Jean Monnet Center at NYU School of Law


IV. Constitutional Requirements for Choice-of-Law in the US and EU Federal Systems

A. US Constitutional Requirements

In the US, the above listed desiderata for choice of law in a federal system stand at odds with the fundamental structure of choice of law, as it is understood by many of the children of the so called Conflicts Revolution. In fact, most of the ideas that have been found incompatible with the federal system, such as forum law bias, substantive bias, or limiting a state's interests to benefiting its own citizens, have been developed by this US American school of conflicts scholarship. But these ideas are not only irreconcilable with the federal model as developed above, they also seem irreconcilable with the legal requirements set forth by the US Constitution.

1. Contemporary US Supreme Court Jurisprudence

Reading US law as it "is", i.e., as it is interpreted by the US Supreme Court, one will probably be quite puzzled by the last sentence.85 In the last decades, the Court has become increasingly lax in controlling state choice-of-law decisions, culminating in the much discussed Allstate Ins. v. Hague decision of 1981.86 The Court merges Due Process Clause and Full Faith & Credit Clause with regard to state choice-of-law decisions. The standard "is that for a State's substantive law to be selected in a constitutionally permissible manner, that State must have a significant contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair."87 In this test, it is the interests of the individual litigant which are considered and weighed against the state's interest in claiming legislative jurisdiction (and in practice, the state's interests are weighed very generously, giving states such broad freedoms that one can legitimately ask whether there are any real limitations at all). The test is thus concerned with the relationship of state and individual, i.e., the vertical relationship between sovereign and citizen, in line with the basic structure and purpose of the Due Process Clause.

As Justice Stevens pointed out in his concurrence in Allstate, properly distinguishing between Due Process and Full Faith & Credit analysis would have brought out the different structure and purpose of the Full Faith & Credit Clause, which is concerned with the horizontal relationship between sovereign states.88 "The Full Faith and Credit Clause is one of several provisions in the Federal Constitution designed to transform the several States from independent sovereignties into a single, unified Nation. ... [It] implements this design by directing that a State, ..., respect the legitimate interests of other States, and avoid infringement upon their sovereignty."89 However, the test Justice Stevens ultimately proposes for the state-state relationship under the Full Faith & Credit Clause is almost equally tolerant of States' choice-of-law preferences. "[T]he Clause should not invalidate a state court's choice of forum law unless that choice threatens the federal interest in national unity by unjustifiably infringing upon the legitimate interests of another State."90 Like the majority, Justice Steven is of the opinion that "[i]t is not this Court's function to establish and impose upon state courts a federal choice-of-law rule."91

2. Alternative Interpretation of the US Constitution

a) General Overview

The Supreme Court's reading of the Constitution with regard to choice-of-law has been the object of heavy criticism, though, both before and after the Allstate v. Hague decision. Reducing the constitutional scrutiny of state choice-of-law decisions to a Due Process test, giving attention only to the interests of the adjudicating state and of the individual litigant, ignores the special relationship between the States implicated in any choice-of-law decision. The Full Faith & Credit Clause, the Commerce Clause, and the Privileges & Immunities Clause were "all added [to the constitutional text] precisely so that states would not stand in relation to one another as independent nations."92 The Full Faith & Credit Clause and the Privileges & Immunities Clause embody the principles of equal states and equal citizens, respectively, which mandate neutral choice-of-law rules. Such rules can only be territorial.93 Under the Full Faith & Credit Clause, Congress has the power to make such central choice-of-law rules. Absent such congressional action, the federal courts are charged with arbitrating between the interests of the different states, as laid down in the federal jurisdictional grant for diversity cases, and for conflicts between the states.94

b) Privileges & Immunities Clause

The Privileges & Immunities Clause prescribes that "[t]he Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States." Citizens of different states have to be treated equally; discrimination against out-of-state citizens is forbidden.95 The idea that a state has an interest in applying its laws only when it benefits one of its citizens in the case at hand, as proposed by many supporters of interest analysis, is incompatible with this constitutional requirement. This would be plain if one were to consider the case of a state not prosecuting perpetrators under its criminal laws if the victim is an out-of-state citizen; private law questions are only gradually different.96

c) Full Faith & Credit Clause

While it is thus impermissible under the Privileges & Immunities Clause to discriminate against litigants from other states, it is also impermissible to discriminate against laws from other states under the Full Faith & Credit Clause. In fact, giving "Full Faith and Credit ... to the Acts ... of every other State" can only mean that those "Acts"97 have to be given the same consideration as the forum state's laws - otherwise, the "Faith and Credit" accorded sister states' laws would be less than that given to forum state's laws, i.e., not "Full". Obviously, this does not mean that the forum state always has to apply the other state's law, as the argument has sometimes been distorted by its critics98. It only means that any asymmetric preference for forum law, or the content of forum law (in form of a better-law approach, or the like), is forbidden.99 The Full Faith & Credit Clause mandates neutral choice-of-law rules.100 In fact, the drafters of the constitution apparently presupposed a shared set of choice-of-law rules operating in the background of the Full Faith & Credit Clause.101 The power to specify such rules lies, according to the second sentence of the Full Faith & Credit Clause, with Congress. 102

