by a law other than the proper law.

Article 10(1) subjects questions of essential validity or formation to the actual or putative proper law; the putative proper law being the law that would be the proper law if the contract or term in question were valid. This applies to such questions as whether a contract has validly incorporated another document by reference, and whether an incomplete agreement has subsequently been completed by a further agreement.108 It also applies to whether a person has become a party to an existing contract between others – for example, as the holder of a bill of lading.109 As regards essential validity, the control of the proper law is subject to the provisions of Arts 9 and 21 on public policy and overriding interests.110

As regards formation, an exception is made by Art 10(2), by which a party may rely on the law of his habitual residence to establish that he did not consent, if it appears from the circumstances that it would not be reasonable to determine the effect of his conduct in accordance with the actual or putative proper law. This would probably apply where an English resident ignores an offer (or counter-offer) received from abroad and governed by a foreign law under which silence is treated as consent. However in general Art 10(2) will be applied with caution, as in Egon Oldendorff v Libera Corp,111 where Mance J explained that in evaluating such a defence, the court should adopt a dispassionate, internationally-minded approach, and that the onus is on the party invoking Art 10(2) to bring himself within its provisions. He ultimately rejected the defendant’s argument invoking Japanese law, on the ground that it required one to ignore a London arbitration clause, contrary

107Thus, where two agreements are governed by the same proper law, it is for that law to determine, as a matter of interpretation, whether they should be treated as a single agreement; see Carnoustie v ITWF [2002] 2 All ER (Comm) 657.

108See Egon Oldendorff v Libera Corp [1995] 2 Lloyd’s Rep 64; and The Atlantic Emperor (No 1) [1989] 1 Lloyd’s Rep 548 (CA). Cf The Heidberg [1994] 2 Lloyd’s Rep 287; and Dornoch Ltd v Mauritius Union Assurance Co Ltd [2006] 2 Lloyd’s Rep 475 (CA).

109See TheYthan [2006] 1 All ER 367.

110See pp 548-50 below.

111[1995] 2 Lloyd’s Rep 64. See also Welex v Rosa Maritime [2002] Lloyd’s Rep 701, affirmed without reference to this point [2003] 2 Lloyd’s Rep 509 (CA); Morin v Bonhams & Brooks [2003] 2 All ER (Comm) 36, affirmed without reference to this point [2004] 1 Lloyd’s Rep 702 (CA); and Horn Linie v Panamericana Formas E Impresos [2006] EWHC 373 (Comm).

to ordinary commercial expectations, and despite every indication that the defendant had actually considered and accepted the clause, and that the clause was precisely the sort of clause which would be expected in an international charter agreement.

As regards formalities, Art 11 lays down a rule of alternative reference, reflecting a policy of validation. By Art 11(1), a contract concluded between persons who, or whose agents, are in the same country at the time of its conclusion is formally valid if it satisfies the formal requirements of its proper law, or those of the law of the country where it is concluded. By Art 11(2), a contract concluded between persons who, or whose agents, are in different countries at the time of its conclusion is formally valid if it satisfies the formal requirements of its proper law, or those of the law of either of the countries where one of the parties or agents is present at the time of conclusion, or those of the law of a country where one of the parties is habitually resident at that time.112 In addition, Art 18(2) enables a contract to be proved by any mode of proof recognised by the law of the forum or by any law which is applicable to its formal validity under Art 11 and under which the contract is formally valid, provided that such mode of proof can be administered by the forum. This effectively overrides the traditional English approach to the Statute of Frauds 1677, which was extended by means of procedural characterisation to contracts made abroad and governed by foreign law.113 By way of exception, Art 11(5) of the Regulation subjects a contract whose subject-matter is a right in rem in immovable property or a tenancy of immovable property to certain formal requirements of the law of the country where the property is situated. The formal requirements in question are requirements which, under the lex situs, cannot be derogated from by agreement and are imposed irrespective of where the contract is concluded and of its proper law. Probably such mandatory requirements include those imposed by s 2 of the Law of Property (Miscellaneous Provisions) Act 1989, under which a contract for the sale or other disposition of an interest in land can only be made in writing.

