Stanford Journal of International Law
35 Stan. J Int'l L. 255
LENGTH: 40519 words
ARTICLE: Reviving the "Public Law Taboo" in International Conflict of Laws
Philip J. McConnaughay *
* Associate Professor of Law, University of Illinois. Of Counsel, Morrison & Foerster, San Francisco, California. J.D., University of Illinois, 1978; B.A., University of Illinois, 1975.
... Not long ago, participants in international commercial transactions could safely assume that conflict of laws principles and contractual choice of law clauses applied exclusively to private law and did not operate with respect to public law issues. ... Thus, the public law taboo in traditional contractual conflict of laws is responsible for three of the four rules I mentioned at the outset of this Part that ordinarily govern the question of what law applies to any given international transaction: (1) the forum will confine its conflict of laws analysis to categories of private law, thus limiting the forum's possible application of foreign law to private law, (2) the forum will not apply foreign public law to the transaction, but instead will dismiss the case if the dispute is governed exclusively by foreign public law, and (3) the forum will not displace its own applicable public law in favor of any other law. ... Two questions that might occur concerning the relationship between the public law taboo and the public policy exception to conflicts analysis are (1) whether the public law taboo is simply one aspect of the public policy exception rather than a separate category of law that resides outside the ambit of conflicts analysis, and (2) whether public policy ever serves as a reason for permitting the displacement of mandatory forum law in addition to serving as a reason for barring application of objectionable foreign law. ...
Not long ago, participants in international commercial transactions could safely assume that conflict of laws principles n1 and contractual choice of law clauses applied exclusively to private law and did not operate with respect to public law issues. If the parties to a transaction occurring in both Nation A and Nation B became embroiled in a contract dispute in a court of Nation B, for example, that court might apply Nation A's contract law as a result of a conflict of laws analysis. The court of Nation B, however, would not apply Nation A's antitrust, securities, or other "public" law to the dispute and certainly would not consider the possibility of displacing its otherwise applicable public law with that of Nation A. Similarly, if the parties to this transaction had contractually elected the law of Nation A as the law governing their contract or transaction, a court of Nation B likely would honor that election by excluding Nation B's own contract law. However, the court would not interpret the election to include Nation A's public law or to exclude the application of Nation B's public law. Neither the selection principles of conflict of laws analysis nor party autonomy to designate applicable law contractually traditionally influenced or constrained the jurisdictional reach of a na [*256] tion's public law. A "public law taboo" existed with respect to both of these principles. n2
This state of affairs troubled many courts and scholars. The traditional distinction between public law and private law became more difficult to maintain as public regulatory legislation encroached increasingly on areas of conduct and commerce traditionally deemed private and as awareness grew that even private law (e.g., contracts, torts, property, and family law) had public significance. One commentator declared the public law/private law distinction "wholly irrelevant to the organisation of modern society." n3
Moreover, a belief grew among courts and commentators that, in the context of international transactions, public law (e.g., antitrust, securities, exchange controls, general economic regulation) should be subject to traditional conflict of laws principles. These courts and commentators believed that concurrent jurisdiction among several nations over the same transaction unduly burdened international commerce and that rules should be developed to identify a single national regulatory regime with respect to any given international issue or transaction. They believed that traditional judicial inquiries into a nation's power to regulate an international transaction should be expanded to include an inquiry into the wisdom of applying the regulation. n4
The traditional separation of public law from conflict of laws analysis began to give way in the face of these criticisms, and choice of law principles were increasingly applied to questions concerning the jurisdictional reach of public law. U.S. courts considering the jurisdictional reach of U.S. antitrust law to international transactions, for example, began to enlarge their inquiry to include not only the traditional question of whether the alleged anticompetitive conduct had occurred in or had effects in the United States, but also the question of whether, even if U.S. antitrust law applied to the transaction, jurisdiction nonetheless should be declined because some nation other than the United States had a greater regulatory interest in the transaction. n5 Additionally, the Third Restatement of Foreign Relations Law urged the extension of such interest balancing principles to public laws generally. n6 U.S. courts even extended to public law the principle that private parties to international [*257] transactions may contractually elect applicable law. In a series of decisions culminating just this year, the U.S. Courts of Appeals for the Second, Fourth, Fifth, Seventh, Ninth, Tenth, and Eleventh Circuits held that private parties to international transactions may effectively elect out of otherwise applicable U.S. public law (in these cases the Securities Acts of 1933 and 1934) so long as the substituted law "vindicates" similar rights and does "not subvert" the general policy of the displaced law. n7
This Article contends that these developments have created more problems for international commerce than they have solved. The task of identifying, explaining, and weighing the comparative regulatory interests of different nations in any given international transaction is virtually impossible for courts and private litigants. Similarly, the assumption that conflicts rules enhance the predictability of international transactions by identifying a single national regulatory regime for any given international transaction or issue seems completely belied by the ex post and inexact nature of the various interest balancing rules for selecting a single applicable law. It typically would be far more predictable and less burdensome for an international transaction to comply with the regulatory regimes of multiple nations so long as that prospect is known beforehand and accounted for when the transaction is structured. Although predictability for international commerce undoubtedly would be enhanced by universally extending to private parties the ability to elect contractually a single applicable national regulatory law, that prospect is as inappropriate as it is unlikely insofar as it elevates the economic interests of private commercial parties over the regulatory interests of all nations.
Finally, the displacement of forum public law, whether by private contractual election or comparative interest balancing, carries a substantial risk of underregulation. Parties to international transactions do not contractually "opt out" of a given national regulatory scheme or litigate its applicability because of a desire for more stringent or burdensome regulation by another nation. When forum public law is displaced, the likelihood is that it will be replaced by lesser regulation or a regulatory void, perhaps creating an occurrence of precisely the harm that forum public law was intended to prevent. n8
This Article argues that these problems suggest that the traditional public law taboo in conflict of laws should be revived, and that public law should not be eligible for displacement by contractual election or choice [*258] of law principles. In fact, the U.S. Supreme Court has embarked on precisely that path. In Hartford Fire Insurance Co. v. California, n9 the Court rejected comparative national interest balancing and considerations of private expectations as possible constraints on the application of U.S. antitrust law to an international transaction. The Court recognized that parties to international transactions often must contend with overlapping, and sometimes inconsistent, regulation by several different national jurisdictions. Hartford Fire arguably signals a restoration of the traditional principle that neither conflicts analysis (in Hartford Fire, "comity") nor principles of contractual autonomy apply to public law, at least with respect to the possible displacement of forum public law by foreign law or interests. n10 If correct, this reading indicates a vital and continuing role for a public law/private law distinction in international conflict of laws.
Nevertheless, the fact that a public law/private law distinction remains vital to conflicts analysis does not resolve the definitional problems that initially led to the collapse of the distinction. The question remains whether the concepts of public law and private law remain useful for purposes of distinguishing between those laws and provisions of law that are appropriately the object of conflicts analysis and those that are not. Answering that question is the principal objective of this Article.
Part II briefly reviews the traditional separation of public law from conflict of laws principles and Part III covers the more recent trend of applying conflicts principles to public law. Part IV explores the serious problems that result from the merger of those concepts. Part V analyzes the argument that the Supreme Court's decision in Hartford Fire represents a resurrection of the traditional public law taboo in conflict of laws. Part VI then addresses the important question of whether the public law/private law distinction remains useful for applying the taboo.
The paper concludes in Part VI that, with a single qualification, the public law/private law distinction does remain useful as a means of identifying those laws and provisions of law that properly should be subject to the public law taboo. The qualification is that only mandatory public law should automatically fall within the taboo; the treatment of nonmandatory public law should turn on the reasons for its failure to qualify as [*259] mandatory. All private law, whether mandatory or not, should remain eligible for choice of law analysis.
These categories of law (or provisions of law) can be identified according to the two dimensions suggested in the mandatory public law nomenclature: a private/public dimension and a mandatory/nonmandatory dimension. The private/public dimension essentially measures the externalities likely to result from noncompliance with or repeal of the law. The greater the externalities, the more likely the law should be classified as public (e.g., the Sherman Act, the Securities Acts, the Copyright Act); the fewer the externalities, the more appropriate classification would be as private (e.g., laws forbidding covenants not to compete, statutes of fraud). The mandatory/nonmandatory dimension measures two characteristics: (1) the extent to which the law restricts private party discretion and regulates private conduct, and (2) the extent to which the rights and entitlements conferred by the law are not prospectively waivable. A law that restricts private party discretion and that is not prospectively waivable is mandatory (e.g., laws forbidding covenants not to compete, the Sherman Act); a law that does not restrict private party discretion (e.g., U.C.C. 2) or that is prospectively waivable (e.g., certain provisions of the U.S. Copyright Act) is not mandatory.
As Part VI.B discusses, "nonmandatory public law" is a somewhat self-contradictory category insofar as public law is generally synonymous with "regulatory law" and "regulatory law" generally refers to legal restrictions on individual discretion that are mandatory. Nonetheless, a law may both legitimately regulate discretion and be prospectively waivable. If a law combines those characteristics, that law should not automatically be deemed mandatory for purposes of the public law taboo. For example, if the protection of a public law may be waived prospectively by an individual for whom the protection is intended, it would make little sense to apply the public law taboo to forbid the contractual election of different applicable law by that individual if the election meets whatever requirements attend a prospective waiver. If the protected individual has not made a contrary contractual election, however, the taboo appropriately may apply to forbid a choice of law analysis that might displace the particular public law; the ability to waive prospectively might be so integral to the particular law's regulatory scheme (e.g., ensuring adequate compensation of a protected class in exchange for a waiver) that the law is essentially indistinguishable from a mandatory public law. Conceivably, a prospective waiver could be so easily obtained that the law should be regarded as potentially displaceable by ordinary conflicts principles.
Thus, it is possible for public laws to be nonmandatory (e.g., certain provisions of the Copyright Act) and for private laws to be mandatory (e.g., laws forbidding covenants not to compete, statutes of fraud). Only public laws, however, are eligible for the public law taboo (mandatory public laws automatically and nonmandatory public laws depending on the reason for their failure to qualify as mandatory). Private laws never fall within the taboo, even if mandatory. Mandatory private laws retain [*260] their mandatory character in a domestic setting only; in a transnational context, they traditionally become eligible for possible displacement by contractual election or choice of law analysis. The difference likely reflects the reduced level of public interest (i.e., likely externalities resulting from noncompliance or repeal) in private as opposed to public laws. Even if private laws are mandatory in a domestic setting, the public interest in their enforcement in an international transaction is insufficient to insist on application of the law without regard for the expectations of the parties, the impact on cross-border commerce, and the comparative interests of other nations.
The discussion in Parts V and VI suggests that these distinctions explain why the U.S. Supreme Court invoked conflicts principles and comparative interest balancing in Lauritzen v. Larsen n11 when deciding the jurisdictional reach of the Jones Act, n12 but expressly rejected consideration of the same principles in Hartford Fire when deciding the jurisdictional reach of the Sherman Act. These distinctions also explain why courts are willing to consider choice of law principles when assessing the applicability to cross-border transactions of mandatory statutes of frauds and laws forbidding covenants not to compete, but not when assessing the applicability of mandatory customs, competition, and health regulations. They suggest, for example, that the U.S. Supreme Court will not apply choice of law principles when considering the jurisdictional reach of the U.S. Carriage of Goods by Sea Act, n13 but that it might when considering the displacement of certain provisions of the U.S. Copyright Act. n14
Restoring the clear separation of mandatory public law from conflict of laws principles should benefit both the participants in international transactions and the nations that host international transactions. Participants will enjoy greater ex ante certainty with respect to the identities of the national regulatory regimes with which their transactions must comply, and thereby be better able either to avoid certain regimes or account for the cost of compliance by structuring their transactions accordingly. Nations that host or aspire to host international transactions will be better able to assess the impact of their mandatory public laws on international commerce and whether or not the interests served by their mandatory public laws outweigh the impact. If that assessment implicates the interests of other nations, any accommodation that is in order can be negotiated in the political arena rather than imposed unilaterally and without complete information by the judiciary.
II. The Traditional Separation of Public Law from Conflict of Laws Analysis
The traditional separation of public law from conflict of laws principles is reflected in four interrelated rules that typically have governed most courts' consideration of the question of which law or laws apply to any given international transaction: (1) the forum will confine its conflict of laws analysis to categories of private law, thus limiting the forum's possible application of foreign law to private law, (2) the forum will not apply foreign public law to the transaction, but instead will dismiss the case if the dispute is governed exclusively by foreign public law, (3) the forum will not displace applicable forum public law in favor of any other law, and (4) the applicability of the forum's public law will turn on the intended reach of the law and not on private contractual election or on whether other nations do or do not regulate the same transaction. The first three rules are found within the traditional body of conflicts scholarship and case law; the fourth rule is found more typically in the body of work concerning the "extraterritorial" application of a nation's regulatory law. For the purpose of this historical summary, private law and public law are defined according to the categories or types of law traditionally within each: private law traditionally includes contracts, torts, property, and family law, while public law traditionally includes antitrust, securities, exchange controls, and most economic regulation. Part VI provides a more detailed elaboration of these definitions.
A. The Limited Scope of Conflicts Analysis
The discipline of conflict of laws is known throughout most of the world as "the rules of private international law," a name that intrinsically reflects the understanding that conflicts analysis conventionally operates with respect to categories of private law but not with respect to public law. n15 For example, in the absence of a contractual designation of governing law, a court may identify governing law as the law of the state or nation with the "most significant relation" to the parties and the transaction, n16 or the law of the nation to which the contract "is most closely connected," n17 or the law of the place of the making of the contract, n18 or [*262] the law of any connected nation that will validate the contract. n19 The law thus selected by the court as governing law will include the private law of the designated state or nation (in this context, essentially the state's or nation's main body of contract law) but not that state's or nation's public law. The forum's own public law, if applicable, applies irrespective of the court's conflicts analysis. The same is true in the event of a contractual designation of governing law: the court will neither apply the public law of the designated foreign jurisdiction nor decline to apply applicable, but nondesignated, forum public law. n20
Oddly, this "public law taboo" rarely is explicit in the articulation of any given theory or approach to contractual choice of law, n21 or in the statutes or rules governing party autonomy to contractually designate the law applicable to a contract or transaction. n22 However, it clearly serves as a traditional limitation on each of these means of determining the law applicable to international commercial transactions and issues. The aspect of the taboo that forbids forum application of foreign public law appears to have originated in the centuries old refusal of nations to enforce the penal or revenue laws of other nations, n23 perhaps in acknowl [*263] edgment of or deference to their separate sovereignty or spheres of power. n24 If an action appears to be governed exclusively by foreign public law, the forum will dismiss the case. n25
The aspect of the taboo that forbids the displacement of forum public law is grounded firmly in the sensible notion that the mandatory regulatory priorities of the forum should take precedence, when applicable, over the forum's accommodation of a private party election or foreign law purporting to displace the forum's mandatory rule. As Professor Batiffol has noted, "If the proper law of the contract is contrary to some provision of the law of the forum pertaining to public law, it is [only] natural that the public law should prevail." n26 Professor Yntema confirmed a general adherence to this proposition when he reported a pervasive judicial practice of permitting the parties to international transactions to choose the law that will govern their transactions, "subject to the general public laws." n27 Traditional conflicts scholarship assumes [*264] the nondisplacement of forum public law by party autonomy or contractual conflicts principles. n28 Moreover, it is explicit in the European Union's Convention on the Law Applicable to Contractual Obligations. n29
Thus, the public law taboo in traditional contractual conflict of laws is responsible for three of the four rules I mentioned at the outset of this Part that ordinarily govern the question of what law applies to any given international transaction: (1) the forum will confine its conflict of laws analysis to categories of private law, thus limiting the forum's possible application of foreign law to private law, (2) the forum will not apply foreign public law to the transaction, but instead will dismiss the case if the dispute is governed exclusively by foreign public law, and (3) the forum will not displace its own applicable public law in favor of any other law.
At this point, it is helpful to consider the relationship between the public law taboo and the often repeated public policy exception to conflict of laws analysis. A classic statement of the public policy exception to conflicts analysis is Justice Cardozo's: A forum properly may refuse to apply the law designated by conflicts analysis if application of that law "would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common [wealth]." n30 The European Union's Convention on the Law Applicable [*265] to Contractual Obligations contains a similar limitation by providing that the law chosen pursuant to the Convention's rules need not be applied if it "is manifestly incompatible with the public policy of the forum," n31 while the Restatement (Second) of Conflict of Laws imposes the limitation with respect to party designated applicable law. n32
Two questions that might occur concerning the relationship between the public law taboo and the public policy exception to conflicts analysis are (1) whether the public law taboo is simply one aspect of the public policy exception rather than a separate category of law that resides outside the ambit of conflicts analysis, and (2) whether public policy ever serves as a reason for permitting the displacement of mandatory forum law in addition to serving as a reason for barring application of objectionable foreign law.
The concept of public policy as an exception to conflicts analysis is almost unmanageably elastic, and the case law and literature regarding its scope of application are consequently muddled and ambiguous. n33 Properly understood, however, the public policy exception applies exclusively to private law and not at all to public law, and thus is completely distinct from the public law taboo. The public law taboo demarcates the boundaries of conflicts analysis; the public policy exception operates within conflicts analysis. The traditional public law taboo means that, in [*266] any particular forum, foreign public law is never applied and applicable forum public law is always applied, irrespective of contractual conflicts analysis or party designated law. It is not equally true, however, that the foreign private law designated by conflicts analysis always applies; designated foreign private law still must survive the forum's public policy. n34 For example, if a court of State A determines by conflicts analysis or party designation that the law of State B applies to a particular cross-border transaction or contract, and the contract law of State B omits a statute of frauds, usury restriction, or unconscionability doctrine that the law of State A contains (or vice versa), an issue may arise about whether the public policy of State A nonetheless forbids the application of State B's law. n35 In contrast, State B's antitrust law or securities law would not apply because of their status as public laws; State A's public policy would not need to be invoked to achieve that result. Public policy sometimes invalidates an otherwise proper contractual choice of law clause or conflicts analysis, because public law is simply outside the scope of public policy analysis. n36
With respect to the question of whether public policy ever permits the displacement of forum public law in addition to barring the application of objectionable foreign private law, the short answer is "no." At least until the U.S. Court of Appeals Lloyd's cases permitted the displacement of otherwise applicable U.S. securities law, n37 no other courts in a contractual conflicts context invoked domestic public policy as a reason for not applying domestic public law (one would assume the two synonymous). Public policy traditionally has been invoked only as a rea [*267] son for barring the application of objectionable foreign law. n38 As Professor Baade has pointed out:
Ordre public international [i.e., the public policy exception to conflicts analysis] serves as the "safety valve' of private international law by barring the domestic application of an otherwise competent rule of foreign law to the extent that it conflicts with the public policy of the forum. It has no application to domestic law, which by definition does not contradict domestic public policy. n39
It is now appropriate to consider the fourth rule that reflects the traditional separation of public law from conflict of laws principles: The applicability of a forum's public law ordinarily turns on the intended scope or reach of the law and not on whether other nations might regulate (or purposefully not regulate) the same transaction.
B. The Applicability of Public Law
Conflicts analysis almost by definition seeks to resolve "conflicts" among competing applicable laws by selecting the single "most appropriate" law pursuant to a contractual designation by the parties or pursuant to one of the "comparative interest balancing" assessments typical of choice of law analysis in the absence of party designation. n40 This determination is inherently hierarchical, as perhaps it must be in the context of private contractual relationships when singular guidance is required to determine the exact nature of the contractual expectation and performance due between private parties.
