EU Overriding Mandatory Law and the Applicable Law on the Substance in International Commercial Arbitration

The position of mandatory law and public policy in arbitration has been extensively discussed for quite a number of years, however, there is little consensus on the role of arbitral tribunal in applying EU overriding mandatory law. At the same time, it is clear that (overriding) mandatory law of EU origin is of increasing importance, as a result of the growing body of EU law and the approach of the Court of Justice of the European Union (CJEU). EU mandatory law creeps up to mingle with the applicable law and the law chosen by the parties.

This paper discusses the role of overriding mandatory law in international commercial arbitration and focuses on the law applicable to the substance of the dispute. The question is what the position of EU overriding mandatory law is in relation to the applicable substantive law in the arbitration setting, and in particular whether, why, and how overriding mandatory rules can or should be applied by arbitral tribunals.

It is concluded that generally arbitral tribunals do not have a special responsibility to protect the interests of the internal market as EU courts do. However, it is submitted that the importance of international commercial arbitration as a dispute resolution method (that is also widely supported in the EU and by EU law) gives these tribunals a responsibility to at least consider EU overriding mandatory law of a fundamental nature.