The capacity of both individuals and companies to contract is excluded from the scope of the Rome I Regulation by Art 1(2)(a) and (f), with the exception that Art 13 (reflecting French case-law)114 insists that, in the case of a contract concluded between persons who are in the same country, an individual who would have capacity under the law of that country may not invoke his incapacity resulting from the law of another country unless the other party to the contract was aware of the incapacity at the time of the conclusion of the contract, or was not unaware of the incapacity as a result of negligence.Thus, subject to Art 13, English courts continue to determine a person’s capacity to contract in accordance with the traditional English conflict rules. Under these it is probably sufficient in the case of ordinary contracts115 that an individual has capacity either under the proper law of the contract (now ascertained under Arts 3 and 4 of the Regulation, and with full account taken of even an express choice by the parties),116 or under the law of his domicile.117

112The third alternative, referring to habitual residence, was added by the Regulation.

113Cf Naraji v Shelbourne [2011] EWHC 3298 (QB).

114See De Lizardi v Chaise, Sirey 61.1.305 (1861), a decision of the Chambre des Requêtes of the Court of Cassation.

115There is a special rule for marriage settlements, where each party’s capacity is governed by the law of his or her domicile (see Re

Cooke’s Trusts (1887) 56 LT 737; Cooper v Cooper (1888) 13 App Cas 88; and Viditz v O’Hagan [1900] 2 Ch 87), and for contracts for the disposition of land, where capacity is governed by the lex situs (see Bank of Africa v Cohen [1909] 2 Ch 129).

116See Male v Roberts (1800) 3 Esp 163; McFeetridge v Stewarts and Lloyds 1913 SC 773; Charron v Montreal Trust (1958) 15 DLR (2d) 240; and especially Bodley Head v Flegon [1972] 1 WLR 680. Cf Dicey, Rule 228(1).

117Cf Dicey, Rule 228(1); and Gorjat v Gorjat [2010] EWHC 1537 (Ch).

But a company must have capacity both under the proper law of the contract and under the law of the country of its incorporation.118

Article 12(1)(b) of the Rome I Regulation expressly includes performance among the issues governed by the proper law, but Art 12(2) adds a minor exception that, in relation to the manner of performance and the steps to be taken in the event of defective performance, regard must be had to the law of the country in which performance takes place. This seems to reflect Lord Wright’s remark in Mount Albert BC v Australasian Assurance Soc119 that the law of the place of performance may regulate the minor details of performance, but not so as to affect the substance of the obligation. It no doubt applies to such questions as what are normal business hours within which delivery should be affected under a contract of sale.120 It also ensures that a sea carrier may comply with a requirement under the law of the country of discharge that the bill of lading should after presentation be returned to the customs agent, marked if necessary to show that delivery has been made.121

By Art 12(1)(c), the proper law governs, within the limits of the powers conferred on the court by its procedural law, the consequences of a total or partial breach of obligations, including the assessment of damages in so far as it is governed by rules of law. This cautious formulation ensures that English courts will not be required to follow a foreign proper law to the length of making available non-monetary remedies, such as orders for specific performance, in circumstances where English law would limit the plaintiff to monetary remedies – for example, because specific performance would necessitate continuing judicial supervision.122 In contrast, the Regulation seems to encourage the application of the proper law to the greatest extent practicable in connection with the assessment of damages – not only to questions of remoteness of damage, admissible heads of damage, and mitigation of loss, but even to mere quantification, in so far as the proper law supplies a rule sufficiently definite that a court elsewhere can apply it with reasonable accuracy. Moreover, as the Court of Appeal ruled in Lesotho Highlands Development Authority v Impregilo,123 the proper law must be applied in determining the currency in which a monetary judgment should be given, and also whether the claimant is entitled to interest on unpaid sums, whether by virtue of a contractual term or of a rule of law; however, if the rate of interest is not fixed by a contractual term, it must be determined in accordance with the lex fori.

By Art 12(1)(d), the Regulation specifies that the proper law governs prescription and limitation of actions. This substantive characterisation of time limits for bringing actions was anticipated by the Foreign Limitation Periods Act 1984,124 which, however, invokes public policy to restrict its effect. Section 2 declares it inconsistent with public policy to apply a foreign rule on time limitation

118See Carse v Coppen [1951] SLT 145; Kutchera v Buckingham International Holdings Ltd[1988] IR 61; Continental Enterprises Ltd v Shandong Zhucheng Foreign Trade Group Co [2005] EWHC 92 (Comm); and Dicey, Rule 175. Cf Haugesund Kommune v Depfa ACS Bank [2010] EWCA Civ 579, where the Court of Appeal invalidated a contract of loan, governed by English law, between a Norwegian local authority and an Irish subsidiary of a German bank, on the ground that the local authority lacked power under Norwegian law to obtain loans for speculative purposes. It proceeded to disregard a further Norwegian rule, validating a contract despite incapacity where the other party had acted in good faith, on the ground that the consequences of incapacity to contract are governed by the putative proper law of the contract in question.