Judicial analysis concerning the applicability of public law, in contrast, traditionally ends where conflicts analysis begins: If the court determines that the forum's public law applies to the particular transaction or issue, it does not proceed further to consider the parties' expectations or some other nation's possible superior interest in the transaction or issue. The inquiry is not hierarchical: International law contemplates that national jurisdiction to prescribe law regulating a cross-border transaction will often be concurrent and overlap and not be mutually exclu [*268] sive. n41 Thus, the question that traditionally confronts courts considering public law's applicability to an international transaction is not which nation's public law should apply, but simply whether the forum's public law applies. As discussed in the following paragraphs, the answer to that question traditionally turns on legislative intent and the sufficiency of regulatory power, not on whether the exercise of that power is otherwise appropriate in light of other nations' interests. Traditionally, there is no effort (save the exceptional situation of two or more nations' laws requiring simultaneous inconsistent conduct n42) to relieve the affected parties of the duty to comply with the public laws of all of the jurisdictions to which they have submitted. n43
The seminal case reflecting this traditional approach to the application of public law is United States v. Aluminum Co. of America, n44 the famous Alcoa opinion by Judge Learned Hand. n45 The case involved an action by the U.S. Justice Department seeking to dissolve the Aluminum Company of America because of its alleged monopolization of the market for alu [*269] minum ingot in violation of U.S. antitrust law. The relevant portion of Judge Hand's opinion concerned the application of U.S. antitrust law n46 to a cartel composed entirely of foreign aluminum companies from Canada, France, Germany, Switzerland, and Great Britain. The purpose of the cartel was to regulate the production, price, and trade of aluminum among cartel members. The cartel organized a separate Swiss corporation, the "Alliance," for that purpose. n47 There was no evidence that the cartel or any of its members had performed any acts in furtherance of the cartel in the United States, but there was substantial evidence that the cartel intended to affect and did affect the U.S. market for aluminum. n48
Significantly, in deciding whether U.S. antitrust law should apply to the cartel, Judge Hand expressly rejected the possibility that the laws or interests of Canada, France, Germany, Switzerland, or Great Britain were relevant to the court's decision. Instead, he declared the issue to be one exclusively of U.S. congressional intent:
Did [the cartel] violate 1 of the [Sherman] Act? The answer does not depend on whether we shall recognize as a source of liability a liability imposed by another state. On the contrary we are concerned only with whether Congress chose to attach liability to the conduct outside the United States of persons not in allegiance to it. That being so, the only question open is whether Congress intended to impose the liability, and whether our own Constitution permitted it to do so: as a court of the United States, we cannot look beyond our own law. n49
Judge Hand acknowledged that Congress presumably intended to abide by the limits on prescriptive jurisdiction customarily observed by the community of nations, n50 but he decided that application of U.S. anti [*270] trust law to the foreign cartel in Alcoa was consistent with those limitations because the cartel "intended to affect imports and did affect them," n51 thus falling clearly within the traditional rule of international law that "any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the state reprehends." n52 The Alcoa "intended effects" test has remained the touchstone for assessing the "extraterritorial" reach of prescriptive jurisdiction since. n53
[*271] Obviously, the intended effects test and the various other traditional bases for justifying an assertion of prescriptive jurisdiction n54 are not inherently "noncomparative" in the sense that their application depends on the irrelevance of the interests of other states to the issue of the jurisdictional reach of public law. For example, the intended effects test might simply serve as one of several factors for determining the application of public law, with a hierarchical assessment of the interests of other nations in the transaction influencing the outcome as well. n55 But that has not been the case traditionally. Judge Hand's admonition about courts not "looking beyond our own law" when assessing the Sherman Act's applicability to an international transaction has accompanied the intended effects test hand in hand with its transposition to additional areas of public law. n56
The Second Restatement of Foreign Relations (in contrast to the Third Restatement, discussed in Part III.A), is decidedly noncomparative in its approach to prescriptive jurisdiction. It endorses the attachment of legal consequences to conduct within a state "whether or not such consequences are determined by the effects of the conduct outside [the state]," n57 and the attachment of legal consequences to conduct outside the state that causes effects within the state so long as the prescribed rule "is not inconsistent with the principles of justice generally recognized by states that have reasonably developed legal systems." n58 Like the Alcoa intended effects test, these tests of prescriptive jurisdiction focus on the sufficiency of the relationship between the conduct or transaction and the prescribing jurisdiction, not on the strength of that relationship in comparison to other prescribing jurisdictions. n59
In applying U.S. securities laws to international transactions, the traditional U.S. approach is similarly indifferent to the regulatory interests of other nations. n60 U.S. courts have used conduct and intended effects [*272] tests essentially identical to the Second Restatement and Alcoa's to determine the reach of the antifraud provisions of the Securities Exchange Act. n61 The degree of conduct or extent of intended effects required for the application of U.S. law is the subject of much litigation and commentary, n62 but the inquiry nonetheless focuses on the sufficiency of the conduct or effects in an absolute sense, not their sufficiency in comparison to the relationships to the transaction of other potentially prescribing jurisdictions. n63 Different tests of "extraterritorial" application apply to areas of public law other than antitrust and securities, but they are similarly noncomparative in nature. n64
[*273] To conclude, a public law taboo traditionally has applied to conflict of laws to strictly separate issues concerning the applicability or extraterritorial reach of public law from the conflict of laws principles ordinarily governing the application of private law to cross-border transactions. The application of private law to cross-border transactions usually turns on a private contractual election as to which nation's law shall apply, or, in the absence of such an election, on a comparative interest balancing assessment designed to select as applicable the law of the nation with the most significant relationship to the transaction. The application of public law to an international transaction traditionally has turned on neither of these approaches. Public law has applied by virtue of its intent to apply; neither private party expectations nor other nations' interests have been relevant to that determination.
III. Abandoning the Public Law Taboo - The Merger of Public Law and Choice of Law Principles
The public law taboo in conflict of laws became increasingly difficult to sustain as the traditional distinction between public and private law increasingly blurred. Regulatory legislation began to invade areas of commercial life in the traditional domain of private law, n65 and there was an enormous increase in the codification of all law. n66 Additionally, an awareness developed that even private law serves governmental purposes and public interests. n67 Commentators thus came to regard private law as [*274] something of an "oxymoron" n68 and the public/private law distinction as an artifact of "simpler times" n69 that is largely "irrelevant to the organisation of modern society." n70 "The classical distinction between public and private law, in so far as it affects transnational activity," wrote Professor Lowenfeld almost two decades ago, "has long been overtaken - one could well say overwhelmed - by [these] events." n71
Moreover, there was an emerging belief that issues concerning the reach or application of public law should be subject in any event to traditional conflict of laws principles and comparative interest balancing. Professor Trautman posed the issue as follows: "The question is whether we are concerned with finding the most appropriate [public] law to govern a transaction or simply with the sufficiency of the legislative concern of the United States." n72 Leading scholars answered with resounding support for "appropriateness," arguing that it is a mistake "to separate the existence of authority from the wisdom of applying it," n73 and that "optimal rationality" should govern the determination of applicable regulatory law rather than simply "minimum contacts" with a prescribing jurisdiction. n74 These scholars contended that "public law...[should be] eligible ... for the choice of law process." n75
In addition to the diminishing clarity of the public law/private law distinction and a preference for rules justified by "wisdom" rather than simply "power," these commentators advanced two principal reasons for urging the application of conflicts principles to issues concerning public law regulation of international transactions: comity among nations and the facilitation of international commerce.
[*275] With regard to comity, n76 Professor Lowenfeld argued that Learned Hand's admonition to courts to "not look beyond our own law" n77 in deciding prescription jurisdiction issues had "an arrogant, chauvinistic sound." n78 Professor Trautman noted that "many consider it perverse for the United States to apply its [regulatory] law ... to foreign activities... in countries whose law tolerates or promotes what we proscribe," n79 and Professor Brewster objected that, "if extraterritorial jurisdiction is not confined to the protection of interests which are not inherently opposed to the interests of other nations, then law, far from serving its ancient function of providing for an orderly settlement of dispute, will become an affirmative stimulus to international contention." n80 These scholars, and others since, have urged courts to consider "the needs of the international system in determining the territorial scope of [public law]" n81 and to allocate legislative authority among the international community so as to achieve a fair and rational distribution of prescriptive power. n82
Commentators in favor of finding the most appropriate law for a particular transaction believed that such a proportional allocation of prescriptive jurisdiction among nations also would help achieve their second principal goal: the facilitation of international business. "Perhaps the most important result encouraged by focusing on system needs," wrote Professor Maier, "is the increased likelihood of developing predictability in the system." n83 "Predictability" in this sense, of course, refers to the application of a single rather than multiple public laws to any given international commercial dispute or issue. The assumption of these commentators is that concurrent prescriptive jurisdiction affirmatively harms international business, n84 an assumption perhaps originating with Profes [*276] sor Beale: "If two laws were present at the same time and in the same place upon the same subject we should also have a condition of anarchy." n85 Even if anarchy is not the result of concurrent regulation, these commentators believe that burdensome overregulation is. n86
These criticisms of the public law taboo soon found expression in (1) caselaw concerning the application of U.S. antitrust law to international transactions, (2) sections of the Third Restatement of Foreign Relations pertaining to prescriptive jurisdiction, (3) considerably more recent caselaw concerning the application of contractual choice of law clauses (i.e., principles of party autonomy) to public law, and (4) caselaw and certain treaties contemplating forum recognition of foreign public law. The first three of these developments contemplate the possible displacement of otherwise applicable forum public law; the fourth contemplates the recognition of foreign public law, but not necessarily the coincidental displacement of forum public law. Each of the developments represents the abrogation of the public law taboo in contractual conflict of laws, and each represents the infusion of conflicts principles into the standards that traditionally governed the reach and application of public law.
A. Antitrust Cases
The leading antitrust case abrogating the public law taboo is Timberlane Lumber Co. v. Bank of America, n87 a case in which, as one commentator has noted, "conflicts analysis almost entirely replaces [the traditional public law] inquiry into congressional intent." n88 Timberlane alleged that Bank of America officials and others "conspired to prevent Timberlane, throughout its Honduran subsidiaries, from milling lumber in Honduras and exporting it to the United States [so that] control of the Honduran lumber export business [could remain] in the hands of a few select individuals financed and controlled by the Bank." n89 The Ninth Circuit complained that the district court's assessment of the applicability of U.S. antitrust law to the alleged conspiracy had focused only on the tradi [*277] tional Alcoa intended effects test. n90 The Ninth Circuit complained that "the effects test by itself is incomplete because it fails to consider other nations' interests," n91 and held that "[a] more comprehensive inquiry is necessary. We believe that the field of conflict of laws presents the proper approach." n92 The court then articulated an "interest balancing" approach n93 to the application of U.S. antitrust law that explicitly considers, among other factors, the "degree of conflict with foreign law or policy [and] ... the relative significance of [the] effects on the United States as compared with those elsewhere." n94
The Third Circuit completely embraced Timberlane's conflicts approach to antitrust jurisdiction in Mannington Mills, Inc. v. Congoleum Corp. n95 Mannington alleged that Congoleum unlawfully restrained export trade of vinyl floor covering by fraudulently securing patents in twenty-six different foreign nations and then enforcing those patents to prevent Mannington and others from exporting to those nations. n96 The Third Circuit concluded that U.S. antitrust law did reach Mannington's claims, n97 but that that question (i.e., a question of power) was different [*278] from the question of whether the court should exercise jurisdiction (i.e., a question of wisdom). n98 The Court then insisted on an "interest balancing" analysis n99 similar to that articulated in Timberlane. n100 The Mannington court insisted that interest balancing occur with respect to each of the twenty-six nations involved in Congoleum's alleged conduct. n101 Other courts also expressed some attraction to an interest balancing approach to the application of U.S. antitrust law. n102
B. The Restatement (Third) of Foreign Relations Law
Timberlane and Mannington are cited as precedent for section 403 of the Third Restatement of Foreign Relations Law, which addresses limitations on prescriptive jurisdiction, and which, like Timberlane and Mannington, casts aside the public law taboo in favor of a multifactor interest balancing approach to the application of public law to international transactions. n103 The Third Restatement urges that interest balancing be [*279] considered not merely as a matter of comity, but instead as a requirement of international law, n104 and that it be undertaken "not only [by] governments, but also [by] judges." n105
There are three additional ways in which the Third Restatement cements its effort to abrogate the public law taboo. First, the interest balancing approach of section 403 of the Third Restatement applies to the judicial evaluation of whether prescriptive jurisdiction exists ab initio for any given application of public law n106; it is not limited, as was its predecessor, section 40 of the Second Restatement, to suggesting interest balancing only in the event that applicable public laws of two different nations "require inconsistent conduct on the part of a person." n107 Con [*280] sequently, under the Third Restatement, concurrent public law jurisdiction, to the extent that it would continue at all, would be the exception rather than the rule. n108 Second, section 403 of the Third Restatement requires interest balancing with respect to the application of any public law to an international transaction, not just antitrust law, as in Timberlane and Mannington. n109 And finally, section 403 of the Third Restatement suggests that prescriptive jurisdiction should be limited not only by the interests of other nations in comparison to those of the prescribing nation, but also by the expectation interests of private parties. n110 In this respect, section 403 anticipates the next major abrogation of the public law taboo: the inclusion of public law within the conflicts doctrine permitting the private contractual displacement of otherwise applicable law.
C. The Contractual Displacement of Otherwise Applicable Public Law
In perhaps the most remarkable abrogation of the public law taboo, seven U.S. Circuit Courts of Appeals, in decisions culminating just this year, n111 have permitted parties to international commercial transactions to contractually opt out of otherwise applicable public law (the Securities Acts of 1933 and 1934 in all of the cases), so long as the law they substitute for the displaced public law "vindicates" similar rights and does "not subvert" the general policy of the displaced law. All of the cases involved essentially identical international transactions: investments by U.S. investors in the Lloyd's of London insurance market.
The Lloyd's insurance market consists of over 300 syndicates which compete for underwriting business. Investors in each syndicate are known as "Names." Names are solicited from countries other than England, but all prospective Names must travel to London to participate in a [*281] personal interview during which their financial commitment is explained and all final agreements are concluded. The agreements include choice of law clauses designating the law of England as the governing law, and choice of forum clauses requiring any disputes relating to the agreements to be resolved in England. The agreements specify that each Name is liable for underwriting losses only to the extent of the individual Name's interest in the particular syndicate, but each Name's personal liability is unlimited with respect to that interest. n112
During the late 1980s and early 1990s, several Lloyd's underwriting syndicates experienced substantial unanticipated losses as a result of asbestosis and pollution claims, the bombing of Pan Am Flight 103 over Lockerbee, Scotland, and the devastation in Florida caused by Hurricane Hugo. Lloyd's estimated that its losses during these years would exceed premiums by $ 22 billion. n113 Pursuant to the agreements the Names had signed, individual Names of the syndicates that had insured these losses were personally liable for the $ 22 billion excess in proportion to their interest in each syndicate, a prospect that could mean financial ruin for many Names.
The American Names who were exposed to these losses sought relief in U.S. courts under U.S. securities laws, alleging that they had been fraudulently induced to invest in the riskiest Lloyd's syndicates and that Lloyd's had failed to disclose material facts and risk factors concerning their investments. n114 The Names argued, essentially on the basis of the traditional public law taboo, that the choice of law and choice of forum clauses in their contracts with Lloyd's did not bar their Securities Acts complaints in U.S. courts. n115
Because the Supreme Court already had held by the time of the Lloyd's cases that claims under the U.S. Securities Acts are arbitrable, n116 [*282] the change of forum issue alone was largely inconsequential to the outcome of the Lloyd's cases. n117 The heart of the Lloyd's courts' analyses focused on the displacement of U.S. securities law that would result from enforcement of the choice of law clauses to which the Names had agreed.
Significantly, all of the Lloyd's courts relied exclusively on Supreme Court precedent from the private law context - specifically, contract and tort claims arising in international maritime transactions n118 - for a decisional rule that choice of law and forum clauses in international transactions generally are enforceable so long as they are "reasonable," i.e., so long as the chosen law neither deprives the plaintiffs of a remedy nor contravenes a strong U.S. public policy. n119 The Lloyd's courts declined to decide the jurisdictional issues concerning the applicability of U.S. securities law to the Names' investments, n120 assuming instead that even if U.S. securities law applied to the investments, U.S. public law was just as displaceable as private law by a valid choice of law clause. The Lloyd's courts then proceeded to assess the reasonableness of the choice clauses at issue according to factors strikingly similar to those suggested by Section 403 of the Third Restatement of Foreign Relations Law n121: the existence [*283] of justified expectations as reflected in the clauses, n122 the relative adequacy of English remedies and procedures for vindicating the Names' claims, n123 and the comparatively greater interest of England in regulating the Names' investments in Lloyd's. n124 The Lloyd's courts concluded on the basis of this comparative interest balancing analysis that the choice clauses were enforceable despite their displacement of otherwise applicable U.S. securities law.
In combination with Timberlane and Mannington and section 403 of the Third Restatement of Foreign Relations law, the Lloyd's cases would appear to abrogate entirely that prong of the traditional public law taboo forbidding the displacement of otherwise applicable forum public law. That leaves for consideration the remaining prong of the taboo: the recognition by a forum of foreign public law.
D. The Recognition of Foreign Public Law
As discussed in Part IV of this Article, the recognition of foreign public law claims by another nation's tribunal stands on entirely different footing from the displacement of forum public law. The recognition of foreign public law claims, for example, need not displace forum public law; nor must the applicability of foreign public law turn on a judicial interest balancing assessment rather than a determination of the law's intent to apply. Similarly, the recognition of foreign public law tends to advance governmental and regulatory interests; the displacement of fo [*284] rum public law tends to defeat them. And there are other differences as well.
The purpose of this brief Subpart, however, is not to evaluate the erosion of this prong of the public law taboo, but only to document its occurrence. The most prominent example is Article 7(1) of the European Union Convention on the Law Applicable to Contractual Obligations, which provides that effect "may" be given "to the mandatory rules of the law of another country with which the situation has a close connection, if ... under the law of [that] country, those rules must be applied whatever the law applicable to the contract." n125 Switzerland's contractual conflict of laws rule is similar: "The application of a provision of foreign law is not excluded solely because public-law character is attributed to it." n126 Section 187 of the Second Restatement of Conflicts also would seem to support occasional recognition of foreign public law, n127 to the extent, of course, the Restatement of Conflicts even applies to public law. n128
There also is some tendency at the judicial level in various nations to recognize and apply certain foreign public law claims (particularly if the foreign public law claim is analogous to private law). n129 One can argue on the basis of the Supreme Court's consistent rulings permitting the foreign arbitration of U.S. public law claims, n130 which are predicated on the assumed importance to international commerce of permitting foreign forums to hear U.S. public law claims, n131 that the Supreme Court would encourage reciprocity in this regard by U.S. courts. n132
IV. The Problems With Merger - Virtues of the Public Law Taboo
Three overarching problems arise from the judicial application of conflicts principles to issues concerning the applicability of public law. The first is underregulation. The risk of diminished regulation is great whenever private contractual election or comparative interest balancing analysis displaces forum public law. Parties to international transactions do not contractually "opt out" of a given national regulatory scheme or [*285] litigate its inapplicability because of a desire for more stringent or burdensome regulation by another nation. The displacement of otherwise applicable public law might in some ways promote private international transactions, but clearly does so at the expense of laws designed to ensure the integrity of such transactions.
The second problem is that courts and private parties are completely ill equipped to undertake the complex presentational and decisional burdens of attempting to identify and balance the interests of multiple nations in order to achieve a fair and equitable allocation of prescriptive jurisdiction (if, in fact, such an allocation even is achievable). That process belongs in the political arena. It is no surprise that the parties in Mannington Mills settled rather than undertake the task assigned by the Court of Appeals. That task involved weighing the interests of the United States in the enforcement of its antitrust laws against the interests of each of the twenty-six possibly affected nations in administering their patent laws independently of U.S. interference. n133
The final overarching problem of applying conflicts principles to public law is that their merger substantially reduces predictability in international transactions rather than increasing it. It is a specious notion that the ex post interest balancing determination of a single applicable public law lends greater predictability to international transactions than ex ante certainty that, if the transaction exceeds some threshold of contacts with a particular jurisdiction, that jurisdiction's public law will apply to the transaction. Only in the latter instance can applicable public law properly be factored in and accounted for in structuring the transaction. The "value" of ex post interest balancing resides exclusively in the litigation arsenal for tactical use if the transaction falls apart.
This Part of the Article briefly elaborates on each of these problems, and then concludes with a short discussion of whether the problems are as serious with respect to the recognition of foreign public law as they are with respect to the displacement of forum public law.
A. The Problem of Underregulation
There is a growing body of scholarship documenting the risk of underregulation that flows so logically and naturally from the displacement of forum public law. n134 No "reasonably parallel law," as Professor Weinberg has noted, necessarily or even probably "springs into place" following displacement. n135 Different nations often have vastly different regulatory objectives and needs and, as international commerce expands to include less developed nations, vastly different capacities to promulgate and enforce regulations. It seems far more probable that lesser [*286] regulation or a regulatory void springs into place following the displacement of forum public law than it does that parallel or greater regulation will occur. Thus, displacement often will allow precisely the harm that forum public law was intended to prevent. n136 There is no more likely an explanation of a defendant's opposition to forum public law in the first place. n137
Additionally, it is by no means clear why a nation with legislative competence to regulate commercial conduct of concern to it should yield regulatory authority to another nation with a closer relationship to or interest in the transaction, but perhaps with less regulatory interest or capacity. Apart from conclusory claims of "comity" n138 and undocumented assertions that singular regulation necessarily promotes international commerce while multiple regulation necessarily harms it, n139 one searches the conflicts literature in vain for actual illustrations of either the rationale behind or consequences of such a subordination of national interest. In fact, by deferring regulatory responsibility to another nation, the displacing forum would seem to be depriving itself of precisely the data necessary to make an informed judgment about whether considerations of comity or international commerce outweigh the need for the displaced public regulation.
[*287] The same point is true, except perhaps with even more force, with respect to the private contractual displacement of forum public law, as in the Lloyd's cases. Ordinarily when private commercial parties seek to avoid the public regulation of a particular nation, they conduct their activities so as not to exceed that nation's prescriptive jurisdictional threshold. If a court instead grants them the right to contractually avoid that nation's public regulation despite their engaging in conduct or producing effects sufficient to come within that nation's prescriptive jurisdiction, the court essentially deprives that nation of the information necessary to test the assumption on which the exemption is made - namely, that the value of the regulation is outweighed by the possible loss of international commercial transactions and/or gains in international comity. Moreover, it is not clear why the parties' mere contractual announcement of their desire to avoid that nation's public law should result in the subordination of the nation's right to regulate the conduct of the parties. It is as if the Lloyd's courts have placed in the hands of private parties the long discredited "liberty of contract" sword used by the Supreme Court during the early twentieth century to strike down social welfare and economic regulatory legislation as an undue interference with the private right of contract. n140 The displacement of forum public law in deference to a contractual choice of law clause says little or nothing about international commerce or comity. It says much, however, about a particular court's preference for private over public interests.