d) The Role of the Federal Courts

So far, Congress has not used its authority to provide federal choice-of-law rules. But the federal courts were granted jurisdiction for diversity cases and disputes between states precisely in order to prevent any discrimination against out-of-state citizens, or, for that matter, against other states, in the adjudication of disputes. If the federal courts are to fulfill this role not only against informal, but also against explicit bias, they have to assume their role of arbiters between the states by forging federal choice-of-law rules (in the absence of congressional legislation). The Erie doctrine, which safeguards the federalistic diversity of state laws, has no place in choice-of-law, because diversity has no place in choice of law103. Just as the Supreme Court has considered disputes over physical borders between states as a federal matter per se104, so should disputes over the borders of legislative jurisdiction between states be considered a federal matter.105 The Klaxon decision, which transposed the Erie doctrine to choice-of-law, should be overturned.106

3. Conclusion

Although present Supreme Court jurisprudence hardly presents any constraints on states' choice-of-law decisions at all, a proper reading of the Full Faith & Credit Clause and the Privileges & Immunities Clause brings out constitutional requirements for choice-of-law in line with the general desiderata for choice-of-law in a federal system, as developed above. Choice-of-law rules in the US must not discriminate against other states' citizens, nor against other states' laws, i.e., they have to be neutral. The union, i.e., Congress or, if Congress stays inactive, the federal courts, have the competence and responsibility to develop such rules.

B. EU Law

In Europe, the situation is inverse: The Constitutional framework does not embody the general desiderata for choice-of-law in a federal system as developed above, but current practice is closer to these desiderata than in the US..

1. Non-Discrimination, and Neutral Choice-of-Law Rules of the Member States

EU law forbids, of course, discrimination against the citizens of other Member States, under Art. 12 EC, or, where applicable, the Freedoms or other more specific provisions. Discriminatory rules in the private international law of the Member States have been weeded out by the ECJ107, or withdrawn by the Member States108.109

But no provision of the EC Treaty seems to mandate equal respect for other Member States' laws in the way the Full Faith & Credit Clause does in the US. While the EC thus prohibits discrimination against the citizens of other Member States, it does not seem to prohibit discrimination against the laws of other Member States. This is relevant, among other things, for the assessment of unilateral choice-of-law rules ("Eingriffsnormen", "lois de police"), and the public policy exception.

All Member States still use unilateral choice-of-law rules for the enforcement of certain policies, while enforcing such unilateral rules of other Member States only on a case-by-case basis. It has been suggested that Member States are under the obligation of solidarity (Art. 10 EC) to apply other Member States' unilateral rules, if they are in conformity with the Freedoms and other EC law.110 But it is unclear why a Member State would be obliged to subdue its own policy (equally respectful of EC law) to that of another Member State, where that other Member State is not implementing, but only respecting, EC law.

A more plausible proposal is that where the EC harmonizes an area of law by mandating certain minimum standards through a directive, Member States are barred to invoke the public policy exception against other Member States' laws which respect these minimum standards.111 However, the Member States seem to be free to adopt any choice-of-law rule they deem appropriate (if it does not discriminate against other Member States citizens; and ignoring for the moment the possible impact of the Freedoms). A prohibition to depart from the chosen multilateral choice-of-law rule for substantive reasons in a given case (the public policy exception) would therefore have to be inferred directly from the directive setting the minimum standard.

In, sum, the EC Treaty does not seem to require the Member States to adopt strictly neutral choice-of-law rules, as would be desirable in a federal system.112

2. EU Choice-of-Law Rules

The importance of this shortcoming of the EC Treaty is mitigated by the fact that as a general tendency, Member States adopt neutral choice-of-law rules anyway, and by an important and growing body of uniform choice-of-law rules. For example, the Rome Convention determines the applicable law for contractual obligations. 113 Scholars had for some time suggested that uniform intra-Community choice-of-law rules could be decreed EC-wide per directive or regulation under Art. 94114, 95115, or 308116 EC. The EC had, rather unsystematically, sometimes attached a choice-of-law provision to directives harmonizing substantive private law.117 The power to adopt (at least) intra-Community choice-of-law rules has now been formally established under Art. 65(b) EC. "[I]nsofar as necessary for the proper functioning of the internal market," this provision gives the EC the power to "promot[e] the compatibility of the rules applicable in the Member States concerning the conflict of laws and of jurisdiction." The interpretation of this provision gives rise to a number of uncertainties, and the procedural questions surrounding this grant of community power are complex.118 Undeterred, the Commission seems to have quite far-reaching plans for creating European choice-of-law norms.119

One can therefore expect a boost of uniformization of choice-of-law within the EU, and this uniformization will, by the force of things, reinforce the prevalence of neutral choice-of-law rules in Europe. Although the "constitutional" requirements for choice-of-law leave more to be desired than those in the US from a federalistic perspective, the fact that the federal legislator is making use of its power to devise federal choice-of-law rules should push European choice-of-law rules further towards the federalistic ideal.