119[1938] AC 224.

120See Dicey, at para 32-151.

121See East West Corp v DKBS 1912 [2002] 2 Lloyd’s Rep 182. This point was not dealt with when the decision was affirmed on appeal [2003] 2 All ER 700 (CA).

122See Dicey, at para 32-155.

123[2003] 2 Lloyd’s Rep 497 (CA), affirming [2003] 1 All ER (Comm) 22. The decision of the Court of Appeal was reversed by the House of Lords on other grounds (relating to the limits of judicial supervision of an arbitral award), [2006] 1 AC 221.

124The 1984 Act largely implemented Law Commission, Classification of Limitation in Private International Law, Report No 114, 1982, HMSO. See also Stone, [1985] 4 LMCLQ 497.

if to do so would cause undue hardship to one of the parties,125 and also requires any foreign rule under which time does not run while a party is absent from a given country to be disregarded. In addition, s 1(3) insists in all cases on the English rule that it is the issue of the claim form, rather than (for example) its service, which constitutes the commencement of English proceedings for limitation purposes. As regards undue hardship, English courts have disregarded a foreign one-year period for personal injury actions, where the claimant had been long hospitalised and had been led by the defendant to believe that her claim would be met by its insurers126; or a limitation period contained in a law which the parties did not realise was the proper law of the relevant contract.127 However, a foreign one-year period for an industrial disease claim, which ran from the date at which the plaintiff obtained knowledge of the injury, and within which the plaintiff was in fact able to obtain relevant legal advice, has been respected.128 Moreover, the undue hardship must arise from the foreign limitation period, not from poor legal advice received by the plaintiff, at least where he was aware of the limitation period, and could if he had chosen have issued proceedings in England within that period.129

Article 12(1)(e) of the Rome I Regulation provides for the application of the proper law to the consequences of nullity of the contract. Under the Rome Convention, the UK had made a reservation under Art 22 excluding the application of Art 10(1)(e) (which corresponds to Art 12(1)(e) of the Regulation) in this country.130 The reservation seemed, however, to be illusory, since the decision of the House of Lords in The Evia Luck131 indicated that the same rule existed in traditional English law. Their Lordships applied English law as the expressly chosen proper law of a contract entered into under economic pressure between foreigners abroad, to establish not only the illegitimacy of the economic pressure and the resulting invalidity of the contract, but also the existence of a consequential restitutionary right to money paid under the contract. In any event, no reservation is possible under the Rome I Regulation. Moreover, similar rules, subjecting restitutionary claims arising out of unjust enrichment, and non-contractual obligations arising out of dealings prior to the conclusion of a contract, to the law governing the related contract, are laid down by Arts 10 and 12 of the Rome II Regulation on the Law Applicable to Non-Contractual Obligations.132

English public policy and overriding mandatory rules

The Rome I Regulation derogates from its main rule, referring most contractual issues to the proper law, by making important exceptions in favour of the public policy or overriding interests of the forum country. Article 21 contains a traditional proviso permitting the forum to insist on respect for its own stringent public policy. It provides that the application of a provision of the law of any country specified by the Regulation may be refused if such application is manifestly incompatible

125However, s 2 of the 1984 Act does not enable an otherwise applicable English limitation rule to be disregarded by reference to public policy or undue hardship; see Chagos Islanders v Attorney General [2003] EWHC 2222 (QB), affirmed on other grounds [2004] EWCA Civ 997.

126See Jones v Trollope Colls (1990) The Times, 26 January (CA).

127See The Komninos S [1991] 1 Lloyd’s Rep 370 (CA).

128See Durham v T&N (1996) unreported, 1 May (CA).

129See Harley v Smith [2010] EWCA Civ 78, and Naraji v Shelbourne [2011] EWHC 3298 (QB).

130See the 1990 Act, s 2(2). A similar reservation had been made by Italy.

131[1992] 2 AC 152. Cf. Baring Brothers v Cunninghame DC [1996] WL 1093491 (Lord Penrose in the Outer House of the Court of Session).

132EC Regulation 864/2007 [2007] OJ L199/40.

with the public policy of the forum. Article 9(2) specifies that nothing in the Regulation restricts the application of the overriding mandatory provisions of the law of the forum.