B. The Institutional Competence Issue
In Laker Airways Ltd. v. Sabena, Belgian World Airlines, n141 a U.S. antitrust action by the low cost British air carrier against a group of foreign and domestic U.S. air carriers for allegedly conspiring to put Laker out of business through predatory pricing, the D.C. Circuit expressly rejected the Timberlane and Mannington "interest balancing" approach to the jurisdictional reach of U.S. antitrust law, and in doing so, addressed the issue of a court's institutional competence to engage in interest balancing:
An English or American court cannot refuse to enforce a law its political branches have already determined is desireable and necessary.... The desireability of applying ambiguous legislation to a particular transaction may imply the presence or absence of legislative intent. However, once a decision is made that the political branches intended to rely on a legitimate base of prescriptive jurisdiction to regulate activities affecting foreign commerce within [*288] the domestic forum, the desireability of the law is no longer an issue for the courts. n142
Even the proponents of public law "interest balancing" acknowledge that "it may be difficult for a court to find statutory authority for this kind of selective application of a regulatory statute." n143
Another problem with judicial interest balancing, as the settlement on remand of the Mannington Mills v. Congoleum Corp. perhaps revealed, n144 is that courts and private litigants typically are ill equipped to undertake the sometimes enormous presentational and decisional burdens that accompany interest balancing. As the Laker Airways court noted, "we seriously doubt whether we could adequately chart the competing problems and priorities that inevitably define the scope of any nation's interest in a legislated remedy." n145
Finally, interest balancing by courts necessarily portends negative consequences for efforts by the political or executive departments of government to negotiate transnational allocations of jurisdiction or harmonizations of law, and possibly to otherwise conduct foreign affairs. As Professor Weintraub noted:
In the long term, reasonable enforcement of our antitrust and securities laws under the effects doctrine [without interest balancing], despite friction with foreign countries, is [more] likely to lead to international cooperation and bilateral agreements of cooperation.... If in fact a significant sacrifice of United States interests results from attempts to serve comity, international accommodation may again, ironically, be retarded rather than ad [*289] vanced. Our bargaining chips will have been given away before the political branches could use them. n146
C. The Problem of Predictability
If multifactor balancing tests for determining applicable public law "defy predictable application" by courts, n147 they clearly are useless as planning tools for the participants in international transactions. Interest balancing is inherently backward looking; it is invoked only as a defense to the application in litigation of a particular public law, and the only predictable consequence for international commerce is a significant escalation of litigation risks and costs.
Parties to international transactions ordinarily conduct their activities with the understanding that they will be subject to the public regulatory laws of those nations in which they engage in conduct or in which their conduct causes substantial effects. They might have different opinions about the level or threshold of conduct or effects they must surpass before their transaction becomes subject to a given nation's public law. However, they never assume that, despite surpassing that level or threshold, they nonetheless can escape that nation's public law because some other nation's relation to the transaction is "more significant" than the first's. Common sense alone dictates this strategy as the only prudent approach to multinational business planning and conduct; it necessarily is the understanding on which international transactions are negotiated. Upsetting this expectation in favor of ex post interest balancing does not favor international commerce as interest balancing proponents contend. Rather, it favors international defendants. Interest balancing does far more to defeat private expectations than it does to serve them.
As unattractive an intellectual exercise as it may be for many judges and scholars, counting the contacts of conduct and effects between an international transaction and potential prescribing jurisdictions is a far more predictable planning tool for international business (even if the result is multiple, concurrent regulation of any given international transaction) than any ex post "interest balancing" assessment designed to identify only a single regulatory jurisdiction. n148 To quote Judge Posner from a domestic conflicts context, "the opponents of mechanical rules of [*290] conflict of laws ... have given too little weight to the virtues of simplicity." n149
D. The Recognition of Foreign Public Law
Professor Lowenfeld's groundbreaking work to abolish the "public law taboo" was predicated as much on arguments in favor of recognizing foreign public law as it was on the occasional need to displace otherwise applicable forum public law. n150 My foregoing criticisms of abolishing the public law taboo apply much more forcefully to the latter prong of the taboo than they do to the former. In fact, recognizing foreign public law - at least when it occurs without the coincidental displacement of forum public law - serves many of the same policies that are undermined by the displacement of forum public law.
For example, the recognition of foreign public law tends to advance the goals and purposes of economic regulation, while the displacement of forum public law tends to diminish them. n151 Although there obviously could be a significant diminution in the substantive protections of foreign public law if the substitute forum's procedures fail to provide a level of fairness and accuracy similar to that which is available in the law supplying forum, n152 overall one would expect a pro-regulatory effect from the judicial recognition and application of foreign public law, particularly when the defendant or the defendant's assets are unavailable for claim in the foreign nation that supplies the applicable public law. n153
Similarly, the decision to recognize and apply applicable foreign public law is far more consistent with the traditional role of courts and traditional judicial decisionmaking than is the decision to displace otherwise applicable forum public law. The former decision focuses on the law's intent to apply, and the latter on reasons not to apply the law despite its intent to apply. The recognition of foreign public law need not concern "interest balancing" as opposed to the more universal "conduct or intended effects" test of prescriptive jurisdiction, and it need never involve the displacement of otherwise applicable forum public law. Thus, the judicial recognition of foreign public law also need not create the problems of predictability for international commerce that plague the dis [*291] placement of forum public law as a result of ex post interest balancing. In fact, the recognition of foreign public law might even enhance the predictability of international transactions by reducing the possibility of forum shopping. Although it may be true that courts will be less adept at applying (and discerning the underlying policies of) foreign public law than they are at applying forum public law, the decisionmaking process and parameters involved in each likely will be similar.
Thus, the problems that plague the merger of conflicts principles with public law do not apply nearly as forcefully with respect to the recognition of foreign public law as they do with respect to the displacement of forum public law.
V. Reviving the "Public Law Taboo" - Hartford Fire Insurance v. California
Inasmuch as Timberlane, Mannington Mills, section 403 of the Third Restatement of Foreign Relations Law, and the Lloyd's cases represent the abrogation of the public law taboo, Hartford Fire n154 represents its revival - at least with respect to that prong of the taboo forbidding the displacement of forum public law by contractual election or choice of law principles. Perhaps that seems a surprising assertion about an opinion that never so much as mentions "public law" and whose holding is not unambiguous. But Hartford Fire clearly reads like a specific application of the public law taboo insofar as it suggests very plainly that notions of "comity" and comparative interest balancing are not permissible constraints on the jurisdictional reach of the Sherman Act, n155 except possibly in the most extraordinary situation of a "true" conflict of laws that imposes impossibly inconsistent obligations on the affected parties. And I believe the broader proposition emerges not so much from what the Hartford Fire majority says in its opinion, but from what it does not say about the dissent's assertion that the majority had failed to follow the Court's previous decisions in Lauritzen v. Larsen n156 and Romero v. International Termi [*292] nal Operating Co., n157 both of which applied notions of comity and comparative interest balancing to the question of the jurisdictional reach of a federal statute, the Jones Act, n158 to international transactions. The public law taboo explains both the Court's refusal to apply a conflicts analysis in Hartford Fire and the Court's application of a conflicts analysis in Lauritzen and Romero: the Sherman Act is within the taboo, while the Jones Act is not.
Hartford Fire involved lawsuits by nineteen states and a number of private plaintiffs alleging that certain U.S. primary insurers and certain London reinsurers had conspired in violation of the Sherman Act to limit or eliminate several types of pollution insurance coverage in the United States. n159 The majority treated the London defendants as having conceded that the jurisdictional reach of the Sherman Act was sufficient to apply to their alleged conspiracy, n160 thus effectively leaving for Supreme Court resolution only the question of whether considerations of international comity should constrain the exercise of that jurisdiction. n161 The Court then technically dodged that issue as well by declaring it inappropriate for a court even to consider matters of comity in the absence [*293] of a "true conflict between domestic and foreign law." n162 The Court defined a "true conflict" in the negative by explaining that "no conflict exists ... "where a person subject to regulation by two states can comply with the laws of both,'" n163 and then determined that no conflict was present in Hartford Fire "since the London reinsurers do not argue that British law requires them to act in some fashion prohibited by the law of the United States ... or claim that their compliance with the laws of both countries is otherwise impossible." n164
A. The Demise of Timberlane, Mannington Mills and Section 403.
Although the Hartford Fire majority opinion seems incredibly stingy in not stating explicitly and unequivocally that a court should not consider the interests of other nations when considering the applicability, ab initio, of the Sherman Act to an international transaction, that is precisely the message that results from the "true conflict" requirement, n165 and that is exactly how the Hartford Fire dissent reads the majority opinion. n166 Thus, it seems beyond reasonable dispute that the comparative interest analysis tests of prescriptive jurisdiction mandated by Timberlane and Mannington Mills n167 do not survive Hartford Fire. n168
Nor should section 403 of the Third Restatement of Foreign Relations Law's proposed judicial comparative interest balancing with respect to prescriptive jurisdiction regardless of whether a "true conflict" of laws exists survive Hartford Fire. n169 Recall that one of the principal changes instituted by section 403 of the Third Restatement to the approach to prescriptive jurisdiction of its predecessor, section 40 of the Second Restatement, n170 was to insist on judicial comparative interest balancing in answering the question of whether prescriptive jurisdiction exists ab initio, n171 rather than to restrict comparative interest balancing to cases in which the laws of two states "require inconsistent conduct upon the part of a person." Hartford Fire now makes clear without doubt that an assertion of prescriptive jurisdiction that meets the Alcoa "intended effects" test is reasonable and that any judicial comparative interest balancing in those circumstances is inappropriate. n172 Hartford Fire thus seems to read section 403(2) out of the Third Restatement for purposes of judicial de [*294] terminations of ab initio prescriptive jurisdiction. Moreover, the identification of Hartford Fire's "true conflict" requirement with section 40's "require inconsistent conduct" standard suggests that a consequence of Hartford Fire will be effectively to restore section 40 as the rule of decision in cases of true prescriptive conflict. n173
The Hartford Fire dissent essentially believed that the only task confronting the Supreme Court was to engage in comparative interest balancing in order to determine whether the obviously substantial interest of Great Britain in regulating the London reinsurers should outweigh application of the Sherman Act to their conduct in that case. n174 The dissent believed that the differing interests of the United States and Great Britain in regulating the London reinsurers was conflict enough for conducting a comparative interest analysis. It rejected the majority's "true conflict" requirement as producing conflict. n175 In essence, the dissent treated the issue of the Sherman Act's applicability exactly as if it presented a standard question of conflict of laws, and insisted that the Supreme Court's prior decisions in Lauritzen v. Larsen n176 and Romero v. International Terminal Operating Co. n177 dictated precisely that approach. n178 The Hartford Fire majority did not so much as mention either Lauritzen or Romero.
In fact, both Lauritzen and Romero did apply a standard conflict of laws, comparative interest balancing approach to questions regarding the jurisdictional reach of the Jones Act. Both cases concerned the applicability of the Jones Act to personal injury claims by foreign seamen while aboard foreign registered vessels sailing under foreign flags. n179 There was some nexus in each case between the injured seaman and the United States - in Lauritzen the employment contact was made in New York, and in Romero the injury occurred in U.S. waters - but there was also a significant nexus among the seamen, their vessels, and one or more other nations. n180
[*295] The Supreme Court made abundantly clear in both Lauritzen and Romero that the issue of the Jones Act's applicability to the injured seamen's claims turned on standard conflict of laws principles and comparative interest balancing. In Lauritzen the Court explained the approach as follows:
International or maritime law in such matters as this does not seek uniformity and does not purport to restrict any nation from making and altering its laws to govern its own shipping and territory. However, it aims at stability ... through ... considerations of comity.... Maritime law, like our municipal law, has attempted to avoid or resolve conflicts between competing laws by ascertaining and valuing points of contact between the transaction and the states or governments whose competing laws are involved. The criteria ... [are] arrived at from weighing of the significance of one or more connecting factors between the... transaction regulated and the national interest served by the assertion of authority. n181
The Romero Court emphasized that:
We must apply those principles of choice of law that are consonant with the needs of a general federal maritime law and with due recognition of our self-regarding respect for the relevant interests of foreign nations in the regulation of maritime commerce .... The controlling considerations are the interacting interests of the United States and of foreign countries, and in assessing them we must move with the circumspection appropriate when this Court is adjudicating issues inevitably entangled with the conduct of our international relations. n182
In both Lauritzen and Romero comparative interest balancing caused the Supreme Court to refrain from applying the Jones Act. n183
The Hartford Fire dissent assumed that, because Lauritzen and Romero had both insisted on the judicial application of comparative interest balancing in determining the international jurisdictional reach of a federal statute, those decisions necessarily controlled resolution of the same issue with respect to the Sherman Act. n184 In fact, that is precisely the assumption made about Lauritzen and Romero by the early proponents of merging conflicts principles and public law: "Two recent decisions... suggest that statutory interpretation may appropriately merge with conflict-of-laws thinking." n185
[*296] The assumption, however, is flawed, and both the flaw and the Hartford Fire majority's silence about Lauritzen and Romero is explained by the public law taboo. Part VI of this Article, concerning the definition of "public law," explains that the statutory forms the Jones Act and the Sherman Act take do not automatically make them both "public laws," even in the most traditional sense. n186 Rather, the Jones Act is but the statutory vehicle for the assertion of a common law tort, n187 and common law torts comprise a traditional category of private law that has long been subject to conflict of laws analysis. n188 The opposite is true of the Sherman Act, perhaps the preeminent example of traditionally recognized "public law." n189 To ignore that fundamental distinction, as did the Hartford Fire dissent, is to merge conflict of laws and public law; to honor the distinction, as did the Hartford Fire majority in their silence about Lauritzen and Romero, is to honor the public law taboo and the separation of public law and conflict of laws. n190 It is for this very reason that Hartford Fire signals a revival of the public law taboo. n191
[*297] Before addressing the important remaining question of how one goes about identifying the public laws that are subject to the public law taboo in today's codified world, n192 I shall briefly consider the implications of Hartford Fire on the holdings of the Lloyd's cases: that forum public law may be displaced by a contractual choice of law clause.
B. The Impending Demise of the Lloyd's Cases
I believe that Hartford Fire's revival of the public law taboo compels the conclusion that private contractual choice of law clauses are no more permissible a constraint on the congressionally intended reach of public law than are the regulatory interests of foreign nations. In fact, the Lloyd's courts appeared to do little more in those cases than use contractual choice of law clauses as vehicles for conducting precisely the comparative interest balancing analysis forbidden by Hartford Fire. n193
The similarities between Hartford Fire and the Lloyd's cases are striking. Both concerned conduct or the effect of conduct in the United States by British insurers subject in Great Britain to a comprehensive regulatory scheme governing the British insurance industry. n194 Both concerned conduct by the British insurers that presumably was perfectly legal under (but not mandated by) the British regulatory scheme, but allegedly illegal under U.S. public law. n195 Additionally, the applicability of U.S. public law to the transactions in both Hartford Fire and the Lloyd's cases was either conceded or assumed. n196 Thus, the only real issue in both was whether factors other than Congressional intent were of sufficient weight to constrain the exercise of U.S. jurisdiction. Finally, both Hartford Fire and the Lloyd's cases involved transactions in which the comparative weight of the respective U.S. and British regulatory interests seemed to favor Great Britain. n197 The Hartford Fire Court held that U.S. [*298] public law applied in these circumstances; the Lloyd's courts held that it did not.
There were only two salient differences between Hartford Fire and the Lloyd's cases. First, Hartford Fire involved the jurisdictional reach of the Sherman Act, whereas the Lloyd's cases involved the jurisdictional reach of the Securities Acts. Second, Hartford Fire did not involve a contractual choice of law clause designating British law as applicable law, whereas the Lloyd's cases did.
Insofar as both the Hartford Fire and Lloyd's courts either determined or assumed that Congress intended the U.S. antitrust or securities laws to apply to the respective transactions in those cases, one would expect the different outcomes in the cases, as well as the two principal differences between the cases, to be explained by the prospective waivability of rights secured by the securities laws, with the consequence of prospective waivability being that otherwise applicable U.S. securities laws could be displaced by the contractual designation of some other nation's law. But that explanation fails as the Securities Acts include explicit antiwaiver provisions. n198 Thus, apart from their differences in subject matter, the mandatory nature of the U.S. antitrust and securities laws seems indistinguishable.
In fact, the Lloyd's courts presumably would agree with that proposition because none of them found that rights secured by the Securities Acts had been prospectively waived. Indeed, the opposite is true. The Lloyd's courts found that the plaintiffs in those cases effectively had not waived their rights under the Securities Acts, despite the contractual displacement of the Securities Acts as applicable law, because the remedies available to the plaintiffs under British law were consistent with the remedies available under displaced U.S. securities law. n199 In other words, the Lloyd's courts determined that there was no significant conflict between U.S. and British law with respect to regulation of the securities fraud at issue in those cases, and thus that the displacement of otherwise applicable U.S. securities law was unobjectionable.
The lesson of Hartford Fire, of course, is that the absence of a true conflict with foreign law actually compels the assertion of applicable U.S. regulatory jurisdiction. Only in a "true conflict" would it be permissible [*299] for a court to consider the displacement of otherwise applicable public law as a result of comparative interest balancing. Yet, comparative interest balancing is exactly the analysis undertaken by the Lloyd's courts by way of the contractual choice of law clauses in those cases. None of the Lloyd's courts suggested that the contractual expectations of private parties on their own accord should be sufficient to displace otherwise applicable public law. Instead, they all relied on Great Britain's comparatively greater regulatory interest in the transactions. n200 Consequently, the principles espoused by the Lloyd's courts should not survive Hartford Fire. n201
Thus, Hartford Fire suggests that the public law taboo is as alive and well with respect to the scope of contractual choice of law clauses as it is with respect to the scope of conflicts analysis in the absence of contractual choice. The taboo's revival will reduce the threat of underregulation of transnational commercial activity, n202 enhance the ex ante predictability of applicable law issues for participants in international transactions, n203 and restore judicial conflicts analysis to its appropriate domain, n204 provided, of course, that the public law within the public law [*300] taboo can be distinguished reliably from those private and possibly public laws and provisions of law residing outside the taboo. The final Part of this Article addresses this topic.
VI. What is "Public Law" Anyway?
The resurrection of the public law taboo does not eliminate the definitional problem that was partly responsible for its earlier demise. n205 The codification of private law and the intrusion of public law into areas traditionally deemed private has obscured the traditional public law/private law distinction that once gave clear meaning to the public law taboo. The question is whether that distinction remains viable, or whether instead, as several commentators contend, the public law/private law dichotomy has lost "its utility" n206 to the point of being "meaningless" n207 and "too blunt an instrument for the present day." n208
Before examining that question, it is important to keep in mind the distinction the public law taboo is seeking to express: Contractual election or choice of law analysis may displace some national laws but they may not displace others. Nondisplaceable laws should apply as a perquisite of national sovereignty to prescribe law within the general limitations traditionally imposed by international law. n209 The national interest in enforcing these laws virtually by definition outweighs private contractual interests and even a comparatively greater interest of some other nation in regulating an international transaction to which such a law applies. The important question is how courts and lawyers can identify these national laws that are beyond the scope of contractual autonomy and conflicts analysis, not what such laws should be called.
A. Some Traditional Definitions of Private Law and Public Law
One disadvantage of the public law/private law nomenclature is that it does not have a clear history or context in common law jurisdic [*301] tions. n210 A public/private distinction for most U.S. lawyers and legal scholars is evocative of the difference between matters appropriate for government attention or regulation and matters that are outside the bounds of legitimate government concern. n211 Adding the word "law" to the "private" side of that distinction would be a contradiction in terms; in that sense, all law is public. n212
But the fact that all law serves to order relationships - in contrast to the completely autonomous ordering that occurs in the "private sphere" - does not mean that all of the relationships ordered by law are equally "public." And it is in that sense, perhaps, that a public law/private law dichotomy begins to make some sense.
In modern Roman law, explained Roscoe Pound, "private law had to do with adjusting the relations and securing the interests of individuals and determining the controversies between man and man, while public law had to do with the frame of government, the functions of public officials, and adjustment of relations between individuals and the state." n213 Professor Merryman explained that "private law was that area of the law in which the sole function of government was the recognition and enforcement of private rights," n214 and as Professor Maier has noted, when "courts are ... considering the rights and duties of private parties to each other ... the interests of governments are not directly engaged." n215 In contrast, "[a] government always has a direct interest in the outcome of a [public law] case, even when the governmental viewpoint is represented by a citizen-prosecutor seeking private recovery." n216 The "driving consideration" in public law matters, consequently, is "the effectuation of the public interest." n217 Public law concerns public harm, [*302] private law, private harm. n218 These characteristics have led many to equate public law with statutes. n219
Thus far, of course, these traditional definitions of public law and private law are not particularly helpful in addressing the definitional problems that led to the collapse of the distinction. Equating public law with statutes hardly illuminates the distinction in an era of codification. n220 The private interest/public interest, private harm/public harm continuums are problematic as well. Many economists view much of the "anticompetitive" activity regulated by antitrust laws as inflicting essentially private harms, n221 and there seems to be a continually growing body of law and economics literature finding that traditional private law categories such as contracts, torts and property serve the public interest in efficiency n222 and otherwise express public regulatory, deterrent and declaratory policies. n223
But the fact that much private law has a public dimension and some public law has a private dimension does not necessarily make all law equally public in a way that undermines the utility of the public law taboo. Clearly there is a difference in degree between the public harm that results from an interpersonal tort or failed contractual transaction and the public harm that results from price fixing in the market for a popular commodity or from misleading statements in financial disclosures about publicly held companies. As discussed below, perhaps that degree of difference can be expressed in a way that continues to make a private law/public law dichotomy useful for purposes of honoring the public law taboo.
First, though, there is another traditional dimension of public law that I have not yet discussed - its regulatory and mandatory nature. It is precisely because of public law's focus on the public interest and preventing public harm that public law traditionally was considered "supe [*303] rior" to private law. n224 Public law was inherently a "subordinating" and "regulatory" law n225 in that it "subordinated individual to public interests" as it regulated to prevent public harm. n226 In fact, "public law" and "regulatory law" are often used as synonyms in economic and commercial contexts. n227 Although private law also has a regulatory aspect to the extent that it seeks to help order and define relations between individuals, public law regulates the relations between individuals and society, even when operating indirectly by regulating relations between individuals. n228
This subordinating aspect of public law also made most public laws mandatory, and "it is the essence of mandatory rules that they defeat [any contrary] agreement of the parties." n229 Mandatory rules are "rules of law of a country which cannot be derogated from by contract." n230 A mandatory law "applies irrespective of or despite the proper law of a contract," whether determined by a contractual choice of law clause or the conflicts rules that apply in the absence of a contractual designation. n231 In that sense, mandatory laws are largely equivalent to laws within that prong of the public law taboo forbidding the displacement of forum public law. In fact, the definitions of mandatory law and public law often [*304] seem to merge. Mandatory law, like public law, is said to be "designed to protect the public interest ... or the ... weaker against a stronger party." n232 Thus, "antitrust law is regulatory law [and] ... is necessarily mandatory." n233
In contrast, nonmandatory law, like private law, "[exists] mainly to provide private parties with a solution to their disputes in case they have not done so themselves." n234 Nonmandatory law operates only to the extent the parties to a transaction do not contractually elect different applicable law or otherwise make their own governing contractual provisions. n235 In other words, nonmandatory laws serve essentially in a default capacity, and govern only in the event that, and only to the extent that, the parties choose not to govern themselves otherwise.
