Author: Hans Smit*
Published: April 2008
Description: In the good old days, arbitrators did not adjudicate issues of mandatory law. These were within the exclusive jurisdiction of the competent public authorities.
The first change came with Scherk v. Alberto Culver. This was an international arbitration between a U.S. company and a Liechtenstein entity that manufactured cosmetics. In this oft-quoted decision, Justice Stewart, in rejecting a plea that U.S. securities law gave exclusive jurisdiction to U.S. courts, wrote for a divided court that, in an international dispute, U.S. courts could not invariably insist on application of U.S. mandatory law. In The Bremen v. Zapata Off-Shore Co., the Supreme Court, per Chief Justice Burger, had earlier rendered a similar ruling in regard to an exclusive choice of forum clause designating a forum that was likely not to apply otherwise applicable mandatory U.S. law. Of course, in international cases, there is, by definition, a competing foreign law that may be non-mandatory and that, under applicable choice-of-law rules, may vie for application. However, these Supreme Court rulings did not consider whether, under applicable choice-of-law rules, foreign non-mandatory law could be argued to be applicable.
*Stanley H. Fuld Professor of Law, Columbia University. The author expresses his profound gratitude to Christos Ravanides, Columbia Law School Class of 2006, who is responsible for all footnotes. A version of this article has previously been published in the FESTSCHRIFT FOR ALBERT H. KRITZER.