The public policy proviso specified by Art 21 of the Regulation refers primarily to the rare cases where the relevant foreign rule (as applied to the substantive facts) departs so radically from English concepts of fundamental justice that its application would be intolerably offensive to the English judicial conscience, even where all the connecting factors (except as to the forum seised) are with the country of the rule.133 It applies, for example, where the foreign proper law would uphold the validity of a contract which was entered into under what English law regards as illegitimate non-economic pressure.134 It would also be contrary to public policy, within Art 21 of the Regulation, to enforce a contract which infringed the competition rules laid down by Art 101 of the Treaty on the Functioning of the European Union.135 In addition, Art 21 appears to preserve the traditional English rule which insists on the invariable application of the English substantive rules as to the effect on existing contracts of the outbreak of a war to which the UK is a party.136

Article 21 of the Regulation also appears to maintain the operation of the traditional English rules designed to prevent the English courts from encouraging or requiring parties to perform acts abroad whose performance would contravene the criminal law of the country where the performance would take place. It is true that the problem of performances that are prohibited at the place of performance is also addressed by Art 9(3) of the Regulation, which specifies that effect may be given to the overriding mandatory provisions of the law of the country where the obligations arising out of the contract have to be or have been performed, in so far as those overriding mandatory provisions render the performance of the contract unlawful; and that in considering whether to give effect to those provisions, regard must be had to their nature and purpose and to the consequences of their application or non-application.137 However, Art 9(3) does not appear to prevent the continued operation of Art 21 in this context. In any event, it seems probable that the English courts will continue to apply their traditional rules in this matter, whether they invoke Art 21 or Art 9(3) as the basis for doing so.

The first of these traditional rules applies where the parties’ actual common intention at the time of contracting was that the contract should be performed by means of an act done in defiance of a known criminal prohibition imposed by the law of the country where the act was intended to be performed.138 In such circumstances, the entire contract will be regarded as illegal and unenforceable in England, even if the unlawful intention is concealed by the documentation and revealed only by oral testimony, and even if the contract is governed by a foreign proper law, which takes a different view of its validity. An analogous result will be reached where the guilty intention to perform in defiance of a known prohibition was possessed by one, but not

133See per Simon P in Cheni v Cheni [1965] P 85.

134See Kaufman v Gerson [1904] 1 KB 591 (CA), which involved a threat to prosecute the promissor’s husband for embezzlement, and Royal Boskalis v Mountain [1997] 2 All ER 929 (CA), which involved a threat by the Iraqi Government to detain the contractor’s equipment and personnel in Iraq as the first Gulf War became imminent.

135See Case C-126/97: Eco Swiss China Time v Benetton International [1999] ECR I-3055.

136See Ertel Bieber v Rio Tinto [1918] AC 260.

137Article 9(3) of the Regulation differs substantially from its predecessor, Art 7(1) of the Rome Convention. Moreover, several member states, including the UK, had made reservations excluding the operation of Art 7(1) of the Convention by their courts. No reservation is possible in relation to Art 9(3) of the Regulation.

138See Foster v Driscoll [1929] 1 KB 470 (CA), which involved a conspiracy to ship whisky into the US during ‘prohibition’; Regazzoni v Sethia [1958] AC 301 (HL), where a contract expressed in the documents as a sale CIF Genoa was in fact intended to be performed by exporting the goods from India in breach of an Indian prohibition on exports destined ultimately for South Africa; and Royal Boskalis v Mountain [1997] 2 All ER 929 (CA), which involved a contract governed by Iraqi law and intended to be performed by acts to be carried out in the Netherlands and Switzerland in breach of Dutch and Swiss prohibitions imposed in implementation of United Nations’ financial sanctions against Iraq in consequence of its invasion of Kuwait.

the other, of the parties. The guilty party will then be unable to enforce the contract at all, but (unless performance would inevitably require breach of the prohibition in the country where it was imposed, in which case a variation on the second rule would apply) the innocent party will be able to do so.139