If, in fact, all public laws were mandatory and all private laws were nonmandatory, as their traditional definitions imply, this difference alone probably would be sufficiently discernible to ensure the continuing usefulness of the public law/private law distinction as the means by which the public law taboo is enforced. Unfortunately, however, just as public law sometimes addresses private interests and private law public interests, private law can be mandatory too. n236 The host of potentially invalidating mandatory contract rules - e.g., prohibitions of covenants not to compete, usury restrictions, competency and capacity rules, statutes of frauds - illustrates this fact.
There is, however, one significant, and perhaps saving difference (at least in terms of enforcing the public law taboo) between mandatory public laws and mandatory private laws: Although both are enforced irrespective of contrary private party agreements in purely domestic transactions, that remains true only of mandatory public laws in international transactions. In international transactions, mandatory private laws traditionally are eligible for choice of law analysis, including possible displacement by a contractual election or conflicts analysis designating the law of another nation as applicable. n237 This difference presumably re [*305] flects the different levels of public interest reflected in private and public law: Even if private law is mandatory in a domestic context, the public interest in the enforcement of private law in an international transaction is not sufficient to insist on application of the law without regard for the expectations of the parties, the impact on cross-border commerce, and the comparative interests of other states. n238 Thus, even though both public and private laws can be mandatory, only mandatory public laws traditionally are mandatory in a conflicts sense such that they cannot be displaced, if otherwise applicable, by contractual election or choice of law analysis.
B. Toward a Workable Public Law/Private Law Distinction
These traditional definitions suggest essentially three categories of law for purposes of applying the public law taboo: (1) mandatory public law, to which the taboo applies and which, consequently, is ineligible for contractual election and choice of law analysis, (2) nonmandatory public law, to which the taboo may or may not apply depending on the reasons for the law's failure to qualify as mandatory, and (3) private law, whether mandatory or not, to which the taboo does not apply and which, consequently, is eligible for possible displacement in international transactions by contractual election or choice of law analysis. I believe that these categories can be reasonably and reliably distinguished by courts and lawyers according to the two dimensions suggested by the "mandatory public law" nomenclature and the traditional definitions of private law and public law: a private/public dimension and a mandatory/nonmandatory dimension.
The private/public dimension attempts to measure those aspects of the traditional private law/public law distinction that focus on private relationships versus public relationships, private interests versus public interests, and private harms versus public harms. Essentially, the private/public dimension is a measurement of the externalities likely to result either from noncompliance with or repeal of the law or provision of law in question. n239 Because common sense and economic analysis [*306] have revealed that laws typically affect public and private relationships, serve public along with private interests, and attempt to prevent public as well as private harms, their private/public dimension necessarily falls along somewhat of a continuum. Consequently, the outcome of the classification is a question of predominance.
To illustrate with a few rather obvious examples, n240 most would agree that noncompliance with or repeal of the contract rules of the Uniform Commercial Code ("UCC") n241 ordinarily would produce fewer externalities than would noncompliance with or repeal of the Sherman Act n242 or the Securities Acts, n243 and therefore that the UCC should be classified as a private law, while the Sherman and Securities Acts should be classified as public laws. Private relationships, interests, and harms are the predominant concern of the UCC; public relationships, interests, and harms are the predominant concerns of the Sherman and Securities Acts.
Similar respective classifications would result between the Jones Act, n244 on the one hand, and the Federal Bills of Lading Act n245 and Carriage of Goods by Sea Act ("COGSA"), n246 on the other. Although all three Acts are federal statutes dealing, at least in part, with ocean-going transport, and although all three statutes create causes of action in favor of aggrieved private individuals, the Jones Act simply provides a mechanism for certain seamen to assert private tort claims in federal court. n247 The Bills of Lading Act and COGSA, in contrast, impose certain minimum duties on carriers with respect to bills of lading, n248 and COGSA additionally imposes certain minimum duties on carriers with respect to the seaworthiness of covered vessels. n249 The repeal of all three Acts likely would reveal the Jones Act as merely the statutory codification of a rule [*307] of private law, but the Federal Bills of Lading and COGSA as laws intended primarily to serve the public interest and prevent public harm.
Importantly, when assessing the degree of externalities likely to result from noncompliance with or repeal of a particular law, the private/public dimension focuses on the particular law at issue and not on the particular transaction to which the law is applied. The dimension is intended to categorize laws for purposes of the public law taboo, not transactions. In any given case, noncompliance with a particular rule of contract law or standard of reasonable care could have externalities comparatively greater than those likely to result from any given violation of the Sherman Act or Securities Acts. But the purpose of the measure is not to rank the severity of actual public harm in any given case; instead, it is to help identify laws or provisions of law whose public purpose is significant enough that they should not be subject to displacement by private contractual election or judicial comparative interest balancing. n250
A law's classification as public law, however, is alone not enough for application of the public law taboo; the law also must be assessed according to the mandatory/nonmandatory dimension. This dimension reflects the "regulatory" aspect of the traditional public law definition - i.e., the fact that public law is a "subordinating law," subordinating individual discretion and private law while regulating for the public good. One measure of the mandatory/nonmandatory dimension, consequently, is the extent to which the law or provision of law in question restricts individual discretion and "regulates" private conduct. A second measure, also essential, is that the law or provision of law not be prospectively waivable.
One would expect these two measures of the mandatory/nonmandatory dimension to coincide. If a law restricts the exercise of private discretion in a way intended to serve the public interest, the ability of persons protected by the restriction to waive its protection prospectively obviously could defeat the purpose of the restriction. It would not make much sense for the Sherman Act, for example, to forbid agreements in restraint of trade without also effectively forbidding agreements prospectively waiving that protection. Thus, the protections afforded by the Sherman Act are not generally regarded as prospectively waivable. n251 The Securities Acts and their explicit antiwaiver provi [*308] sions n252 reflect a similar coincidence of regulated discretion and the nonwaivability of intended protections (at least until the wrongly decided Lloyd's cases altered that proposition n253), and the same coincidence occurs in the Federal Bills of Lading Act and COGSA. n254 Indeed, a presumption would seem appropriate that a public regulatory law is not prospectively waivable without some affirmative indication of waivability explicit in the law.
But the coincidence of restricted discretion and nonwaivable protections need not always occur in public laws. When they do not, it is appropriate that the law or provision of law not qualify for automatic application of the public law taboo. For example, if the protection of a public law may be prospectively waived by an individual for whom the protection is intended, it would make little sense to apply the public law taboo to forbid the contractual election by that individual of different applicable law if the election meets whatever requirements the displaced law imposes on a prospective waiver. If the same protected individual has not made a contrary contractual election, however, it may make perfect sense to apply the taboo to forbid a choice of law analysis that might displace the particular public law; the ability to waive prospectively might be so integral to the particular law's regulatory scheme (e.g., ensuring adequate compensation in exchange for the waiver) that the law essentially is indistinguishable from a mandatory public law. Of course, a public law might provide for a prospective waiver that is so easily obtainable that the law should be regarded as potentially displaceable by ordinary conflicts principles. n255
It is important to distinguish in this regard between the prospective waivability of the protections of a public law, which renders the law effectively nonmandatory, and the discretion individuals typically enjoy to compromise or settle claims privately arising under mandatory public law. Why, some might ask, should the public law taboo automatically prevent the contractual or choice of law displacement of mandatory public law if claims arising under such laws may be privately compromised in the complete discretion of the claimant? How is the exercise of discretion in compromising a claim different from the discretion exercised in a prospective waiver, which in some circumstances may render the public law subject to possible displacement? The answer, I believe, is simple: [*309] There is no reason to expect the released party in the case of a pre-claim prospective waiver to conform to the waived requirements of the public law at issue, but there is every reason to expect a post-claim compromise to require substantial compliance with the requirements of the law, insofar as the claim otherwise would be enforceable in court. Thus, public law loses its mandatory character in the event of a prospective waiver, but essentially retains it in the event of a post-claim compromise.
A slightly different question also might arise: If nonmandatory public law can be treated like private law for conflicts purposes, why not treat mandatory private law like mandatory public law for purposes of the public law taboo? The short answer resides in the public/private distinction: the fact that a law is a public law rather than private law potentially elevates its relative importance sufficiently so as automatically to outweigh the expectations of private parties and regulatory interests of other nations that typically are weighed in a conflicts analysis. Thus arises the "public law taboo." But this is not to say that the relative importance of mandatory private law in comparison to nonmandatory law is nowhere expressed in conflicts analysis; to the contrary, it is fully reflected in the "public policy exception" to conflicts analysis. When properly applied, this much-maligned principle n256 holds that, when a contractual election or the forum's conflicts rules point to foreign law as applicable law, the forum's public policy still may override that designation in favor of forum law - most typically, the forum's mandatory private law. n257 The forum's mandatory private laws are simply eligible for conflicts analysis; they are not necessarily displaced by it. n258
The analytical task of categorizing laws or provisions of law as "public" or "private" and "mandatory" or "nonmandatory" is far more appropriate for and typical of judicial decisionmaking in a regulatory context than the task of identifying and weighing the relative interests of all na [*310] tions in an international transaction in order to determine the single nation to which regulatory responsibility will be assigned. The categorization assessment does not turn on the existence or degree of conflict among laws, the significance or insignificance of different states' interests in the transaction, or what the parties may or may not have expected; it instead focuses on the internal characteristics of the law and reaches a conclusion either that the law, because of its public classification, applies of its own force independent of extraneous factors, or that the law, because of its private classification, is eligible for displacement by possibly greater interests. n259 Significantly, though, the fact that a law is within the public law taboo does not mean that its extraterritorial scope is unlimited. The taboo means only that the law's jurisdictional reach is not limited by contractual choice of law or conflicts principles. Congress may constrain the jurisdictional reach of public laws in whatever way it deems appropriate. n260
The displacement of applicable law in international transactions as a result of private contractual election or judicial conflicts analysis is an extraordinary event, sometimes helpful to the advancement of private commercial interests, but potentially injurious to the public good if not appropriately constrained. The "public law taboo" traditionally provided an appropriate constraint, safeguarding from possible displacement "public laws" whose purposes were to advance public interests and prevent public harms, and whose applicability more appropriately turned exclusively on legislative intent. Although the eventual erosion of that constraint was well meaning - intended, as it was, to reduce conflict among laws and increase predictability for international commerce by identifying a single, "most appropriate" regulatory jurisdiction for every international issue or transaction - its actual effect on international commerce has been deleterious.
The erosion of public law constraints on contractual choice of law and conflicts principles, for example, has created a serious risk of underregulation of international commerce. Parties to international transac [*311] tions do not contractually opt out of a given national regulatory scheme or litigate its inapplicability because of a desire for more stringent or burdensome regulation elsewhere. Whenever applicable public law is displaced, the likelihood is that it will be replaced by lesser regulation or a regulatory void, with a possible consequence being the occurrence of precisely the harm that the displaced public law was intended to prevent.
Moreover, the application to public law of the comparative interest balancing principles of conflict of laws has significantly reduced, rather than increased, predictability for international transactions. Interest balancing is inherently backward looking; it is invoked only as a defense in litigation to the application of a particular public law, and its only predictable consequence for international commerce is a significant escalation of litigation risks and costs. The ex ante certainty that the public law of even multiple jurisdictions will apply to an international transaction if the transaction exceeds some threshold of contacts within each jurisdiction (either by virtue of conduct or effects) is far more predictable and beneficial for international commerce than any ex post interest balancing determination of a single applicable law. Only the former situation permits participants in international transactions to account for (or avoid) the cost of compliance in initially structuring their transactions, and only the former situation permits regulating nations to weigh knowingly the benefits and costs of their regulations.
For these reasons, courts should renew their efforts, as the Supreme Court did in Hartford Fire, to differentiate between laws whose public importance is significant enough to warrant disallowing displacement by contractual election or conflicts analysis, and laws that appropriately should remain eligible for displacement in international transactions. The traditional public law/private law dichotomy facilitates this differentiation.
Specifically, the traditional public law/private law dichotomy expresses two dimensions of a law's character that are susceptible to judicial identification and measurement and enable a law's classification for purposes of applying the public law taboo: a public/private dimension and a mandatory/nonmandatory dimension. The former effectively measures the externalities likely to result from noncompliance with or repeal of a law. The latter assesses whether a law regulates private discretion and is not prospectively waivable. The public/private dimension necessarily is a continuum, and the classification outcome a question of predominance: the greater the externalities, the more likely a law should be classified as "public"; the fewer the externalities, the more appropriate a classification as "private." The mandatory/nonmandatory dimension is more binary in nature: A law that restricts private discretion and that is not prospectively waivable is mandatory, while a law that does not restrict private discretion or is prospectively waivable is nonmandatory.
Mandatory public laws automatically should fall within the public law taboo. Nonmandatory public laws should fall within or outside of the taboo depending on the reason for their failure to qualify as mandatory. [*312] All private law, whether mandatory or not, should fall outside the taboo and remain eligible for possible displacement by contractual election or conflicts analysis. This system of classification will be meaningful and manageable for courts and for participants in international transactions. It will safeguard from possible displacement those laws whose public importance is significant enough that they should apply irrespective of private interests or the interests of other nations, and it will reserve for the political arena, instead of an ill-equipped judiciary, any accommodation of public laws that is necessary because of overlapping regulatory interests of several nations.
n1. This Article, throughout its entirety, will use the phrases "conflicts rules," "conflict of laws principles," "conflicts," "conflicts principles," and "choice of law principles" to refer generally to the comparative interest balancing of various nations' relationships to any given international transaction. This is characteristic of most approaches to contract conflict of laws. See text accompanying note 40 and the last sentence of note 50, infra, for further explanation of this usage. I will be explicit whenever I use any of these phrases in a more refined way. In this Article, the phrases "conflicts principles" and "choice of law principles" include contractual autonomy to select applicable law (often referred to in the literature as "party autonomy") unless otherwise specified. This usage is consistent with the convention in traditional conflicts scholarship of including contractual autonomy to select applicable law as an aspect of conflict of laws.
n2. The phrase "public law taboo" seems to have originated with Professor Lowenfeld. See Andreas F. Lowenfeld, Public Law in the International Arena: Conflict of Laws, International Law and Some Suggestions for Their Interaction, 163 Recueil Des Cours 311, 322 (1979) [hereinafter Lowenfeld, Public Law]. It may have been just as accurate to declare a "conflicts taboo" in the realm of public law, but this Article will continue to use Professor Lowenfeld's apt convention.
n3. Carol Harlow, "Public" and "Private" Law: Definition Without Distinction, 43 Mod. L. Rev. 241, 256 (1980).
n4. See Harold G. Maier, Extraterritorial Jurisdiction at a Crossroads: An Intersection Between Public and Private International Law, 76 Am. J. Int'l L. 280, 299 (1982) [hereinafter Maier, Extraterritorial Jurisdiction]; see also Donald T. Trautman, The Role of Conflicts Thinking in Defining the International Reach of American Regulatory Legislation, 22 Ohio St. L.J. 586, 590-91 (1961).
n5. See, e.g., Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287 (3d Cir. 1979); Timberlane Lumber Co. v. Bank of Am., 549 F.2d 597 (9th Cir. 1976).
n6. Restatement (Third) of Foreign Relations Law 401-03 (1987).
n7. See Richards v. Lloyd's of London, 135 F.3d 1289 (9th Cir. 1998); Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285 (11th Cir. 1998); Haynsworth v. The Corporation, 121 F.3d 956 (5th Cir. 1997); Allen v. Lloyd's of London, 94 F.3d 923 (4th Cir. 1996); Roby v. Corporation of Lloyd's, 996 F.2d 1353 (2d Cir. 1993); Bonny v. Society of Lloyd's, 3 F.3d 156 (7th Cir. 1993); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953 (10th Cir. 1992). The Sixth Circuit relied on identical reasoning to displace state securities law claims in Shell v. R.W. Sturge, Ltd., 55 F.3d 1227 (6th Cir. 1995).
n8. In this respect, it is important to distinguish between the displacement of forum public law and the recognition and enforcement of foreign public law, both of which are aspects of the traditional public law taboo. Whereas the former presents risks of significant underregulation of international commerce, the latter may have pro-regulatory effects. See infra text accompanying notes 151-153.
n9. 509 U.S. 764 (1993).
n10. The Supreme Court's international arbitration cases, of course, do extend principles of contractual autonomy to the arbitration of public law claims. See Vimar Seguros Y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1995) (regarding the Carriage of Goods by Sea Act); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (regarding the Sherman Act); Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974) (regarding the Securities Exchange Act of 1934). Yet, none of these cases suggests that applicable U.S. public law may be displaced by contractual election. Because these cases clearly suggest that forum differences often will be accommodated with respect to public law issues, they imply that the Supreme Court might be willing to abandon the public law/private law distinction in the context of permitting U.S. courts to recognize and apply foreign public law even though the Court is not willing to abandon that distinction with respect to the displacement of forum public law. See infra text accompanying notes 130-132 and accompanying text.
n11. 345 U.S. 571 (1953).
n12. 46 U.S.C. app. 688 (1994). The Jones Act provides that qualified injured seamen may bring personal injury suits (essentially common law tort claims) in federal court.
n13. 46 U.S.C. app. 1300-15 (1994).
n14. 17 U.S.C. 1101 (1994).
n15. See Hans W. Baade, The Operation of Foreign Public Law, 30 Tex. Int'l L.J. 429, 447, 478 (1995); Andreas F. Lowenfeld, International Litigation and Arbitration 1 (1993) [hereinafter Lowenfeld, International Litigation] ("Traditionally, in all countries, conflict of laws has been confined to controversies under private law."). This principle is also reflected in the organization of private law by category in most leading conflicts of laws treatises' tables of contents. See Eugene F. Scoles & Peter Hay, Conflict of Laws (2d ed. 1992); Russell J. Weintraub, Commentary on the Conflict of Laws (3d ed. 1986) [hereinafter Weintraub, Commentary].
n16. Restatement (Second) of Conflicts of Law 188 (1971).
n17. Convention on the Law Applicable to Contractual Obligations, opened for signature June 19, 1980, art. 4 O.J. (L 266) 1 (EEC) [hereinafter CLACO].
n18. See Restatement (First) of Conflicts of Law 332 (1934).
n19. See Weintraub, Commentary, supra note 15, at 397-98; Larry Kramer, Rethinking Choice of Law, 90 Colum. L. Rev. 277, 329-34 (1990).
n20. The term "party autonomy," as used to indicate the parties' ability to designate the law that will apply to an international transaction, is something of a "stepchild" in conflicts theory insofar as none of the dominant approaches to contractual choice of law even considers party preference as to governing law. Patrick J. Borchers, The Internationalization of Contractual Conflicts Law, 28 Vand. J. Transnat'l L. 421, 436 (1995); Edith Friedler, Party Autonomy Revisited: A Statutory Solution to a Choice-of-Law Problem, 37 U. Kan. L. Rev. 471, 472-84 (1989); see also supra notes 15-18 and accompanying text. Nonetheless, party autonomy has been called "perhaps the most widely accepted private international law rule of our time." Russell J. Weintraub, Functional Developments in Choice of Law for Contracts, 187 Recueil des Cours 239, 271 (1984) [hereinafter Weintraub, Functional Developments]. It has been recognized as a doctrine of conflict of laws since the nineteenth century in the United States, the eighteenth century in England, and even centuries earlier on the European Continent. See Ian F. G. Baxter, International Business and Choice of Law, 36 Int'l & Comp. L.Q. 92, 95 (1987); Borchers, supra, at 432; Friedler, supra, at 471; Hessel E. Yntema, "Autonomy" in Choice of Law, 1 Am. J. Comp. L. 341, 348-51 (1952) [hereinafter Yntema, "Autonomy"]. The states or nations whose laws parties may contractually designate as governing sometimes are limited to those with a "reasonable relation" to the parties or their transaction. U.C.C. 1-105(1) (1997), 1 U.L.A. 29 (1989). More often, however, party choice is unrestricted in this regard. See, e.g., Borchers, supra, at 433.
n21. See Scoles & Hay, supra note 15, at 658-734 (summarizing approaches to contracts choice of law); Weintraub, Commentary, supra note 15, at 362-411 (summarizing approaches to contracts choice of law).
n22. See, e.g., U.C.C. 1-105(1) (1997), 1 U.L.A. 29 (1989) ("Except as provided hereafter in this section, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties."); U.N. Conference on Contracts for the International Sale of Goods art. 6, U.N. Doc. A/Conf. 97/18 (1980), 52 Fed. Reg. 6264 (1987), 19 I.L.M. 668 (1980) [hereinafter CISG] ("The parties may exclude the application of this Convention or, subject to [the article concerning a writing], derogate from or vary the effect of any of its provisions."). Section 187 of the Restatement (Second) of Conflict of Laws, concerning the "Law of the State Chosen by the Parties," is also silent about the public law boundaries that traditionally have confined its provisions. It does, however, suggest that a "fundamental policy" of a state with a "materially greater interest" in the particular issue than the chosen state might negate the parties' choice. See Restatement (Second) of Conflict of Laws 187(2)(b) (1971). See also infra note 32 and accompanying text.
