Current theories of conflict of laws have one common feature: they all consider the question of the applicable law in terms of a conflict between states. Legal systems are seen as fighting with each other over the application of law to a certain case. From this perspective, the goal of conflicts methods is to assign factual situations to the competent rule maker for resolution. Party autonomy presents a problem for this view: if individuals are allowed to choose which law will be applied to their dispute, it seems as if private persons could determine the outcome of the battle between states--but how is this possible?
This Article tries to give a theoretical solution to this puzzle. The underlying idea is that conflicts theory has to be recalibrated. Its goal should not be to solve conflicts between states, but to serve the individual, its needs and wants. Through this shift of focus, it becomes not only possible to justify party autonomy, but also to answer a number of practical questions raised by it. Furthermore, this Article will propose a new normative category, "relatively mandatory rules" and discuss some important implications that the new approach may have for conflict of laws generally.
TABLE OF CONTENTS I. INTRODUCTION II. THE GAP IN CONFLICTS THEORY A. The Growing Acceptance of Party Autonomy B. Theoretical Questions C. Practical Questions III. A CRITIQUE OF THE STATE-CENTERED PERSPECTIVE OF CONFLICTS THEORY A. The Notion of Conflict of Laws B. When do Conflicts Arise? C. Why Do We Apply Foreign Law? D. Which Law Do We Apply? IV. A THEORETICAL JUSTIFICATION FOR PARTY AUTONOMY A. Individuals as the Center of the Conflicts Problem B. Philosophical Underpinnings C. A New Normative Theory: Relatively Mandatory Rules D. The Condition for Party Autonomy V. PRACTICAL EFFECTS OF THE NEW PARADIGM A. Effects on the Validity and the Reach of Choice-of-Law Clauses B. Effects on Conflict of Laws in the Absence of a Choice by the Parties VI. SUMMARY I. INTRODUCTION
When we think about the conflict of laws, we always think in terms of states and their relations with each other. Using the traditional method, for instance, we are looking for the state which has the closest connection to the situation or in which the case has its "seat." (1) Under a more modern paradigm, we analyze whether a state has an "interest" in the case before applying its law. (2)
While it is certainly true that conflicts of law arise from the fact that the world is composed of territorial states having separate and differing legal systems, (3) the solution to the problem is not necessarily to be found in seeing every case through the lens of states' territories or states' interests. What we tend to forget is that choice of law, as every other field of law, ultimately pertains to human relations. It might therefore be preferable to include other factors in the analysis as well.
The idea can be illustrated by the principle of party autonomy. Over the course of the previous decades, the concept has taken over a steadily growing field of the law. More and more, it is recognized that parties are free to choose the applicable law.
While writers on conflicts have not overlooked this fact, they have failed to provide a theoretical explanation why the parties are allowed to choose the applicable law. The possibility of a choice-of-law clause is mostly considered as a side-issue, or as one that is problematic. (4) Although verbally recognized, party autonomy has always remained a maverick within the edifice of conflicts theory. (5)
Indeed, the freedom of the parties to choose the applicable law must cause theoretical headaches to any serious positivist. If the law that governs a legal relationship is objectively determinable by legal analysis, how can the parties be free to choose another law as applicable? If states' interests determine the choice-of-law process, why should private individuals be able to change the outcome? Why are they allowed to deselect even mandatory rules of the otherwise applicable law? (6) Does such an allowance confer legislative power on the parties?
Of course, one can try to dissolve these perplexities with the "killer argument" that the parties are free to choose the applicable law because the states' conflict rules allow them to do so. But this leaves an important question unanswered: Why do the states give parties this liberty? Also, the significance of a law that applies as a result of private party choice, rather than authority, is far from clear. Does such a law have a different application, construction or interpretation? What is missing is an exact explanation of party autonomy, both as a matter of policy and as a matter of legal theory.