The second rule relating to criminal prohibitions applies where there was no such guilty intention but, unknown to the parties, there in fact existed at the time of contracting, or there came into force between the time of contracting and the time for performance, in a country where the contract necessarily required an act of performance to be done, a criminal prohibition against the doing of that act. In such a case, if the contract is governed by English law, and the illegality is supervening, then at least the obligation, the performance of which is prohibited, will be pro tanto frustrated and discharged. Such a situation arose in Ralli v Naviera,140 which involved a charterparty governed by English law for a voyage from India to Spain. The contract provided for payment of freight in Spain on arrival, but during the voyage a Spanish decree came into force prohibiting payment or receipt of freight at a rate exceeding a statutory limit, which was lower than the agreed rate. The Court of Appeal held that, under English law as the proper law, the supervening Spanish decree had the effect of frustrating the obligation to pay the contractual freight in so far as it exceeded the statutory limit. A similar result would probably have followed if the prohibition had existed at the time of contracting but had not come to the knowledge of the parties until after the voyage had commenced. If, however, the prohibition had become known to the parties before any substantial performance (such as the commencement of the loading) had been carried out, it would seem proper to regard the entire contract as frustrated.

However, if the proper law were that of a third country, it is probable that in cases of ‘innocent’ illegality, the English courts would respect a rule of the foreign proper law which substituted for the prohibited obligation a similar obligation to be performed in a different country where its performance was not prohibited. An example would be the Ralli situation, with the variation that the proper law was German, and German law substituted an obligation to pay the excess freight in Hamburg or London. But if a foreign proper law were to insist on maintaining the obligation to perform in the original country, in defiance of the prohibition there, that would produce a situation contrary to stringent English public policy, and English law would insist on discharging the obligation as if the contract were governed by English law.

For the second rule (on innocent illegality) to apply, the prohibited act must be an act of performance, an act which the contract necessarily requires to be done by way of its performance. It is not enough that the prohibited act is merely a preliminary or preparatory step that a party may need to take to reach a position from which he can carry out the contractually required performance.141 Thus, a promise governed by English law to pay money in London will not normally be affected by the parties’ awareness that the payer’s assets are all located in Ruritania, and that the remission of funds from Ruritania to enable the payment to be made is prohibited by Ruritanian law unless the consent of the Ruritanian central bank is obtained. Unless it is clearly shown that the parties intended that if necessary the funds should be ‘smuggled out’ without such consent, there will be a valid contract, under which the payer effectively gives an absolute warranty that he will succeed in obtaining the necessary consent.

139See Royal Boskalis v Mountain [1999] QB 674 (CA).

140[1920] 2 KB 287.

141See Kleinwort v Ungarische Baumwolle [1939] 2 KB 678 (CA); Bodley Head v Flegon [1972] 1 WLR 680; Toprak v Finagrain [1979] 2 Lloyd’s Rep 98; and Libyan Arab Foreign Bank v Bankers Trust [1988] 1 Lloyd’s Rep 259; Libyan Arab Foreign Bank v Manufacturers Hanover Trust (No 2) [1989] 1 Lloyd’s Rep 608; and Tamil Nadu Electricity Board v St-CMS Electric Co [2007] EWHC 1713 (Comm). See also Hathurani v Jassat

[2010] EWHC 2077 (Ch).

Article 9(2) of the Rome I Regulation, by specifying that nothing in the Regulation shall restrict the application of the overriding mandatory provisions of the law of the forum, goes beyond the traditionally limited concept of the forum’s stringent public policy and effectively permits the law of the forum to define and effectuate its own overriding interests in invalidating contracts governed by foreign law. The concept of interest analysis, which was isolated by Brainerd Currie,142 is essentially that a country may be said to have an interest in the application to a transnational situation of a rule contained in its internal law, if a policy or purpose which the substantive rule is designed to promote or achieve would be furthered to a substantial extent by the application of the substantive rule in the determination of the case in question, in view of the factual connections between the parties, acts and events involved in the case and the country in question. Where the law of the forum contains an invalidating substantive rule, Art 9(2) gives a broad permission to that law (by legislation or judicial decision) to define its own interests in the application of that substantive rule, to weigh them against other choice-influencing considerations, such as the general policies favouring party expectations and the convenient conduct of international trade which underlie the proper law doctrine, and ultimately to determine the circumstances in which the forum’s invalidating interest will be given overriding effect. The breadth of the permission is, to some extent, reduced by Art 9(1) of the Regulation, which defines overriding mandatory provisions as provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under the Regulation;143 and by Recital 37, which indicates that Arts 9 and 21 should be applied ‘in exceptional circumstances’. Thus, the forum is expected to proceed with caution before asserting an overriding interest under Art 9(2), so as to avoid undermining the harmonising effect of the proper law doctrine as laid down by Arts 3 and 4.