n23. See Holman v. Johnson, 1 Cowp. 341, 343 (1775) (Mansfield, J.) ("No country ever takes notice of the revenue laws of another."); Restatement (First) of Conflict of Laws 610 (1934) ("No action can be maintained on a right created by the law of a foreign state as a method of furthering its own governmental interests."); A.V. Dicey & J.H.C. Morris, The Conflict of Laws 75 (J.H.C. Morris ed., 9th ed. 1973) (noting that courts "have no jurisdiction to entertain an action ... for the enforcement ... of a penal, revenue, or other public law of a foreign State"); Lowenfeld, International Litigation, supra note 15, at 1 ("If...a controversy before the court concerns a ... public law, the thought that State A might apply the law of State B seems to be out of the question. In such cases, the forum either applies its own law, or if there is no basis for doing that, dismisses the action."); see also, e.g., Roby v. Corp. of Lloyd's, 996 F.2d 1353, 1362 (2d Cir. 1993)("Neither an English court nor an English arbitrator would apply the United States securities laws, because English conflict of law rules do not permit recognition of foreign tort or statutory law.").
n24. Judge Learned Hand once hypothesized that the rationale for this aspect of the public law taboo was a dual concern about the impropriety of scrutinizing another sovereign's law and the impropriety of a court enforcing a law it hasn't scrutinized. See Moore v. Mitchell, 30 F.2d 600, 604 (2d Cir. 1929); see also Maier, Extraterritorial Jurisdiction, supra note 4, at 290.
n25. See Lowenfeld, International Litigation, supra note 15, at 1; William S. Dodge, Extraterritoriality and Conflict-of-Laws Theory: An Argument for Judicial Unilateralism, 39 Harv. Int'l L. J. 101, 109 (1998) (noting that, "A U.S. court will apply foreign tort or contract law to decide a case before it, but it will not apply foreign regulatory law like antitrust law. If foreign law is deemed to govern in an antitrust case, the court will simply dismiss..."). Recently, however, that aspect of the public law taboo concerning the enforcement of foreign public law has begun to erode. See infra Part III.D; see also supra note 10 and accompanying text.
n26. Henri Batiffol, Public Policy and the Autonomy of the Parties: Interrelations between Imperative Legislation and the Doctrine of Party Autonomy, in Lectures on the Conflicts of Law and International Contracts 68, 79 (Hessel E. Yntema reprint ed., 1982) (quoting Ernst Rabel, 2 The Conflict of Laws: A Comparative Study (1947)). See also Compania de Inversiones Internationales v. Industrial Mortgage Bank of Finland, 198 N.E. 617, 621 (1935), cert. denied, 297 U.S. 705 (1936) ("The joint resolution [of Congress] has thus revealed clearly the intention of the Congress to regulate the kind and amount of the currency wherewith the obligation may be discharged....The parties to a contract may not by their intention, however expressed, override the [public] laws of the country in which suit is brought....").
n27. Yntema, "Autonomy," supra note 20, at 343. See also, e.g., Knott v. Botany Mills, 179 U.S. 69, 71 (1900) (nullifying a contractual choice of law clause that, if given effect, would have displaced mandatory provisions of the U.S. Harter Act of 1893 (codified as amended at 46 U.S.C. 190-96 (1994))). This same rule should apply as well to forum selection and arbitration clauses: a nonselected forum should not dismiss an action subject to such a clause if to do so would result in the displacement of mandatory forum public law. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 637 n.19 (1985) (noting that the Court "would have little hesitation in condemning" a contract in which "the choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party's right to pursue statutory remedies"); Akai Party Ltd. v. The People's Ins. Co. Ltd., (1996) 71 A.L.R. 156 (Austl.) (refusing to enforce choice-of-forum and choice-of-law clauses in an insurance contract designating an English forum and English law when enforcement of choice clauses would displace the Australian Insurance Contracts Act of 1984); The Hollandia,  App. Cas. 565, 574-75 (H.L. 1982) (appeal taken from Eng.) (refusing enforcement of a choice-of-forum clause that would have displaced the applicable English Carriage of Goods by Sea Act (1971)); Weintraub, Functional Development, supra note 20, at 296 ("If a forum's mandatory rule ... would not yield to a clause choosing the law of another country, then it is inconsistent to permit forum law to be evaded by a clause requiring litigation in a court that would not apply the forum's mandatory rule.").
n28. See, e.g., Batiffol, supra note 26, at 79; Bernardo M. Cremades & Steven L. Plehn, The New Lex Mercatoria and the Harmonization of the Laws of International Commercial Transactions, 2 B.U. Int'l L.J. 317, 325 n.37 (1984) ("Contractual freedom and ... mandatory national laws are different sides of the same coin; one begins where the other one ends."); Joel R. Paul, Comity in International Law, 32 Harv. Int'l L.J. 1, 28 (1991) (noting that European courts use "the principles of loi de police or ordre public to supersede other conflict-of-laws rules and impose domestic law without regard for the public policy of the foreign sovereign"); Hans Smit, The Future of International Commercial Arbitration: A Single Transnational Institution?, 25 Colum. J. Transnat'l L. 9, 23 (1986) ("The autonomy of parties in choosing the applicable law is not absolute; for example, the parties may not ... evade mandatory rules of law that would otherwise be applicable."); Michael Whincop & Mary Keyes, Putting the "Private' Back Into Private International Law: Default Rules and the Proper Law of the Contract, 21 Melb. U. L. Rev. 515, 521 (1997) (noting that, "subject to normal questions of statutory interpretation ... courts will apply mandatory legislative provisions of the forum notwithstanding the choice of another legal system as the proper law of the contract"); Yntema, "Autonomy," supra note 20, at 343.
n29. Article 7(2) of the Convention, which limits both party autonomy to choose applicable law as stipulated in article 3(1) and the choice of law rules that apply in the absence of party choice as promulgated in article 4, provides that, "nothing in this Convention shall restrict the application of the rules of law of the forum in a situation where they are mandatory irrespective of the law otherwise applicable to the contract." CLACO, supra note 17, arts. 3(1), 4, 7(2). The official report on the Convention notes that, "The origin of [article 7(2)] is found in the concern of certain delegations to safeguard the rules of the law of the forum (notably rules on cartels, competition and restrictive practices, consumer protection and certain rules concerning carriage) which are mandatory in the situation whatever the law applicable to the contract may be." See Mario Giuliano & Paul Lagarde, Report on the Convention on the Law Applicable to Contractual Obligations, 1980 O.J. (c 282) 1, 28.
n30. Loucks v. Standard Oil Co., 224 N.Y. 99, 111 (1918) (concerning a conflict between the New York and Massachusetts approaches to the doctrine of respondeat superior).
n31. CLACO, supra note 17, art. 16.
n32. See Restatement (Second) of Conflict of Laws 187(2)(b) (1971)(noting that party designated law need not be applied if "contrary to a fundamental policy of a state which has a materially greater interest ... and which, under the rule of 188, would be the state of the applicable law in the absence of an effective choice of law by the parties"). Unlike the traditional "public policy" exception, section 187 of the Second Restatement obviously contemplates that the public policy of the state whose law would have applied in the absence of the party designation also may limit the application of party designated law, regardless of the forum state. Also, unlike the traditional formulation, this section of the Restatement speaks of a "fundamental policy" exception rather than a "public policy" exception. There has been some scholarly discussion about whether or not those two concepts are identical in practice. See, e.g., Friedler, supra note 20, at 491-92, 512-13; Richard J. Bauerfield, Note, Effectiveness of Choice-of-Law Clauses in Contract Conflicts of Law: Party Autonomy or Objective Determination?, 82 Colum. L. Rev. 1659, 1675 n.106 (1982) [hereinafter Bauerfield, Note, Effectiveness of Choice-of-Law Clauses]. The public policy exception is not explicit in section 188 of the Second Restatement, which establishes a "most significant relationship" standard for determining the law applicable to a transaction in the absence of an effective choice by the parties. The traditional universality of the public policy exception implicitly would seem to modify section 188, however, at least when the law having the "most significant relationship to the transaction and the parties" is not also the law of the forum. Restatement (Second) of Conflict of Laws 188 (1971). Section 6 of the Second Restatement arguably imposes the exception explicitly by requiring the forum court to "follow a statutory directive of its own state on choice of law," or to consider "the relevant policies of the forum" if there is none. Id. 6.
n33. See Monrad G. Paulsen & Michael I. Sovern, "Public Policy" in the Conflict of Laws, 56 Colum. L. Rev. 969, 987 (1956) (noting that public policy easily can "serve as a substitute for thinking"); Borchers, supra note 20, app. B at 462 (attaching a letter from Professor Larry Kramer asserting that "judges frequently and easily use [the Second Restatement's fundamental policy exception] to avoid the parties' choice"); David Clifford Burger, Note, Transnational Public Policy as a Factor in Choice of Law Analysis, 5 N.Y.L. Sch. J. Int'l & Comp. L. 367, 369 (1984) [hereinafter Burger, Transnational Public Policy] (noting "the failure of the current conception of public policy to provide a structured, analytical framework for choice of law purposes"); Bauerfield, Note, Effectiveness of Choice-of-Law Clauses, supra note 32, at 1675 (noting that a review of the case law had revealed that "courts too readily invoke the [public policy] exception in lieu of careful analysis").
n34. One commenator has noted:
Employing [the principle of public policy], a court would first be directed to apply foreign law under ordinary choice of law analysis. After an examination of the foreign law, however, the court [might] find the foreign law or its effect at odds with fundamental principles of the forum, and thus reject application of the offensive foreign law.".
Burger, Transnational Public Policy, supra note 33, at 377.
n35. The outcomes of these and similar issues vary. See, e.g., Woods-Tucker Leasing Corp. v. Hutcheson-Ingram Dev. Co., 642 F.2d 744, 750-51 (5th Cir. 1981) (regarding usury issues and conflicts analysis); Restatement (Second) Conflict of Laws 203 (1971) (suggesting a rule of validation for usury issues if "not greatly in excess" of the rate permitted by the "state of the otherwise applicable law"); Bauerfield, Note, Effectiveness of Choice-of-Law Clauses, supra note 32, at 1672-73. Questions of public policy most often arise when the issue of applicable law affects contract validity as opposed to simply its construction or interpretation. See, e.g., Weintraub, Commentary, supra note 15, at 362-63; Weintraub, Functional Developments, supra note 20, at 252-54, 272. See also infra Part VI.B, with emphasis on text accompanying notes 236-238 (discussing why the typically mandatory private laws mentioned in the above text remain within the scope of conflicts analysis, while mandatory public laws such as antitrust and securities fall outside its scope).
n36. This proposition is illustrated by the fact that the European Community's Convention on the Law Applicable to Contractual Obligations deals with the public law taboo and the public policy exception in separate articles. See CLACO, supra note 17, arts. 7, 16.
n37. See Richards v. Lloyd's of London, 135 F.3d 1289 (9th Cir. 1998); Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285 (11th Cir. 1998); Haynsworth v. The Corporation, 121 F.3d 956 (5th Cir. 1997); Allen v. Lloyd's of London, 94 F.3d 923 (4th Cir. 1996); Roby v. Corp. of Lloyd's, 996 F.2d 1353 (2d Cir. 1993); Bonny v. Society of Lloyd's, 3 F.3d 156 (7th Cir. 1993); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953 (10th Cir. 1992).
n38. See O. Kahn-Freund, General Problems of Private International Law 149 (1976) ("We know that no country applies a foreign rule if the result of doing so would be at variance with its fundamental principles and policies."); Paul, supra note 28, at 34-35 ("Civil-law courts have liberally applied public policy exceptions ... to block the operation of offending foreign laws.").
n39. Baade, supra note 15, at 453 (emphasis added). As Professor Baade's reference to "ordre public international" suggests, nations often distinguish between international public policy and domestic public policy, with the scope of the former being much narrower than the scope of the latter. Only the former, moreover, applies in an international conflict of laws setting, thereby permitting the domestic application of a foreign law that is different from forum law, but not so different that its application offends the forum's notions of international public policy. International public policy still only applies in a private law context, however, and thus does not operate to permit the displacement of forum public law.
n40. See supra Part II.A, particularly text accompanying notes 16-19; Albert A. Ehrenzweig, A Counter-Revolution in Conflicts Law? From Beale to Cavers, 80 Harv. L. Rev. 377 (1966); Burger, Transnational Public Policy, supra note 33, at 368 n.8.
n41. See Laker Airways Ltd. v. Sabena, Belgian World Airways, 731 F.2d 909, 922 (1984) ("When the national of one state causes substantial effects in another state, both states may potentially have jurisdiction to prescribe governing law. Thus, under international law, territoriality and nationality often give rise to concurrent jurisdiction."); Baade, supra note 15, at 443 ("International law ... contemplates concurrent and possibly conflicting penal jurisdiction and hence, conflicting regulatory rules enforced by penalties."). Jurisdiction to prescribe concerns the authority of a state to make its law applicable to persons or activities. See Restatement (Third) of Foreign Relations Law 401(a) (1988); Restatement (Second) of Foreign Relations Law 6, 17, 18 (1965). Whether or not an exercise of prescriptive jurisdiction is effective can turn on a state's jurisdiction to adjudicate, which concerns the authority of a state to subject persons or things to its judicial process (e.g., in personam jurisdiction and subject matter jurisdiction), and on a state's jurisdiction to enforce, which concerns the authority of a state to compel compliance or punish noncompliance with its laws. Restatement (Third) of Foreign Relations Law 401(b)-(c).
n42. Section 40 of the Restatement (Second) of Foreign Relations Law urged states to consider moderating their enforcement of properly prescribed law when the laws of two states "require inconsistent conduct upon the part of a person" (emphasis added). In that narrow situation, each forum state was urged to consider the relative interests of all regulating states. Id. 40(a). As Professor Maier has noted, "the reasonableness requirement in section 40 is not relevant to whether prescriptive ... jurisdiction exists ab initio." Maier, Extraterritorial Jurisdiction, supra note 4, at 294 n.67. Accommodating such compulsion to act inconsistently with properly prescribed law is essentially a purpose of the foreign sovereign compulsion and act of state doctrine defenses. See generally Lowenfeld, International Litigation, supra note 15, chs. 8-9.
n43. See Louise Weinberg, Against Comity, 80 Geo. L.J. 53, 61 (1991) ("In international cases... when defendants argue against application of an act of Congress, courts are likely simply to construe the act to discover the extraterritorial intention of Congress. In such cases foreign law rarely enters the discussion."); Maier, Extraterritorial Jurisdiction, supra note 4, at 291 ("In the regulatory cases, the Restatement (Second) of Conflicts and the Restatement (Second) of Foreign Relations Law combine with statutory construction maxims to encourage an analytical approach that discourages overt consideration of the effect of an assertion of jurisdiction to prescribe or enforce in light of the needs of the transnational legal system."); Diane P. Wood, Conflicts of Jurisdiction in Antitrust Law: A Comment on Ordover and Atwood, 50 Law & Contemp. Probs. 179, 183 (1987) ("Once a particular country is satisfied that its own claim to jurisdiction is validly based, both the desirability and the need to adopt any conflict avoidance mechanism vanishes.").
n44. 148 F.2d 416 (2d Cir. 1945).
n45. The Second Circuit in Alcoa was sitting as a court of last resort by virtue of an assignment from the Supreme Court, which had been unable to muster a quorum of six unrecused Justices to hear the case. See id. at 421. The Supreme Court noted subsequently that this circumstance "adds" to "[Alcoa's] weight as a precedent." American Tobacco Co. v. United States, 328 U.S. 781, 811 (1946).
n46. See Sherman Act, 15 U.S.C. 1.
n47. See United States v. Aluminum Co. of Am., 148 F.2d at 439-43.
n48. See id. at 443-45.
n49. Id. at 443 (emphasis added). See infra notes 191 and accompanying text, for a discussion of why the Supreme Court's later decision in Lauritzen v. Larsen, 345 U.S. 571 (1952), does not contradict this assertion by the Alcoa Court. In Lauritzen, the Court explicitly assessed the regulatory interests of other nations in determining the jurisdictional reach of the Jones Act, 46 U.S.C. 688, which allows injured seamen to maintain personal injury damages actions in U.S. courts.
n50. The limits on prescriptive jurisdiction customarily observed by nations at the time of the Alcoa decision (and as Part IV demonstrates) obviously did not include deferring the exercise of otherwise permissible jurisdiction to the "superior" interest of another state. See supra notes 40-43 and accompanying text. Thus, Judge Hand's reference to "the limitations customarily observed by nations upon the exercise of their powers" and his subsequent equation of those limitations with the "limitations which generally correspond to those fixed by the "Conflict of Laws,'" 148 F.2d at 443, clearly did not mean that Judge Hand was suggesting or using in his analysis of the jurisdictional reach of U.S. antitrust law a "comparative interest balancing" approach to resolving conflicts typical of the private law arena. See supra note 40 and accompanying text. Instead, he explained the "limitations" to which he referred exclusively in terms of the sufficiency of the relationship between the transaction or activities and the nation whose prescriptive jurisdiction is at issue. See infra text accompanying notes 51-52; see also Restatement (First) of Conflicts 65 cmt. a (1934) ("If consequences of an act done in one state occur in another state, each state in which any event in the series of act and consequences occurs may exercise legislative jurisdiction ...."). One author has suggested that "conflict of laws" includes noncomparative, "unilateral" approaches to determining the jurisdictional reach of public law, and therefore, that it is improper to suggest that courts traditionally have not applied a "conflict of laws" approach to public law. See Dodge, supra note 25, at 143-44. I tend to view that suggestion as mistaken, or at best, as splitting hairs, but in all events, I am using in this Article the conventional understanding of the relationship between public law and conflicts law - namely, that public law traditionally has been outside the scope of conflict of laws/private international law and not simply within a unilateralist school of conflicts analysis.
n51. United States v. Aluminum Co. of Am., 148 F.2d at 444.
n52. Id. at 443. Judge Hand's statement of this "traditional" rule obviously overlooked Justice Holmes' statement in American Banana Co. v. United Fruit Co., 213 U.S. 347, 356 (1909), that, "the general and almost universal rule is that the character of an act as unlawful must be determined wholly by the law of the country where the act was done." The American Banana Court consequently refused application of the Sherman Act to an alleged conspiracy in Costa Rica between United Fruit Company (an American corporation) and the Government of Costa Rica to prevent American Banana Company (also an American company) from growing bananas in Costa Rica and shipping them to the United States for sale. Although never formally overruled, it seems clear that American Banana did not survive Alcoa. See, e.g., Russell J. Weintraub, The Extraterritorial Application of Antitrust and Securities Laws: An Inquiry into the Utility of a "Choice-of-Law" Approach, 70 Tex. L. Rev. 1799, 1808 (1992) [hereinafter Weintraub, Extraterritorial Application]; Note, Extraterritorial Application of United States Laws: A Conflict of Laws Approach, 28 Stan. L. Rev. 1005, 1009 n.23 (1976). The American Banana strict territorial approach to prescriptive jurisdiction likely would result in different outcomes in many international transactions than the Alcoa "intended effects" test, as well as a far greater accommodation of foreign regulatory interests. That is, the American Banana test typically results in a single nation having regulatory authority; the Alcoa test permits regulation by multiple nations. However, both tests are noncomparative in application insofar as each focuses on the sufficiency of a transaction's contacts with the candidate regulating nation rather than on how those contacts compare or "balance" in relation to the transaction's contacts with other nations.
n53. Issues concerning the reach or scope of a nation's prescriptive jurisdiction arise most typically when there is some "extraterritorial" aspect to the application of the prescribing nation's law, as when the objects of the particular regulatory assertion are foreign nationals or conduct occurring abroad - factors present in most multinational transactions. The "intended effects" test does not result in an "extraterritorial" assertion of jurisdiction in the sense that nothing of regulatory significance occurs in the regulating nation - effects do. See, e.g., Laker Airways Limited v. Sabena, Belgian World Airways, 731 F.2d 909, 923 (1984). This Article's consideration of the "extraterritorial" reach of public law is essentially confined to the question of whether the judicial determination of that issue has included or should include "comparative interest balancing" typical of conflict of laws, or whether instead the judicial determination of that issue should be confined to the traditionally non-comparative inquiry into Congressional intent (i.e., this Article considers only whether it makes sense to restore a categorical exemption of "mandatory public laws" from judicially applied contract choice of law principles). I will not otherwise address in any detail the important question of what rules of construction or other standards should govern the judicial inquiry into issues of public law "extraterritoriality." The literature on that question is abundant and voluminous. See, e.g., Margaret Sachs, The International Reach of Rule 10b-5: The Myth of Congressional Silence, 28 Colum. J. Transnt'l L. 677, 682-83 n.23 (1990); see generally Jonathan Turley, When in Rome: Multinational Misconduct and the Presumption Against Extraterritoriality, 84 Nw. U. L. Rev. 598 (1990); Symposium, Extraterritoriality of Economic Legislation, 50 Law & Contemp. Probs., No. 3 (1987).
n54. The traditional bases of prescriptive jurisdiction, in addition to "intended effects" within the prescribing territory, are conduct within the territory of the prescribing nation and regulation of the activities of nationals of the prescribing nation wherever the activities occur. See Restatement (Second) of Foreign Relations Law 17 (1965); see also Maier, Extraterritorial Jurisdiction, supra note 4, at 293 n.63 (identifying additional bases of prescriptive jurisdiction outside of a commercial context, such as when dealing with international terrorism).
n55. See discussion infra Part III, Subparts III.A and III.B.
n56. United States v. Aluminum Co. of Am., 148 F.2d at 443.
n57. Restatement (Second) of Foreign Relations Law 17(a).
n58. Restatement (Second) of Foreign Relations Law 18(b).
n59. See Maier, Extraterritorial Jurisdiction, supra note 4, at 292-93. See supra note 42 and accompanying text for an explanation of why section 40 of the Second Restatement of Foreign Relations does not undercut my assertion about the Second Restatement's essentially non-comparative approach to prescriptive jurisdiction.
n60. Most of the case law and commentary concerns the international reach of the antifraud provisions of the Securities Exchange Act, specifically Section 10(b) and Rule 10b-5 (Securities Exchange Act of 1934 10(b), 15 U.S.C. 78j(b) (1996) and 17 C.F.R. 240.10b-5 (1996)), which generally prohibit any person from using the means and instrumentalities of interstate commerce to effect fraudulent securities transactions. See generally Sachs, supra note 53, at 682 n.19, 682-83 n.23; Turley, supra note 53, at 614. Other provisions of the Securities Acts, including their registration and filing requirements, do not have equally extensive international application. Id. See also Robert Hacker & Ronald Rotunda, The Extraterritorial Regulation of Foreign Business Under the U.S. Securities Laws, 59 N.C.L. Rev. 643, 649; Weintraub, Extraterritorial Application, supra note 52, at 1814; 17 C.F.R. 230.901-.904 (1991) (establishing Regulation S, which eliminates the requirement of registration under the Securities Act of 1933, 15 U.S.C. 77e (1988) for offers and sales of securities that occur outside the United States).
n61. See Robinson v. TCI/US West Cable Communications Inc., 117 F.3d 900, 904-05 (5th Cir. 1997).