Such reflections, though principally done from an abstract perspective, are not only of theoretical interest. On the contrary, they are of highest importance in practice. First, they will help to clarify the significance of a private choice of law, as well as its extent and effects. (7) Second, such an analysis might also change the way in which we approach the conflict question when the parties have not chosen the applicable law: if we were to focus more on the parties involved in a case and not on the states, we might adopt a more individualized approach to the conflicts problem in general. (8)
But let us begin from the start. In this Article, the Author will attempt to demonstrate why current conflict-of-laws theory is unable to account for party autonomy. After outlining the rise of party autonomy in practice (Part II), the Article will examine the different concepts and instruments that are used in today's conflicts theory (Part III). These concepts and instruments are unable to grasp the increasing influence of the parties on the applicable law because each is based on the idea that conflicts of laws are battles between states. In contrast, this Article will propound a theory of conflicts in which the individual takes center stage and which leads to a new category of legal rules: "relatively mandatory rules" (Part IV). Part V will explore some implications of the new approach for the solution of conflicts in practice.
It is equally important to indicate what this Article will not do. The Article will not, at least not primarily, explore the limits to party autonomy. Most writers have focused on those limits to ascertain the nature of party autonomy. (9) There are two problems with this approach: first, the limits to party autonomy are mostly idiosyncratic to every legal system. Focusing on those limits does not facilitate general expositions regarding party autonomy and its importance to conflicts theory. Second, to define party autonomy by its limits is to define a vacuum as being free from atmosphere. Far from being a vacuum, party autonomy is an important legal principle that has its roots in the recognition of individual freedom. Accordingly, the Author will take a different approach and try to explain party autonomy not as being void from something, but as justified in its own right.
But first, it is important to further explore the problems of today's conflicts theory raised by the freedom of the parties to choose the applicable law.
THE GAP IN CONFLICTS THEORY
The Growing Acceptance of Party Autonomy
A revolution has taken place in the conflict of laws. This "revolution" does not refer to the U.S. conflict-of-laws revolution, which dates back to the 1960s and which shifted the focus of analysis from factors such as territory and citizenship to the interests of the states involved. (10) Instead, on a global level, the true revolution has been the growing acceptance of party autonomy as a way to determine the applicable law.
Within the last decades, party autonomy has become the one principle in conflict of laws that is followed by almost all jurisdictions. (11) Although there have been many precursors to party autonomy, (12) the principle has never been as widespread in application as it is today. It has been said that "perhaps the most widely accepted private international law rule of our time is that the parties to a contract are free to stipulate what law shall govern their transaction." (13) The Institute of International Law calls party autonomy "one of the fundamental principles of private international law." (14) More and more states allow parties to cut the "Gordian knot" of conflict of laws by choosing the applicable law themselves. (15) The spectacular rise of party autonomy can also be seen from the development of the Restatement of Conflict of Laws: while the first Restatement's chapter on contracts did not contain any provision allowing the parties to stipulate the governing law, (16) the corresponding chapter of the second Restatement turned this freedom into a general rule. (17)
The principle of party autonomy is far from being applicable to all fields of the law. Yet, its scope is increasingly extended and it is now applied in areas where it was unthinkable before. (18) For example, party autonomy has historically been resisted with respect to questions related to the status of a person. (19) Under the traditional view, status needs to be determined objectively and therefore the applicable law cannot be changed at will. (20) Today, however, legal systems have allowed private persons to influence the law governing such questions as their name, (21) their capacity to contract, (22) or the applicable matrimonial regime. (23) Party autonomy is now also followed with regard to successions: under the U.S. Uniform Probate Code, the testator is allowed (within certain limits) to choose the law that will be applied with regard to the meaning and legal effect of a deed or will. (24) Italy, Quebec and Switzerland also allow the testator to choose the applicable law, (25) and a Hague Convention proposes to make this principle an international rule. (26)
The will of the individual has also gained significance in another area in which it...