Before the Rome Convention, English and similar laws had sometimes given overriding effect to mandatory rules of the law of the forum designed to protect weaker parties, such as a consumer habitually resident and acting in the forum country,144 but it is probable that the protection of consumers and employees should now be affected under the specific provisions of the Regulation designed for that purpose, to the exclusion of Art 9(2).145 In contrast, it seems acceptable for a forum to invoke Art 9(2) so as to apply its own mandatory rules for the protection of weaker parties other than consumers and employees – for example, in favour of small businesses. Moreover, mandatory rules with overriding effect, analogous to that provided for by Art 9(2), may arise from EU legislation. Thus, in Ingmar v Eaton Leonard,146 the European Court ruled that Arts 17 and 18 of Directive 86/653, which guarantee certain rights to commercial agents after the termination of agency contracts, must be applied where the commercial agent carried on his activity in a member state, even if the principal is established in a non-member country and a clause of the contract stipulates that the contract is to be governed by the law of the non-member country.

English and similar laws have also sometimes asserted overriding interests based on more general purposes, and such decisions now illustrate the operation of Art 9(2) of the Rome I Regulation. Thus the forum rule against champerty (invalidating a contract by which a person who has no legitimate interest in a dispute agrees to finance litigation in return for a share of the proceeds) has been insisted

142See his Selected Essays on the Conflict of Laws, 1963, Duke University Press.

143Art 9(1) is a new provision introduced by the Regulation.

144See English v Donnelly [1958] SC 494.

145See pp 553-60 below.

146Case C-381/98: [2000] ECR I-9305.

on whenever the litigation to be financed is to take place in a court of the forum country.147 The forum rule against unreasonable restraint of trade has been applied whenever the contract prejudiced trade which would take place in the forum country148; and a forum provision against tie-in clauses in patent licences has been applied to any licence under a forum patent.149 Forum exchange control legislation has been applied to borrowings anywhere by a forum national or resident150; and forum legislation restricting credit in the interests of currency stability has been applied to all contracts concluded in the forum country.151

There is no provision in the Rome I Regulation which closely resembles Art 7(1) of the Rome Convention, which provided:

When applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract. In considering whether to give effect to these mandatory rules, regard shall be had to their nature and purpose and to the consequences of their application or non-application.

By virtue of a reservation made by the UK under Art 22(1)(a) of the Convention, and by s 2(2) of the 1990 Act, Art 7(1) was not applicable in the UK. Similar reservations were made by Ireland, Germany, Luxembourg, Portugal, Latvia, and Slovenia. In countries where it applied, Art 7(1) of the Convention might have been expected to lead to respect for an overriding interest asserted by another country which closely resembled an overriding interest that the forum would have asserted in converse circumstances. The effect of its exclusion in the UK was illustrated by the decision of Thomas J in Akai v People’s Insurance,152 upholding in accordance with the expressly chosen English law a commercial insurance contract between an Australian policyholder and a Singapore insurer, and disregarding the invalidation of certain terms by protective Australian legislation which had been held applicable by the Australian High Court. Similarly, in Shell v Coral Oil,153 which involved a contract for exclusive distribution of oil products in the Lebanon, Moore-Bick J gave effect to an express choice of English law, so as to deprive the distributor of the protection of mandatory rules of Lebanese law.

Under the Regulation, a much more limited respect is offered to overriding mandatory rules of a country that is neither the forum country nor the country of the proper law. Article 9(3) permits effect to be given to the overriding mandatory provisions of the law of the country where the obligations arising out of the contract have to be or have been performed, in so far as those overriding mandatory provisions render the performance of the contract unlawful, and adds that in considering whether to give effect to those provisions, regard must be had to their nature and purpose and to the consequences of their application or non-application.This provision is confined to prohibitions on performance imposed by the law of the place of performance, and in the English context appears to add nothing to the traditional English rules on this problem which fall within the scope of the public policy proviso.

147See Grell v Levy (1864) 143 ER 1052, and Re Trepca Mines [1963] Ch 199.

148See Rousillon v Rousillon (1880) 14 ChD 351, and Duarte v Black & Decker [2008] 1 All ER (Comm) 401. Cf BGC Capital Markets v Rees

[2011] EWHC 2009 (QB).

149See Chiron v Murex [1993] FSR 567 (CA).

150See Boissevain v Weil [1950] AC 327.

151See Kay’s Leasing v Fletcher (1964) 116 CLR 124.

152[1998] 1 Lloyd’s Rep 90.

153[1999] 1 Lloyd’s Rep 72.