The Exchange Act does [not explicitly] address the circumstances under which American courts have subject matter jurisdiction to hear suits involving foreign transactions.... The courts... have created two basic tests[:] ... the "conduct' test, which in essence asks whether the [allegedly] fraudulent conduct ... occurred in the United States, and the "effects' test, which asks whether conduct outside the United States has had a substantial adverse effect on American investors or securities markets.
Id.; see also Turley, supra note 53, at 613; Hacker & Rotunda, supra note 60, at 656-66.
n62. See, e.g., Robinson, 117 F.3d at 905-06, in which the Fifth Circuit stated:
The circuits are divided as to precisely what sort of activities are needed to satisfy the conduct test.... The more restrictive position - that the domestic conduct must have been of "material importance' to or have "directly caused' the fraud complained of - is followed in the Second and District of Columbia Circuits [which we now adopt].
See also, e.g., Alfadda v. Fenn, 935 F.2d 475, 478 (2d Cir. 1991) (applying antifraud provisions because the "defendant's conduct in the United States was more than merely preparatory to the fraud, and ... directly caused losses to foreign investors abroad"); Bersch v. Drexel Firestone, Inc., 519 F.2d 974, 989 (2d Cir. 1975) (applying antifraud provisions "only when [the foreign acts] result in injury to purchasers or sellers ... in whom the United States has an interest, not where acts simply have an adverse affect [sic] on the American economy or American investors generally"); Leasco Data Processing Equipment Corp. v. Maxwell, 468 F.2d 1326, 1337 (2d Cir. 1972) ("It tips the scales in favor of applicability when substantial misrepresentations were made in the United States.").
n63. The lack of a transaction's connection with the United States, of course, often inevitably reveals a stronger connection between the transaction and some other potential prescribing jurisdiction. See, e.g., Zoelsch v. Arthur Andersen & Co., 824 F.2d 27, 34 (D.C. Cir. 1987) (noting that the fraudulent "core" occurred in West Germany and any misrepresentations in the United States were not "sufficiently in connection with the purchase or sale of any security"); Mormels v. Girofinance, S.A., 544 F. Supp. 815, 818 (S.D.N.Y. 1982) (noting that defendants committed the "crucial acts" of fraud in Costa Rica; any U.S. acts were of a "secondary nature"). The basis of decisions refusing to apply U.S. securities law still is the insufficiency of the contacts or effects in the United States, not the comparatively greater connection between the transaction and some other jurisdiction despite the sufficiency of the contacts or effects in the United States. See also, Maier, Extraterritorial Jurisdiction, supra note 4, at 298.
n64. Traditionally, the Supreme Court has weighed territorial constraints far more heavily in considering the extraterritorial application of public laws outside the antitrust and securities areas, such as labor law. In Foley v. Filardo, 336 U.S. 281 (1949), for example, the Court invoked the "canon of construction which teaches that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States," in holding that the federal Eight Hour Law, (40 U.S.C. 324-25 (1940), which imposes overtime compensation for work in excess of eight hours a day did not apply to protect a U.S. employee of a U.S. company abroad. The Supreme Court invoked the same canon more recently to deny extraterritorial application to Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000a-2000h-6 (1992). See EEOC v. Arabian American Oil Co., 111 S.Ct. 1227, 1230-35 (1991) (holding that Title VII does not apply to U.S. citizens employed abroad by U.S. employers). This result has since been overturned by Congress. See 42 U.S.C. 2000e(f), 12111(4) (1991). These cases sometimes express a concern that applying U.S. law would interfere unduly with the regulatory prerogative of foreign nations. See, e.g., Foley v. Filardo, 336 U.S. at 286 ("An intention ... to regulate labor conditions which are the primary concern of a foreign country should not be attributed to Congress in the absence of a clearly expressed purpose."). But this generalized concern works to constrain all extraterritorial applications of the particular law, not a specific one that constrains a specific application in light of the comparatively greater regulatory interest of a specific nation. Thus, although limiting the application of these public laws to the territorial boundaries of the United States obviously results in greater comity or deference to other regulatory jurisdictions, the canon of construction itself is no more comparative or conflicts like than the "conduct" and "intended effects" tests of extraterritoriality in the antitrust and securities areas.
n65. See W. Ivor Jennings, The Institutional Theory, in Modern Theories of Law 68, 72 (1933) ("Public law ... is gradually eating up private law."); Lowenfeld, Public Law, supra note 2, at 325 ("Governments regulate ... more and more activity of all kinds."); John Henry Merryman, The Public Law-Private Law Distinction in European and American Law, 17 J. Pub. L. 3, 15 (1968) ("Today it is common for the state to "intervene' in the society and the economy. The individualistic state of the 19th century has been replaced by the social state of the 20th century."); Roscoe Pound, Public Law and Private Law, 24 Cornell L.Q. 469, 470 (1939) [hereinafter Pound, Public Law](discussing "the disappearance of private law"); Trautman, supra note 4, at 601 (noting "the increasing scope of public regulation").
n66. See Mary Ann Glendon, The Sources of Law in a Changing Legal Order, 17 Creighton L. Rev. 663, 666-68 (1984) (discussing "the rise of statutory law"); Joel P. Trachtman, Conflict of Laws and Accuracy in the Allocation of Government Responsibility, 26 Vand. J. Transnat'l L. 975, 983 (1994) (noting "the problem of increased statutory and regulatory law").
n67. See, e.g., Baade, supra note 15, at 435 ("Private law, too, serves a governmental purpose."); Trachtman, supra note 66, at 997 ("Sometimes the public interest is the protection of private interests."); id. at 1009 ("Provided one accepts as part of public policy ... the interest in efficiency in private transactions, there is no longer a preserved sphere for private law."). See also Baade, supra note 15, at 437 (noting that Professor Currie's "government interests [conflicts] analysis ... has the potential for overcoming the public-private distinction in the conflict of laws altogether" because "if even private-law disputes can be resolved by a process which attributes a governmental purpose to each and every rule of law adopted by a sovereign state, public-law conflicts can, by definition, be resolved at least as easily through the application of the same scheme"). Professor Baade concluded that government interests analysis alone, however, has not resulted in the abrogation of the public/private distinction because Professor Currie's method started as a "private-law method in one country and still encounters resistance even there." But cf., Lowenfeld, Public Law, supra note 2, at 335 ("The governmental interests of which Currie and his followers speak in the private law contexts are imaginary: governments ... do not really care about whether the driver of an automobile is liable to a passenger....").
n68. Trachtman, supra note 66, at 985.
n69. Lowenfeld, Public Law, supra note 2, at 325.
n70. Harlow, supra note 3, at 246.
n71. Lowenfeld, Public Law, supra note 2, at 326.
n72. Trautman, supra note 4, at 590.
n73. Maier, Extraterritorial Jurisdiction, supra note 4, at 299.
n74. See Lowenfeld, Public Law, supra note 2, at 367; see generally Kingman Brewster, Jr., Antitrust and American Business Abroad (1958).
n75. Lowenfeld, Public Law, supra note 2, at 350; see also Lea Brilmayer, The Extraterritorial Application of American Law: A Methodological and Constitutional Appraisal, 50 Law & Contemp. Probs. 11 (1987); Larry Kramer, Vestiges of Beale: Extraterritorial Application of American Law, 1991 Sup. Ct. Rev. 179; Maier, Extraterritorial Jurisdiction, supra note 4, at 287.
n76. I am using comity in this context, as I believe these commentators use that term, to express essentially a rule of choice of law reflecting an appropriate concern for the interests and concerns of other nations in addition to the forum's. See Paul, supra note 28, at 3-4; Maier, Extraterritorial Jurisdiction, supra note 4, at 318; and Weintraub, Extraterritorial Application, supra note 52, at 1801.
n77. See United States v. Aluminum Co. of Am., 148 F.2d 416, 443 (1945).
n78. Lowenfeld, Public Law, supra note 2, at 380. Cf., Weinberg, supra note 43, at 59 ("Words like comity ... have a deceptively right ring, like good breeding and sweet disposition.").
n79. Trautman, supra note 4, at 586.
n80. Brewster, supra note 74, at 298; see also Kenneth W. Dam, Extraterritoriality in an Age of Globalization: The Hartford Fire Case, 1993 Sup. Ct. Rev. 289, 324.
n81. See Maier, Extraterritorial Jurisdiction, supra note 4, at 318; see also Lowenfeld, Public Law, supra note 2, at 380.
n82. See, e.g., Lowenfeld, Public Law, supra note 2, at 411 (noting also that this "function... can and should be performed by judges..."); Paul, supra note 28, at 160 n.335 (citing authorities). Some of these authors also press the notion that judicial deference to the interests and laws of other nations will result in greater "reciprocity" by other nations to the enforcement of U.S. law. See, e.g., Lowenfeld, Public Law, supra, at 417. But cf. Weinberg, supra note 43, at 54 (questioning this notion).
n83. Maier, Extraterritorial Jurisdiction, supra note 4, at 319. See also Friedler, supra note 20, at 503 ("Predictability in international business transactions is an important state policy that creates a legitimate state interest."); Trachtman, supra note 66, at 998 ("Predictability is the type of private value that also should be considered a public value in a market economy.").
n84. The works urging the application of conflicts principles to public law employ this assumption. See, e.g., Brewster, supra note 74, at 298; Lowenfeld, Public Law, supra note 2, at 380; Maier, Extraterritorial Jurisdiction, supra note 4, at 319; Trautman, supra note 4, at 586; see also, e.g., Weinberg, supra note 43, at 64 (citing authors who believe that "facilitation of multistate activity should be a general goal of choice of law").
n85. Joseph H. Beale, A Treatise on the Conflict of Laws 46 (1935). This concern, of course, is the underlying premise of Professor Beale's "vested rights" theory of conflicts as applied to private law: each legal relationship has a single proper "seat" and consequently is governed only by the law of that state.
n86. Cf. Lauritzen v. Larsen, 345 U.S. 571, 581 (1953) ("The virtue...of sea-borne commerce lies in its frequent ... contacts with more than one country. If ... the courts of each were to exploit every such contact to the limit of its power ... a multiplicity of conflicting and overlapping burdens would blight international carriage by sea.").
n87. 549 F.2d 597 (9th Cir. 1976).
n88. Turley, supra note 53, at 613.
n89. 549 F.2d at 601.
n90. 549 F.2d at 601, 613. The district court had dismissed the complaint, reasoning in part that the effect of the alleged conspiracy in the United States was insufficiently substantial. Id. at 601. The Ninth Circuit disagreed with this factual conclusion, noting that "the magnitude of the effect alleged would appear to be sufficient to state a claim," along with the test of jurisdiction itself. Id. at 615. The Ninth Circuit also held, contrary to the district court, that Timberlane's complaint was not precluded by the act of state doctrine. Id. at 608.
n91. Id. at 611-12.
n92. Id. at 613.
n93. See id.
n94. Id. at 614. The Court writes:
Timberlane's other "interest balancing" factors included the nationality or allegiance of the parties and the locations or principal places of business or corporations, the extent to which enforcement by either state can be expected to achieve compliance, ... the extent to which there is [an] explicit purpose to harm or affect American commerce, the foreseeability of such effect, and the relative importance to the violations charged of conduct within the United States as compared with conduct abroad.
Id. The Timberlane factors were very similar to those Professor Brewster had suggested judges weigh when considering the application of U.S. antitrust law to international transactions. See Brewster, Antitrust and American Business Abroad, supra note 74, at 446. On remand, the district court dismissed the Timberlane complaint (574 F. Supp. 1453 (N.D. Calif. 1983)), and the Ninth Circuit affirmed, noting a relatively "minimal" effect on U.S. commerce in comparison to a potentially significant conflict of jurisdiction with Honduras (749 F.2d 1378, 1386 (9th Cir. 1984)).
n95. 595 F.2d 1287 (3d Cir. 1979).
n96. Id. at 1297.
n97. Specifically, the Court concluded that the district court did have subject matter jurisdiction over Mannington's claims. See id. at 1292. Both the Timberlane and Mannington courts considered the issue of the applicability of U.S. antitrust law to facts alleged to present an issue of "subject matter jurisdiction" rather than "prescriptive jurisdiction." See Mannington, 595 F.2d at 292; Timberlane, 549 F.2d at 601. Neither court distinguished the two types of jurisdiction, and both analyzed the existence of subject matter jurisdiction as if it were a question of prescriptive or legislative jurisdiction. See, e.g., Mannington, 595 F.2d at 1297. There traditionally are differences between the two types of jurisdiction (see supra note 41; Restatement (Third) of Foreign Relations 401; see also Hartford Fire Ins. Co. v. California, 509 U.S. 764, 795 (1993)). However, those differences are not important to my analysis in light of the courts' treatment of the issues presented by each as identical (i.e., whether or not a particular public law applies to a given transaction or issue).
n98. 595 F.2d at 1294 ("Having concluded ... that there is subject matter jurisdiction, the question remains whether jurisdiction should be exercised.").
n99. Id. at 1296 ("When foreign nations are involved ... it is unwise to ignore the fact that foreign policy, reciprocity, comity, and limitations of judicial power are considerations that should have a bearing on the decision to exercise or decline jurisdiction.").
n100. Id. at 1297. The Mannington factors differed only slightly from the Timberlane factors. See supra note 94 and accompanying text.
n101. Id. at 1298 ("We do not believe that the extensive inquiry required must yield the same answer in each instance.... The individual interests and policies of each of the foreign nation differ and must be balanced against our nation's legitimate interest in regulating anticompetitive activity."). Perhaps it is no surprise that the parties eventually settled, apparently encouraged in part by the difficulty involved in gathering and submitting facts sufficient to permit effective balancing of the interests of each of the other countries against those of the United States. See Harold G. Maier, Interest Balancing and Extraterritorial Jurisdiction, 31 Am. J. Comp. L. 579, 589 n.41 (1983).
n102. See, e.g., Uranium Antitrust Litig., Westinghouse Elec. v. Rio Algom Ltd., 617 F.2d 1248 (7th Cir. 1980); Zenith Radio Corp. v. Matsushita Elec., 494 F. Supp. 1161 (E.D. Pa. 1980).
n103. Restatement (Third) of Foreign Relations Law 403 (1986) provides:
403. Limitations on Jurisdiction to Prescribe
(1) Even when one of the bases for jurisdiction under 402 is present, a state may not exercise jurisdiction to prescribe law with respect to a person or activity having connections with another state when the exercise of such jurisdiction is unreasonable.
(2) Whether exercise of jurisdiction over a person or activity is unreasonable is determined by evaluating all relevant factors, including, where appropriate:
(a) the link of the activity to the territory of the regulating state, i.e., the extent to which the activity takes place within the territory, or has substantial, direct, and foreseeable effect upon or in the territory;
(b) the connections, such as nationality, residence, or economic activity, between the regulating state and the person principally responsible for the activity to be regulated, or between that state and those whom the regulation is designed to protect;
(c) the character of the activity to be regulated, the importance of regulation to the regulating state, the extent to which other states regulate such activities, and the degree to which the desirability of such regulation is generally accepted;
(d) the existence of justified expectations that might be protected or hurt by the regulation;
(e) the importance of the regulation to the international political, legal, or economic system; (f) the extent to which the regulation is consistent with the traditions of the international system;
(g) the extent to which another state may have an interest in regulating the activity; and
(h) the likelihood of conflict with regulation by another state.
(3) When it would not be unreasonable for each of two states to exercise jurisdiction over a person or activity, but the prescriptions by the two states are in conflict, each state has an obligation to evaluate its own as well as the other state's interest in exercising jurisdiction, in light of all the relevant factors, Subsection (2); a state should defer to the other state if that state's interest is clearly greater.
The citation to Timberlane and Mannington actually occurs in note 4 of the Reporter's Notes to section 415 of the Restatement (Third), which deals expressly with "Jurisdiction to Regulate Anti-Competitive Activities." However, official Comment (a) to section 415 notes that "Any exercise of jurisdiction under this section is subject to [section 403's] requirement of reasonableness," and it is clear that Timberlane and Mannington are cited as examples of judicial applications of the reasonableness requirement. Section 403's list of factors that must be balanced in assessing the reasonableness of any given exercise of prescriptive jurisdiction borrows from the interest balancing factors of section 6 of the Second Restatement of Conflict of Laws, which was intended to govern choice of law in a private law context. See, e.g., Maier, Extraterritorial Jurisdiction, supra note 4, at 290 (noting that "the Restatement (Second) of Conflicts is quite explicit that issues raised by the application of regulatory legislation to foreign events or persons are primarily the concern of the Restatement (Second) of Foreign Relations Law").
n104. Restatement (Third) of Foreign Relations Law 403 cmt. a (1986) ("This section states the principle of reasonableness as a rule of international law."). It is interesting to note that the Restatement appears to have departed in this regard from the consensus of the American Law Institute's membership: "The floor debates preceding the adoption of section 403(3) by the American Law Institute indicated that an overwhelming majority agreed that the balancing of state interests in such cases reflected established principles of comity, not of international law." Paul, supra note 28, at 46 (citing Harold Maier, Book Review, 83 Am. J. Int'l L. 676, 679 (1989)). Professor Lowenfeld was an Associate Reporter for the Restatement (Third), and he aptly has been called the "intellectual father" of section 403. See Harold G. Maier, Resolving Extraterritorial Conflicts, or "There and Back Again," 25 Va. J. Int'l L. 7, 18 (1984).
n105. Weintraub, Extraterritorial Application, supra note 52, at 1804. See also, Restatement (Third) of Foreign Relations Law 403 cmts. a, e.
n106. See supra note 103 and accompanying text; Maier, Extraterritorial Jurisdiction, supra note 4, at 300, 294 n.67.
n107. Restatement (Second) of Foreign Relations Law 40 (1965) provides as follows:
40. Limitations on Exercise of Enforcement Jurisdiction
Where two states have jurisdiction to prescribe and enforce rules of law and the rules they may prescribe require inconsistent conduct upon the part of a person, each state is required by international law to consider, in good faith, moderating the exercise of its enforcement jurisdiction, in the light of such factors as
(a) vital national interests of each of the states,
(b) the extent and the nature of the hardship that inconsistent enforcement actions would impose upon the person,
(c) the extent to which the required conduct is to take place in the territory of the other state,
(d) the nationality of the person, and
(e) the extent to which enforcement by action of either state can reasonably be expected to achieve compliance with the rule prescribed by that state.
