There are certain limitations to freedom of contract. Under national laws, these limitations appear as mandatory rules based on public policy. Similarly, under international law, even if the parties have made a choice of law, in case there are overriding mandatory rules, these rules shall apply despite the choice of law. In this Newsletter article, overriding mandatory rules shall be assessed especially within the framework of Article 31 of Act No. 5718 on Private International and Procedure Law ("MOHUK").
Definition and Scope
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 purposes1.
There 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.
Overriding mandatory rules are regulated under Article 6 and Article 31 of MOHUK under Turkish law. Article 6 of MOHUK regulates overriding mandatory rules of Turkish law, while Article 31 of MOHUK sets forth giving effect to the overriding mandatory rules of another country's law, under the condition that this law is closely related to the contract.
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 laws3.
Overriding Mandatory Rules of a Third Country
Pursuant to Article 31 of MOHUK, "While applying the law that the contractual relationship is subject to, the effect of the overriding mandatory rules of another country's law may be recognized on the condition that they are closely related to the contract. The intent, nature, content and effects of these provisions are respected in deciding whether to recognize and whether to apply them."
The first condition to give effect to another country's overriding mandatory rules is that this rule should be applied, irrespective of the applicable law, to the contract4.
The second condition within this framework is the concept of the close connection between the third country's law and the given case. Since there is no clarity for the cases of close connection, the court's discretion shall be applied5.
Rome Convention and Rome I Regulation
The source of Article 31 of MOHUK is Article 7/1 of the Rome Convention. The related article 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 to their nature and purpose, and to the consequences of their application or non-application."
The Rome Convention was replaced by the Rome I Regulation a short while after the entry into force of MOHUK. The Rome I Regulation contains in its Article 9 the definition of the overriding mandatory provisions since there were doubts between scholars during the application of Rome Convention that related to the difference between the mandatory rules and overriding mandatory rules6. As per Article 9/1 of the Rome I Regulation, overriding mandatory rules are "provisions, the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organization, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract."
As stated above, mandatory rules are the general provisions that limit the freedom of contract. Their appearing in international law is due to national laws. Within this framework, it should be noted that there are several opinions on the differences between the mandatory rule notion and their applications amongst scholars. This Newsletter article brings attention to the overriding mandatory rules within the framework of Article 31 of MOHUK.
1 Francescakis Ph., Quelques précisions sur les "lois d'application immédiate" et leurs rapports avec les règles de conflits des lois, Rev.Cr.DIP, 1966/I(p. 1-18), p. 13 in Hatice ÖZDEMİR KOCASAKAL, Sözleşmelere Uygulanacak Hukukun MÖHUK m. 24 Çerçevesinde Tespiti ve Üçüncü Devletin Doğrudan Uygulanan Kuralları, MHB Yıl 30, No. 1-2, 2010, p. 71.
2 Ergin NOMER, Devletler Hususi Hukuku, Beta, Edition 19, 2011, p. 163.
3 NOMER, p. 183.
4 ÖZDEMİR KOCASAKAL, p. 77.
5 ÖZDEMİR KOCASAKAL, p. 77.
6 ÖZDEMİR KOCASAKAL, p. 79.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.