The change to ab initio judicial interest balancing in section 403 of the Restatement (Third) perhaps reflects Associate Reporter Professor Lowenfeld's view that judicial interest balancing "should take place whether or not there is a potential for inconsistent orders." Lowenfeld, supra note 2, at 401.
n108. Although section 403(3) of the Restatement (Third) seems to contemplate occasional concurrent jurisdiction even following the interest balancing assessment dictated by 403(2), section 403(3) urges the avoidance of concurrent jurisdiction by insisting that, "a state should defer to the other state if that state's interest is clearly greater." See supra note 103, for the full text of section 403.
n109. See supra note 103 and accompanying text.
n110. See id. at 403(2)(d) (requiring an assessment of the appropriateness of prescriptive jurisdiction in light of "the existence of justified expectations that might be protected or hurt by the regulation"); Lowenfeld, Public Law, supra note 2, at 363 (urging the assessment of prescriptive jurisdiction on the basis of the "expectations of the parties" in addition to "governmental interests").
n111. See supra text accompanying note 7.
n112. See Richards v. Lloyd's of London, 135 F.3d 1289, 1291-92 (9th Cir. 1998); Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285, 1288 (11th Cir. 1998); Haynsworth v. Lloyd's of London, 121 F.3d 956, 958-60 (5th Cir. 1997); Allen v. Lloyd's of London, 94 F.3d 923, 926-28 (4th Cir. 1996); Roby v. Corporation of Lloyd's, 996 F.2d 1353, 1357-58 (2d Cir. 1993); Bonny v. Society of Lloyd's, 3 F.3d 156, 158-59 (7th Cir. 1993); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 955-56 (10th Cir. 1992), for more complete discussions of the facts in these cases.
n113. See Haynsworth, 121 F.3d at 960; Allen, 94 F.3d at 927.
n114. The Allen plaintiffs made federal securities law fraud and nondisclosure claims with respect to Lloyd's restructuring plan following its unanticipated losses, but not with respect to the Names' initial investments in Lloyd's underwriting syndicates. See Allen, 94 F.3d at 926.
n115. Specifically, the Names relied on dicta in the Supreme Court's opinions in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 637 n.19 (1985), and Vimar Seguros Y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 541 (1995), that, "In the event [that] choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party's right to pursue statutory remedies for antitrust violations, we would have little hesitation condemning the agreement as against public policy." The Names also relied on explicit antiwaiver provisions in the Securities Acts declaring void "any ... stipulation ... binding any person acquiring any security to waive compliance" with any rights secured or rules imposed by the federal securities laws. See 15 U.S.C. 77n for the nonwaiver provision of the Securities Act of 1933, and 15 U.S.C. 78c(a) for the nonwaiver provision of the Securities and Exchange Act of 1934.
n116. See Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989); Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987); Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974); see also Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, at 26 (1991) (noting that "it is by now clear that statutory claims may be the subject of an arbitration agreement...").
n117. The choice of forum clauses in the agreements signed by the Names had changed over time, with pre-1986 investors in Lloyd's agreeing to submit any disputes to arbitration in London, and post-1986 investors agreeing to submit any disputes to London courts. See Haynsworth v. Lloyd's of London, 121 F.3d at 959-60. Because English conflict of law rules honor the traditional public law taboo, English courts necessarily would not entertain claims based on U.S. securities law. See, e.g., Roby v. Corp. of Lloyd's, 996 F.2d at 1362 ("English conflict of law rules do not permit recognition of foreign tort or statutory law."). The Lloyd's courts assumed the same to be true of English arbitrators. Id. Although the Supreme Court's decisions in Scherck, Mitsubishi, and Vimar Seguros would have countenanced a change of forum in the Lloyd's cases that did not involve the displacement of U.S. public law, those cases are not precedent for a change of forum resulting in the displacement of U.S. public law.
n118. The Lloyd's courts all relied on The Bremen v. Zapata Offshore Co., 407 U.S. 1 (1972), and Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991), both of which involved the enforcement of choice of forum and choice of law clauses in the context of contract and tort claims in a maritime context: The Bremen concerned negligent towage, and Carnival Cruise Lines, negligent passenger carriage. See Richards v. Lloyd's of London, 135 F.3d 1289, 1293-94; Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285, 1291-92; Haynsworth, 121 F.3d at 961-65; Roby v. Corp. of Lloyd's, 996 F.2d at 1363; Bonny v. Society of Lloyd's, 3 F.3d 156, 160.
n119. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 595 (1991); The Bremen v. Zapata, 407 U.S. at 12-14 (1972). In Roby, 996 F.2d at 1363, the Second Circuit remarked:
The Supreme Court has [determined that] forum selection and choice of law clauses are "unreasonable" [only] (1) if their incorporation into the agreement was the result of fraud or overreaching ... (2) if the complaining party "will for all practical purposes be deprived of his day in court, due to the grave inconvenience or unfairness of the selected forum ... (3) if the fundamental unfairness of the chosen law may deprive plaintiff of a remedy ... or (4) if the clauses contravene a strong public policy ....
n120. See, e.g., Riley, 969 F.2d at 957 n.4 ("We need not decide whether Riley's participation as a Name constitutes a security, or whether Lloyd's or the Defendant Underwriters are subject to the provisions of the 1933 or 1934 Securities Act."); Accord Haynsworth, 121 F.3d at 966; Roby, 996 F.2d at 1357; Bonny, 3 F.3d at 160 (implicit). Allen decides some applicability issues adversely to the defendants, but in a settlement context. See Allen, 94 F.3d at 930-31.
n121. See supra note 103 for the text of section 403.
n122. See, e.g., Lipcon, 148 F.3d at 1294-95("To conclude that the anti-waiver provisions of the United States securities laws categorically preclude sophisticated parties from entering into international agreements [selecting a single applicable law] ... would undermine [predictability and international comity]."); Roby, 996 F.2d at 1360 ("It defies reason to suggest that a plaintiff may circumvent [choice] clauses merely by stating claims under laws not recognized by the forum selected in the agreement."); Allen, 94 F.3d at 931 ("In summary, the policies of the United States securities laws do not override the parties' choice of forum and law for resolving disputes in this case."); id. at 930 ("To permit the Names to escape their agreements to be bound by the laws and rules of the British market just at a time when they face losses would also violate the most fundamental precepts of international comity.").
n123. See, e.g., Allen, 94 F.3d at 929 ("We do not believe that enforcing the parties' forum selection and choice of law provisions in this case will subvert the United States Securities laws' policy of prohibiting fraud. British law not only prohibits fraud and misrepresentations ... but also affords Names adequate remedies in the United Kingdom."); Bonny, 3 F.3d at 161 ("We are satisfied that several remedies in England [will] vindicate plaintiffs' substantive rights while not subverting the United States policies of insuring full and fair disclosure by issuers and deterring the exploitation of United States investors."); Riley, 996 F.2d at 1365 ("We are satisfied ... that the Roby Names have several adequate remedies in England to vindicate their substantive rights....").
n124. See, e.g., Lipcon, 148 F.3d 1285; Haynsworth, 121 F.3d at 969 ("The American system of securities law may be the broadest, most comprehensive of all. We refuse to accept the notion, however, that the sheer scope of U.S. securities law automatically renders that of other countries inferior...."); Allen, 94 F.3d at 929-30 ("The United States nexus to the transactions is ... incidental.... [A] court may abstain from exercising enforcement jurisdiction when the extraterritorial effect of a particular remedy is so disproportionate to harm within the United States as to offend principles of comity."); Roby, 996 F.2d at 1364 ("Lloyd's is a British concern which raises capital in over 80 countries. Its operations are clearly international in scope.... Comity...weighs in favor of enforcing the [choice] clauses."); Bonny, 3 F.3d at 159 n.9 ("Lloyd's [is] a distinctively British entity....").
n125. See CLACO, supra note 17, art. 7(1). A number of contracting states, including, importantly, Germany and the United Kingdom, have reserved the right to exclude this provision. See Whincop & Keyes, supra note 28, at 522.
n126. Bundesgesetz <um u>ber das Internationale Privatrecht, art. 13., SR (Switz. 1988), as translated in Baade, supra note 15, at 462.
n127. See supra note 32 for the relevant portion of section 187 (2)(b).
n128. See the concluding sentence of supra note 103 and the quotation from Maier.
n129. See Baade, supra note 15, at 466-72, 481, 495.
n130. See supra note 116 for a sampling of such rulings.
n131. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. at 638 (1986).
n132. Cf. Restatement (Third) of Foreign Relations Law 483 (1986) (regarding the recognition and enforcement of certain foreign public law judgments (specifically, tax and penalty judgments), wherein the first Reporter's comment notes that "no rule of United States law or of international law would be violated if a court of the United States enforced [such] a judgment of a foreign court....").
n133. See supra note 101 and accompanying text.
n134. See, e.g., Dodge, supra note 25, at 101; Paul, supra note 28, at 1; Weinberg, supra note 43, at 53.
n135. Weinberg, supra note 43, at 61.
n136. See Paul, supra note 28, at 71 ("By allowing transnational business to choose legal systems imposing a lower regulatory burden than the United States, U.S. courts have effectively lowered regulatory standards."); Weinberg, supra note 43, at 71 ("Systematic denials of law enforcement must pro tanto encourage predatory or injurious conduct."); id. at 72 (noting the increased "magnitude of the risk of a reciprocal posture of nonenforcement of forum law"); id. at 60 ("If the forum refuses to take unilateral responsibility for law enforcement, there is a finite risk of system-wide failure to govern injurious behavior.").
n137. The displacement of forum private law likely does not have significant regulatory consequences, even though a defendant's motive in seeking displacement might be similar personal advantage. See e.g., Weintraub, Extraterritorial Application, supra note 52, at 1818 ("The sovereign's interest in enforcing its regulatory rules is of a different order than the "interest,' meaning the social policy, underlying the rules of torts and contracts."); Lowenfeld, Public Law, supra note 2, at 335 ("Governmental interests ... in the private law contexts are nearly all imaginary: governments ... do not really care about whether the driver of an automobile is liable to a passenger."). According to one source:
A government always has a direct interest in the outcome of a regulatory case, even when the governmental viewpoint is represented by a citizen-prosecutor seeking private recovery .... In this sense, they are distinguishable from nonregulatory choice-of-law cases in which the issue is which of two or more conflicting governmental policies shall be applied to private persons, none of whom functionally serves as a government surrogate.
Maier, Extraterritorial Jurisdiction, supra note 4, at 289.
n138. See supra text accompanying notes 76-82.
n139. See supra text accompanying notes 83-86; see also, Laker Airways Ltd. v. Sabena, Belgian World Airways, 731 F.2d 909, 952 (D.C. Cir. 1984) ("There is ... no rule of international law holding that a "more reasonable' assertion of jurisdiction mandatorily displaces a "less reasonable' assertion of jurisdiction as long as both are, in fact, consistent with the limitations on jurisdiction imposed by international law"). Obviously, singular regulation presumably is better for commerce than multiple regulation in cases in which the differing regulations actually require impossibly inconsistent conduct on the part of the same individual or company, but that is not a condition of interest balancing among those who advocate the merger of conflicts principles with rules governing the application of public law. See, e.g., Lowenfeld, Public Law, supra note 2, at 401 (urging that interest balancing "take place whether or not there is a potential for inconsistent orders").
n140. See Roscoe Pound, Liberty of Contract, 18 Yale L.J. 454 (1909), (discussing these cases and the jurisprudence on which they were based).
n141. 731 F.2d 909 (D.C. Cir. 1984).
n142. Id. at 949. See also, Mannington Mills Inc. v. Congoleum Corp., 595 F.2d 1287, 1299 (3rd Cir. 1979) (Adams, J., concurring and dissenting in part) ("I do not agree that a court may conclude that it is invested with subject-matter jurisdiction under the Sherman Act but may nonetheless abstain from exercising such jurisdiction in deference to considerations of international comity."); G. Chesire & P. North, Private International Law 4 (12th ed. 1992) ("The word itself is incompatible with the judicial function, for comity is a matter for sovereigns, not for judges ...."); Paul, supra note 28, at 72 ("Allowing transnational business in effect to opt out of higher regulatory burdens raises ... an institutional competence issue regarding whether the decision ostensibly to relax regulatory standards should be made by the courts, or whether it should be left to the legislature."); EEOC v. Arabian American Oil Co., 499 U.S. 244, 259 (1991) (noting that if Congress wished Title VII to apply to U.S. citizens employed abroad by U.S. companies, Congress could "amend Title VII and in doing so ... calibrate its provisions in a way we cannot").
n143. Trautman, supra note 4, at 621.
n144. See supra note 101 and accompanying text.
n145. Laker Airways, 731 F.2d at 950 (noting the procedural and discovery difficulties that would occur in an interest balancing analysis); Zoelsch v. Arthur Andersen & Co., 824 F.2d 27, 32 n.2 (D.C. Cir. 1987) ("It would ... seem counterproductive [in deciding the jurisdictional reach of the antifraud provisions of the Securities Act] to adopt a balancing test, or any test that makes jurisdiction turn on a welter of specific facts.").
n146. Weintraub, Extraterritorial Application, supra note 52, at 1817; see also Maier, Extraterritorial Jurisdiction, supra note 4, at 297-98, 310; Dodge, supra note 25, at 163-65 (collecting examples of politically negotiated resolutions of prescriptive jurisdictional conflicts).
n147. See Weintraub, Extraterritorial Application, supra note 52, at 1817.
n148. Obviously, the "conduct or intended effects" test of prescriptive jurisdiction converges somewhat with the "minimum contacts" test of in personam jurisdiction. The focus of both tests on the "sufficiency" of contacts in an absolute sense (as opposed to their "comparative sufficiency," as with interest balancing) is a virtue for planners of international business in terms of being able to identify and factor into transactions, ex ante, the cost of compliance (or, the cost of avoiding business in any particular jurisdiction).
n149. Kaczmarek v. Allied Chemical Corp., 836 F.2d 1055, 1057 (7th Cir. 1987). Judge Easterbrook comments that he "would be most reluctant to accept an approach that calls on the district judge to throw a heap of factors on a table and then slice and dice to taste." Reinsurance Co. of Am. v. Administratia Asigurarilor de Stat, 902 F.2d 1275, 1283 (7th Cir. 1990)
n150. Lowenfeld, Public Law, supra note 2, at 311.
n151. See discussion supra Part IV.A.
n152. See, e.g., McConnaughay, The Risks and Virtues of Lawlessness, 93 Nw. U. L. Rev. (forthcoming Apr. 1999). This issue also would have implications for the enforceability in the forum that supplied the public law of any judgment rendered pursuant to the law in the substitute forum.
n153. Obviously, even if there were a general rule in favor of judicial recognition and application of foreign public law the recognizing forum still could decline to apply foreign public law if doing so would contravene an important policy of the recognizing forum. See supra notes 30-36; infra note 257, and accompanying text.
n154. Hartford Fire Ins. Co. v. California, 509 U.S. 764 (1993).
n155. 509 U.S. at 77 n.24, 798. While the Court saw "no need to address [the] contention here" that "comity concerns figure into the ... analysis [of] whether jurisdiction exists [ab initio] under the Sherman Act" because "the parties conceded jurisdiction at oral argument," it did say that:
This contention is inconsistent with the general understanding that the Sherman Act covers foreign conduct producing a substantial intended effect in the United States, and that concerns of comity come into play, if at all, only after a court has determined that the acts complained of are subject to Sherman Act jurisdiction.
Id. at 797 n.24 (1993).
Moreover, the Court's actual holding seems to be that comity is not a consideration in the exercise of public law jurisdiction until a "true conflict" exists between the U.S. law and a foreign law, which, as the Court defined "true conflict," would preclude judicial considerations of comity prior to determining the jurisdictional reach of the U.S. law. See infra text accompanying notes 163-164.
n156. 345 U.S. 571 (1953).
n157. 358 U.S. 354 (1959).
n158. 46 U.S.C.A. 688 (West 1998). The Jones Act allows injured seamen to maintain damages actions in U.S. courts.
n159. See Hartford Fire, 509 U.S. at 795.
n160. The majority found the following statement made by the London reinsurers at oral argument to be a concession: "Our position is not that the Sherman Act does not apply.... Our position is that there are certain circumstances, and that this is one of them, in which the interests of another State are sufficient that the exercise of that jurisdiction should be restrained." Id. The Hartford Fire dissent disagreed about whether the London reinsurers actually had intended this as a concession, but the substance of the disagreement seemed to have less to do with the interpretation of the London reinsurers' remarks than it did with the legal issue of whether or not comity or comparative interest balancing is relevant to the jurisdictional reach of the Sherman Act. Significantly, despite viewing the defendants' statement as a concession, the Hartford Fire majority clearly endorsed the Alcoa "intended effects" test as the test of the jurisdictional reach of the Sherman Act. Id. ("It is well established by now that the Sherman Act applies to foreign conduct that was meant to produce and did in fact produce some substantial effect in the United States.").
n161. See 509 U.S. at 779, n.9, 797. There was a significant disagreement between the Hartford Fire majority and dissent about whether "subject matter jurisdiction" or "prescriptive jurisdiction" was at issue in the case, with the majority arguing subject matter, and the dissent, prescriptive. Id at 796 n.22, 813-14. Although that nomenclature issue is important, it largely masks the underlying issue of substance that both the majority and dissent addressed and which is the chief concern of this Article: namely, whether or not a court should conduct a conflicts analysis (i.e., consider international comity and comparative interest balancing) in conjunction with determining the jurisdictional reach of a public law. The nomenclature issue becomes important if one views section 403 of the Restatement (Third) of Foreign Relations Law (supra note 103) as supplying the rule of decision on the underlying question of substance, for section 403, which by its terms applies to prescriptive jurisdiction rather than subject matter jurisdiction, insists on comparative interest balancing prior to determining the jurisdictional reach of public law. The dissent mistakenly viewed section 403 as accurately reflecting international law and therefore as supplying the rule of decision. See infra text accompanying notes 196 for a discussion of the dissent's position. Because the majority correctly did not view section 403 as supplying the rule of decision, it thus could have conceded the nomenclature issue and still decided the substantive issue the way it did (i.e., that comparative interest balancing is not a permissible constraint on the jurisdictional reach of the Sherman Act, at least in the absence of a "true conflict"). One commentator has stated that "there is no such general practice and hence no customary international law like that advanced in section 403." Phillip Trimble, The Supreme Court and International Law: The Demise of Restatement Section 403, 89 Am. J. Int'l L. 53, 55 (1995).
n162. 509 U.S. at 798.
n163. Id. at 799, citing Restatement (Third) of Foreign Relations law 403 cmt. e (1986). Section 403 is reprinted in supra note 103.
n164. 509 U.S. at 799.
n165. See supra note 155 and accompanying text.
n166. 509 U.S. at 812-22.
n167. See supra text accompanying notes 87-101.
n168. See supra text accompanying note 155.
n169. See supra text accompanying notes 106-108.
n170. See supra note 107 for the text of section 40.
n171. See supra text accompanying notes 106-107.
n172. 509 U.S. at 796-97.
n173. The "true conflict" hurdle is so high, in fact, that one would expect it (1) to occur only rarely (e.g., when participants in international transactions have been so ill advised that they actually have encountered a "true conflict" unbeknownst) and (2) probably to overlap with the foreign compulsion defense when it does occur. See Restatement (Third) of Foreign Relations Law 441-44 (1985). "True conflicts" as presented in Hartford Fire and section 40 of course are very different from traditional "true conflicts" in the context of private law conflicts. "True conflicts" exist in a private law context whenever differing state laws apply to the same issue. See, e.g., Lowenfeld, Public Law, supra note 2, at 398; Weinberg, supra note 43, at 57-59; Weintraub, Extraterritorial Application, supra note 52, at 1804; Hartford Fire, 509 U.S. at 820-21 (Scalia, J., dissenting). Although differing outcomes of a dispute might result in a private law context involving a "true conflict," inconsistent conduct rarely would be required because private law seldom is regulatory in that sense. See, e.g., Weinberg, supra note 43, at 59 n.28.
n174. 509 U.S. at 815-19.
n175. See id. at 820-21.
n176. 345 U.S. 571 (1953).
n177. 358 U.S. 354 (1959).
n178. See Hartford Fire, 509 U.S. at 815-16.
n179. See, e.g., Romero v. International Terminal Operating Co., 358 U.S. at 383.
n180. See id. at 383-84.
n181. Lauritzen v. Larsen, 345 U.S. at 582.
n182. Romero v. International Terminal Operating Co., 358 U.S. at 382-83.
n183. See Romero, 358 U.S. at 384; Lauritzen, 345 U.S. at 592. The Jones Act since has been amended to more clearly delineate its jurisdictional reach by restricting its availability to U.S. seamen in certain circumstances. See 46 U.S.C. 688(b) (1994).
n184. 509 U.S. at 815-17.
n185. Trautman, supra note 4, at 588. Later commentators also make this assumption about Lauritzen and Romero. See, e.g., Maier, Extraterritorial Jurisdiction, supra note 4, at 303 (suggesting that Lauritzen and Romero reveal the "functional intersection" of public law and conflict of laws in "transnational regulatory cases"). See also, e.g., Timberlane Lumber Co. v. Bank of Am., 549 F.2d 597, 614 (9th Cir. 1976); Restatement (Third) of Foreign Relations Law 403 and reporter's notes (1986).
n186. See discussion infra Part VI, and particularly the text accompanying notes 213-220, for a discussion of those aspects of a law that distinguish a private law statute from a public law statute.
n187. Both the Lauritzen and Romero Courts acknowledge this explicitly. See Lauritzen, 345 U.S. at 583 ("We therefore review the several factors which, alone or in combination, are generally conceded to influence choice of law to govern a tort claim...."); Romero, 358 U.S. at 382 ("The similarity in purpose and function of the Jones Act and the general maritime principles of compensation for personal injury, admit of no rational differentiation of treatment for choice of law purposes.").
n188. See supra text accompanying note 15.
n189. See discussion infra notes 236-239. Of course, commentators today recognize that tort law has a regulatory effect, if not purpose, and that regulatory law, like the Sherman Antitrust Act, is tortlike in many respects. Part VI discusses how those similarities might bear on the question of distinguishing laws or provisions of laws whose applicability should not be subject to judicial comparative interest balancing (i.e., whose applicability is within the public law taboo), from those whose applicability should turn on comparative interest balancing. For present purposes, it is important to keep in mind that, contrary to the suggestions of proponents of the merger of public law and conflict of laws principles, the similarities between tort law and antitrust law suggest more that tort law should be considered "public" than that antitrust law should be considered "private."
n190. Cf. Trautman, supra note 4, at 618 (noting that Lauritzen "may [simply] demonstrate that courts are probably most likely to entertain an argument that respect should be given foreign law in cases in which the primary purpose of the federal statute is to extend or clarify private rights, as in the Jones Act").
n191. Or more precisely, that Hartford Fire signals a revival of that prong of the public law taboo that forbids the displacement by judicial comparative interest balancing of otherwise applicable forum public law. Hartford Fire says nothing about the prong of the taboo concerning the recognition by a forum of foreign public law. In fact, Hartford Fire to a large extent is but an echo of the 1988 decision by the European Court of Justice in the Wood Pulp Cases. Case 89/85, In re Joined Cases "wood pulp' v. Commission, 1988 E.C.R. 5193. In those cases, the European Court essentially applied an Alcoa "intended effects" test to apply European Community competition law to a cartel (including several American firms) of foreign producers of wood pulp that had fixed the price of wood pulp imported into the EEC. Significantly, the European Court held that international comity was irrelevant to its determination of jurisdiction under the intended effects test. See id. at 5244 para. 22. The court held that there was no need to consider comparative interest balancing further because "there is not ... any contradiction between the conduct required by the United States and that required by the Community since the [U.S.] Webb Pomerene Act merely exempts the conclusion of export cartels from the application of anti-trust laws but does not require such cartels to be concluded." Id. at 5244 para. 20. In other words, the European Court of Justice held that judicial comparative interest balancing is not appropriate in determining the jurisdictional reach of public law in the absence of a "true conflict."
n192. See discussion infra Part VI. See also supra text accompanying notes 65-71.
n193. See McConnaughay, supra note 152, for a discussion of the implications of Hartford Fire for the Lloyd's cases.
n194. Great Britain's insurance regulatory scheme is described in some detail in the district court's opinion in Hartford Fire Ins. Co. v. California, 723 F. Supp. 464 (N.D. Cal. 1989), in Lipcon v. Underwriters at Lloyd's of London, 148 F.3d 1285, 1288 (11th Cir. 1998), and in Haynsworth v. Lloyd's of London, 121 F.3d 956, 958-60 (5th Cir. 1997).
n195. In Hartford Fire, British law appeared to permit the concerted activity by London reinsurers that U.S. law would forbid, and in the Lloyd's cases British law appeared not to require the same degree of disclosure in the sale of securities as is required by U.S. law.
n196. The Hartford Fire defendants conceded the applicability of the Sherman Act to their conduct. See 509 U.S. at 795 and supra note 160 and accompanying text. In contrast, the Lloyd's courts essentially assumed the applicability of the Securities Acts to the U.S. Investments in Lloyd's syndicates for purposes of deciding those cases. See supra text accompanying note 120.
n197. See, e.g., Hartford Fire, 509 U.S. at 819, and supra note 124, with respect to the Lloyd's cases.
n198. See 15 U.S.C. 77n for the antiwaiver provision of the Securities Act of 1933 and 15 U.S.C. 78cc(a) for the antiwaiver provision of the Securities and Exchange Act of 1934, both declaring void "any, condition, stipulation, or provision binding any person ... to waive compliance" with any of the rights secured or rules imposed by the federal securities laws.
n199. See, e.g., Lipcon, 148 F.3d at 1288; Allen v. Lloyd's of London, 94 F.3d 923, 929 (4th Cir. 1996) ("We do not believe that enforcing the parties' forum selection and choice of law provisions in this case will subvert the United States securities laws' policy of prohibiting fraud. British law not only prohibits fraud and misrepresentation ... but also affords Names adequate remedies in the United Kingdom."); Bonny v. Society of Lloyd's, 3 F.3d 156, 161 (7th Cir. 1993) ("We are satisfied that several remedies in England will vindicate plaintiffs' substantive rights while not subverting the United States' policies of insuring full and fair disclosure by issuers and deterring the exploitation of United States investors."); Roby v. Corp. of Lloyd's, 96 F.2d 1353, 1365 (2nd Cir. 1993) ("We are satisfied ... that the Roby Names have several adequate remedies in England to vindicate their substantive rights ....").
n200. See, e.g., Roby, 996 F.2d at 1364 ("Lloyd's is a British concern which raises capital in over 80 nations.... Comity ... weighs in favor of enforcing the [choice] clauses."); Allen, 94 F.3d at 929-30 ("The United States nexus to the transaction ... is thus incidental.... "[A] court may abstain from exercising enforcement jurisdiction when the extraterritorial effect of a particular remedy is so disproportionate to harm within the United States as to offend principles of comity.'")(quoting Consolidated Gold Fields PLC v. Minorco, S.A.; 871 F.2d 252, 263 (2nd Cir. 1989)); Bonny, 3 F.3d at 159 n.9 ("Lloyd's [is] a distinctively British entity...."); id. at 162 ("The fact that an international transaction may be subject to laws and remedies that are different or less favorable than those of the United States is not alone a valid basis to deny enforcement of ... choice of law clauses."); Lipcon, 148 F.3d at 1295 (concluding that enforcement of the parties' choice of law clauses would undermine international comity).
n201. The Lloyd's courts' displacement analysis fails because of the Supreme Court's holding in Knott v. Botany Mills, 179 U.S. 69, 71 (1900), which nullified a contractual choice of law clause that would have displaced mandatory provisions of the U.S. Harter Act. See 46 U.S.C. 190-195 (a public law imposing certain duties on common carriers by land or sea). The displacement argument also ignores key dicta in the Supreme Court's decisions of Vimar Seguros Y. Reaseguros, S.A.v. M/V Sky Reefer, 515 U.S. 528, 540 (1995) (indicating that in the event that "choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party's right to pursue statutory remedies for antitrust violations, we would have little hesitation condemning the agreement as against public policy"). See also Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, n.19 at 637 (1985). However, the results themselves in the Lloyd's cases are not necessarily inappropriate. It is entirely possible on the facts of those cases that the "conduct or intended effects" jurisdictional threshold of the Securities Acts may not have been met. See McConnaughay, supra note 152.
n202. See discussion supra Part IV.A.
n203. See discussion supra Part IV.C.
n204. See discussion supra Part IV.B. Forbidding judicial comparative interest balancing as a constraint on the jurisdictional reach of otherwise applicable forum public law does not mean that the jurisdictional reach of public law is unconstrained. It means simply that other branches of government must be more diligent in their efforts to consider foreign interests when prescribing or enforcing public law. There are numerous examples that this is precisely what occurs. See, e.g., Foreign Trade Antitrust Improvements Act, 15 U.S.C. 6(a)(1)(1982) (requiring that international export trade have a "direct, substantial, and reasonably foreseeable effect" on U.S. commerce before it will violate the Sherman Act); Regulation S, Securities Act of 1933, 17 C.F.R. 230.901-.904 (1991) (removing the 1933 Act's registration requirement for offers and sales of securities that occur outside the United States); U.S. Dep't of Justice, Antitrust Guide for International Operations, Antitrust Div. (1977); see also Lowenfeld, Public Law, supra note 2, at 364 ("It is a mistake to assume that a statute cannot be drafted ... that adopts a reasoned weighing of relevant considerations rather than maximum reach as the standard for exercise of legislative jurisdiction.").
n205. See supra text accompanying notes 65-71.
n206. Merryman, supra note 65, at 17.
n207. Paul, supra note 28, at 35.
n208. David Jackson, Mandatory Rules and Rules of "ordre public,' in Contract Conflicts 59, 64 (P.M. North ed., 1982).
n209. These limitations include conduct or effects within the sovereign territory or the nationality of the actor. See supra note 54. "Public law" and "private law" in this Article, of course, refer to public domestic law and private domestic law, not to public international law or private international law. The differences are important. Public international law essentially regulates relations among nations (and sometimes relations between nations and individuals, as in the area of human rights); private international law is a synonym for conflict of laws. See, e.g., Paul, supra note 28, at 2 n.1; Baade, supra note 15, at 447. As I discuss in Subpart VI.A, private domestic law, such as contracts and torts, concerns relations between individuals within a given jurisdiction; public domestic law, such as antitrust or securities law, tends to be more concerned with relations between individuals and society, or with relations between individuals insofar as they significantly affect the public interest.
n210. See Merryman, supra note 65, at 19 ("Conceptions of public law and private law have never figured greatly in the history of the common law."); Jackson, supra note 208, at 59 ("The [public law] label is used in the United Kingdom to describe that category of rules concerned with [the] state as distinct from individual interest but no legal consequence flows from the categorisation.").
n211. See generally, Symposium, The Public/Private Distinction, 130 U. Pa. L. Rev. 1289 (1982); Robert H. Mnookin, The Public/Private Dichotomy: Political Disagreement and Academic Repudiation, 130 U. Pa. L. Rev. 1429 (1982).
n212. The phrase "all law is public law" is Lenin's. Letter from V. Lenin to Kurskii, 1922, in 20 Soviet Legal Philosophy 292 (H. Babb trans., 20th Century Legal Philosophy Series No. 5, 1951), cited in Merryman, supra note 65, at 13 n.36.
n213. Pound, Public Law, supra note 65, at 470.
n214. Merryman, supra note 65, at 11.
n215. Maier, Extraterritorial Jurisdiction, supra note 4, at 289; see also Lowenfeld, Public Law, supra note 2, at 335 ("Governments (as contrasted with courts) do not really care about whether the driver of an automobile is liable to the passenger in the case of an accident.").
n216. Id. One traditional distinction between public law and private law was that public law causes of action were usually brought by government authorities, private law actions by aggrieved private individuals. See Randy E. Barnett, Foreword: Four Senses of the Public Law-Private Law Distinction, 9 Harv. J.L. & Pub. Pol'y 267, 269 (1994); L. Harold Levinson, The Public Law/Private Law Distinction in the Courts, 57 Geo. Wash. L. Rev. 1579, 1580 (1989). As Professor Maier's quote in the text accompanying note 215 indicates, it is now generally accepted that public law can afford private remedies and remain public law. See also Lowenfeld, Public Law, supra note 2, at 350.
n217. Merryman, supra note 65, at 12. It was the heightened interest of the sovereign that accounted for that prong of the public law taboo that forbade forum recognition of foreign public law. See supra note 24 and accompanying text. Cf. Restatement (First) of Conflict of Laws 610 (1934) ("No action can be maintained on a right created by the law of a foreign state as a method of furthering its own governmental interests.").
n218. See Barnett, supra note 216, at 268; see also Jeffrie G. Murphy & Jules L. Coleman, The Philosophy of Law: An Introduction to Jurisprudence 145 (1984) ("The standard way of drawing [this distinction] is to say that duties imposed by tort law cover private harms, and those imposed in the criminal law cover public harms.").
n219. See, e.g., sources cited supra note 66. Cf. Jackson, supra note 208, at 61 ("There is sometimes a tendency to see a distinction between a statutory and a judge made domestic rule when considering whether they are subject to or over-ride the conflicts process - to assume that a statutory provision is more likely to over-ride it.").
n220. As one California statute notes, "statutes are public or private." Cal. Civ. Proc. Code 1898 (Deering 1997).
n221. See, e.g., Barnett, supra note 216, at 273-74.
n222. See, e.g., Trachtman, supra note 66, at 1010.
n223. See, e.g., Weinberg, supra note 43, at 67, 70. The fact that government interest analysis represents the dominant approach to torts conflict of laws would seem to reflect this proposition as well. See Bauerfeld, Note, Effectiveness of Choice-of-Law Clauses, supra note 32, at 1685 ("Often, too, regulatory schemes are partially effected through contract law.").
n224. Allan Philip, Mandatory Rules, Public Law (Political Rules) and Choice of Law in the E.E.C. Convention on the Law Applicable to Contractual Obligations, in Contract Conflicts (P.M. North ed. 1982).
n225. See Pound, Public Law, supra note 65, at 474; Barnett, supra note 216, at 268.
n226. See Pound, Public Law, supra note 65, at 471-72. The maxim jus publicum privatorum pactis mutari non potest expresses "the preeminence of public over private concerns." Baade, supra note 15, at 432.
n227. See, e.g., Weintraub, Extraterritorial Jurisdiction, supra note 52, at 1806 and passim (using "regulatory legislation"); Friedler, supra note 20, at 516 n.231 (equating the traditional French public law category of lois de police with "certain French regulatory laws"); Philip, supra note 224, at 88 ("Public laws are akin to what is sometimes called political laws and in French "lois de police.'"); Baade, supra note 15, at 466 (noting that currency controls, while not "fiscal," "revenue," or "penal," "obviously [are] regulatory, and readily classified as pertaining to public law according to traditional notions"); Lowenfeld, Public Law, supra note 2, at 325; Trautman, supra note 4, at 601. Public law, of course, also can refer to constitutional, criminal, and revenue laws, and to administrative law governing the operations of government. See, e.g., Baade, supra note 15, at 447.
n228. See Jackson, supra note 208, at 89; Baade, supra note 15, at 447. Professor Baade suggests four categories or "strata" of public law: (1) constitutional and administrative law, which governs the "organs of government," (2) penal and revenue law, which reflect each nation's territorial monopoly of coercive power, (3) national economic and service institutions, which concern the monetary system and the management of public property, and (4) regulatory law, which "operates indirectly by channeling, penalizing, invalidating, or rewarding conduct between private parties." Id. This paper, of course, is concerned with Professor Baade's last category.
n229. A.J.E. Jaffey, Choice of Law in Relation to Ius Dispositivum with Particular Reference to the E.E.C. Convention on the Law Applicable to Contractual Obligations, in Contract Conflicts 33, 41 (P.M. North ed. 1982).
n230. This is the definition of mandatory law provided by the European Community's Convention on the Law Applicable to Contractual Obligations, supra note 17, arts. 3(3), 7.
n231. Michael Pryles, Reflections on the E.E.C. Contractual Obligations Convention - An Australian Perspective, in Contract Conflicts, 323, 331 (P.M. North, ed. 1982); see also Arthur von Mehren, A General View of Contract, 7 International Encyclopedia of Comparative Law 3, 6 (1982) ("Transactions to which public law rules apply are not by that token to be considered as outside the domain of contract, broadly conceived. However, although contractual in the sense that a significant element of autonomous ordering is present, such transactions are in many respects regulated by special rules.").
n232. Jaffey, supra note 229, at 40; see also Philip, supra note 224, at 83 ("Mandatory rules are rules which have the purpose of protecting one or both parties or a third party.").
n233. Baade, supra note 15, at 472; see also Giuliano & Lagarde, supra note 29, at 28 (describing mandatory rules as "notably rules on cartels, competition and restrictive practices, consumer protection and certain rules concerning carriage").
n234. Philip, supra note 224, at 83.
n235. See Jaffey, supra note 229, at 34. The main body of contract law generally is considered nonmandatory. See also Philip, supra note 224, at 83; Restatement (Second) Conflict of Laws 187 cmt. c (1971) ("Most rules of contract law are designed to fill gaps in a contract which the parties could themselves have filled with express provisions.").
n236. See Jackson, supra note 208, at 61; Philip, supra note 224, at 84.
n237. See Philip, supra note 224, at 92-93; Wolfgang von Bieberstein, Limitation of Party Autonomy in Private International Law by Rules of Jus Cogens in Laws Protecting Agents and Distributors, in International Contracts 93, 96 (Hans Smit et al. eds., 1981) ("The term ius cogens, or mandatory provisions, [describes] rules which are binding on the parties and cannot be avoided by contractual agreement in a domestic relationship.... The question... [is] whether or not such rules are also regarded as having a mandatory character [in] an international relationship...."). This same principle holds true for cross-border (interstate) transactions within the United States. See, e.g., Woods-Tucker Leasing Corp. v. Hutcheson-Ingram Dev. Co., 642 F.2d 744, 750 (5th Cir. 1981) (displacing forum's usury restriction in favor of contractually designated law of another state); Restatement (Second) of Conflict of laws 187(2) (1971) (suggesting the possible displacement of law that governs an issue the "parties could not have resolved by an explicit provision in their agreement"); id. at 203 (suggesting conflicts analysis for usury issues); Friedler, supra note 20, at 485 n.71 ("The validity of contractual choice-of-law clauses as a matter of conflicts law relates to those few issues that the parties are not free to resolve by an explicit provision in their agreement, e.g., issues of capacity and essential validity.").
n238. See Weintraub, Functional Developments, supra note 20, at 258 ("The central transjurisdictional policy in contract-validity cases is to encourage interstate and international commercial transactions. Enforcement of local invalidating rules will discourage these transactions and be contrary to the long-range best interests of even the state with the invalidating rule.").
n239. I have suggested that likely externalities may be estimated on the basis of either noncompliance with or repeal of the law in question because noncompliance alone might not obviously reveal the "public" nature of an obviously public law. An example might be the Copyright Act, 17 U.S.C. 101-20 (1994), whose public character some might argue is not conclusively revealed through acts of infringement (which even en masse occur principally in private relationships), but whose repeal clearly would expose public injury resulting both from under- and over-protection of intellectual property in the absence of the Act.
n240. See, e.g., the Sherman Act , 15 U.S.C. 1-7 (1994); the Securities Acts, 15 U.S.C. 77-80; the Federal Bills of Lading Act, 49 U.S.C. 80101-80116 (1994); the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. 1300-1315 (1994); the Copyright Act , 17 U.S.C. 101-20 (1994). Cataloging public laws by applying the public/private and mandatory/nonmandatory dimensions necessarily would be the subject of another article. Private litigants contesting a law's categorization likely would expose relevant aspects of the law in question that are simply beyond the scope of this Article. The examples cited here are among the most obvious and are used for illustrative purposes only. I have selected as examples laws that one is likely to encounter in international commercial transactions having some nexus with the United States.
n241. U.C.C. art. 2 (1997).
n242. 15 U.S.C. 1-7.
n243. 15 U.S.C. 77-80.
n244. 46 U.S.C. 688 (1994).
n245. 49 U.S.C. 80101-80116.
n246. 46 U.S.C. 1300-1315.
n247. See supra note 187; see also, e.g., Trautman, supra note 4, at 609 (concurring in the Second Circuit's assessment of the Jones Act as "an ordinary rule of torts" (quoting Gerradin v. United Fruit Co., 60 F.2d 927, 929 (2nd Cir. 1932))); id. at 618 (describing the "primary purpose" of the Jones Act as " extending or clarifying private rights").
n248. See 46 U.S.C. 1303 for duties imposed by COGSA and 49 U.S.C. 80103-80114 for duties imposed by the Federal Bills of Lading Act.
n249. See 46 U.S.C. 1303-1304.
n250. Because the private law/public law dimension attempts to categorize laws rather than transactions, other characteristics of a law in addition to its "probable externalities" score might help determine its classification as public or private. The availability of damages unrelated to or in addition to actual loss (as in the Sherman Act and COGSA), the imposition of minimum standards of conduct or safety (as in COGSA, the Federal Bills of Lading Act, and the Securities and Exchange Act), or the possibility of criminal in addition to civil liability as a result of noncompliance (as in the Federal Bills of Lading Act and the Sherman Act) indicates a public law classification. On the other hand, the closer the codified law to the subject matter of traditional common law categories of private law - contracts, torts, property, family law - the more likely the law's classification as private.
n251. See, e.g., Minnesota Mining and Mfg. Co. v. Graham-Field, Inc., 96-3839, 1997 U.S. Dist. LEXIS 4457, at *7-9 (S.D.N.Y. Apr. 8, 1997); supra note 233 and accompanying text.
n252. See supra note 198.
n253. See discussion supra Parts III.C and V.B.
n254. For this provision in COGSA, see 46 U.S.C. 1303(8) (1994). For the Federal Bills of Lading Act, see 49 U.S.C. 80113(a) (1994).
n255. Precisely because one ordinarily would expect a law that restricts private discretion in a way designed to serve the public interest not to be prospectively waivable, the category of "nonmandatory public laws" is probably not large. Examples might be laws that forbid certain acts in the absence of consent or authorization by the affected party, such as section 1101 of the Copyright Act, which forbids the unauthorized fixation and trafficking in sound recordings and music videos, and subjects offenders to remedies "to the same extent as an infringer of copyright." 17 U.S.C. 1101 (1994). Section 1101 might be an example of a prospectively waivable public law that is displaceable by contractual election in appropriate circumstances but not otherwise subject to choice of law analysis.
n256. See supra note 26 and accompanying text.
n257. See supra notes 30-36 and accompanying text. One commentator has noted that:
Ordre public international serves as the "safety valve' of private international law by barring the domestic application of an otherwise competent rule of foreign law to the extent that it conflicts with the public policy of the forum. It has no application to domestic law, which by definition does not contradict domestic public policy.
Baade, supra note 15, at 453.
The fact that the "public policy exception" operates most typically in favor of the forum's mandatory private law is reflected in many cases. See To-Am Equip. Co. v. Mitsubishi Caterpillar Forklift Am., 913 F. Supp. 1148, 1151 n.4 (N.D. Ill. 1995) (finding that the Illinois Franchise Disclosure Act's anti-war provision trumped a contrary choice of law clause); Solman Distribs. v. Brown-Forman Corp., 888 F.2d 170, 172 (1st Cir. 1989) (deciding that a Maine statute regarding wholesale licensees trumped a contrary conflicts rule); North Am. Bank, Ltd. v. Schulman, 474 N.Y.S.2d 383, 388 (N.Y.Co.Ct. 1984) (stating that New York's usury statute reflected public policy barring application of a Israeli law that permitted a higher rate); Blalock v. Perfect Subscription Co., 458 F. Supp. 123, 127 (S.D. Ala. 1978) (deciding that an Alabama prohibition on covenants not to compete trumped the contrary conflicts rule).
n258. The public policy exception traditionally has no application to forum public law. Public policy properly is invoked as a reason for declining to apply foreign law; it traditionally is not available as an excuse for the selective application (i.e., occasional displacement) of the forum's public law. As Professor Baade notes, public policy "has no application to domestic law, which by definition does not contradict domestic public policy." See supra text accompanying note 39.
n259. On the surface, the process and result of classifying laws is reminiscent of the thirteenth and fourteenth century Italian statutists, who determined a law's sphere of application according to the category in which it was classified - a system whose eventual complications led to its demise. See, e.g., Hessel E. Yntema, The Historical Bases of Private International Law, 2 Am. J. Comp. L. 297, 303-04 (1953); Maier, Extraterritorial Jurisdiction, supra note 4, at 282 n.5; Paul, supra note 28, at 13-14. The classification that occurs in the context of the public law taboo does not suffer a similar infirmity. The sphere of application of a law within the taboo depends on the law's intent, not on its categorization.
n260. Clearly, public laws may designate their own scope of application, and it seems something of an abdication of responsibility for Congress, the Executive branch, or independent agencies responsible for public law enforcement not to be more diligent with respect to issues of so-called "extraterritorial" regulation. See supra notes 61, 204 and accompanying text; see also, e.g., Commodities Exchange Act, 7 U.S.C. 2 (1994) (disclaiming explicitly regulation of transactions in foreign currencies that do not occur on a domestic board of trade); Salomon Forex, Inc. v. Tauber, 8 F.3d 966, 975-78 (4th Cir. 1993) (applying 7 U.S.C. 2).