85 Cf. the general overview of present US law in Peter E. Herzog, Constitutional limits on choice of law, 234 R.C.A.D.I. 239 (1992-III); and Willis L.M. Reese, Legislative Jurisdiction, 78 Colum. L. Rev. 1587 (1978).

86 449 U.S. 302 (per Brennan, J.).

87 Id., at 313.

88 Id., at 320-322. Accord, e.g., Hay, supra note 46, 711-712; James A. Martin, The Constitution and Legislative Jurisdiction, 10 Hofstra L. Rev. 133, 139 (1981).

89 Id., at 322.

90 Id. at 323. See also Robert A. Sedler, Constitutional Limitations on Choice of Law: The Perspective of Constitutional Generalism, 10 Hofstra L. Rev. 59, 92-100 (1981).

91 Id. at 332. Likewise, Justice Brennan held for the majority that "[i]t is not for this Court to say ... whether we would make the same choice-of-law decision if sitting as the Minnesota Supreme Court. Our sole function is to determine whether the [State] Court's choice of its own substantive law in this case exceeded federal constitutional limitations. Implicit in this inquiry is the recognition, long accepted by this Court, that ... , in constitutional terms, application of the law of more than one jurisdiction [may be justified]", id., at 307.

92 Kramer, Public Policy Exception, supra note 82,1986 (1997); accord Jackson, supra note 40, 17.

93 Supra notes 33-36, and accompanying text.

94 The discussion here follows Laycock, supra note 23; accord. Roosevelt, supra note 33, 2503-2534; Gene R. Shreve, Choice of Law and the Forgiving Constitution, 71 Ind. L. J. 271 (1996); Gary J. Simson, State Autonomy in Choice of Law: A Suggested Approach, 52 S. Cal. L. Rev. 61 (1978); Laurence H. Tribe, American Constitutional Law (vol. 1, 3rd ed. 2000), § 6-39 n. 67.

95 This does not mean that there are no problematic cases, cf. supra II.B, p. 4.

96 Cf. Laycock, supra note 23, 274-277; Roosevelt, supra note 33, 2516-2527; and supra II.B, p. 4.

97 Which includes not only statutes, but also case law, see, e.g., Laycock, supra note 23, at 289-295.

98 Such as in Alaska Packers Ass'n. v. Industrial Accident Comm'n. of California, 294 U.S. 532, 547 (1934) (per Stone, J.); and, for the Australian equivalent (s. 118 of the Australian Constitution), by the majority opinion in McKain v. R W Miller and Co (South Australia) Pty Ltd (1991) 174 CLR 1, 36 (Brennan, Dawson, Toohey, McHugh, JJ.).

99 Laycock, supra note 23, at 295-301, 310-315.

100 Roosevelt, supra note 33, 2527-2529.

101 Laycock, supra note 23, at 297-301, 306-310 (accord Roosevelt, supra note 33, 2508), writing against Sedler, supra note 90, 92-100, who argues that choice-of-law was a discipline unknown to the Framers, so that the Full Faith & Credit Clause could not have been meant to address this issue at all. While the majority of the Australian High Court (supra note 98) has refused to see s. 118 of the Australian Constitution (Full Faith & Credit) as incorporating or presupposing federal (territorial) choice-of-law rules, this point was forcefully argued by the dissenters, Breavington v. Godleman (1988) 168 CLR 41, 98 (Wilson and Gaudron, JJ., dissenting), 129-135 (Deane, J., dissenting); McKain v R W Miller and Co (South Australia) Pty Ltd (1991) 174 CLR 1, 55 (Gaudron, J., dissenting); Stevens v. Head (1993) 176 CLR 433, 461 (Deane, J., dissenting), 464 (Gaudron, J., dissenting); see also Thompson v Hill (1995) 38 NSWLR 714, 716-718 (per Kirby, P.).

102 This congressional authority seems to be undisputed. See, in addition to Laycock, e.g., Baxter, supra note 15, 23; Currie, supra note 54, 182; Gottesman, supra note 30, 24-28; H. Geoffrey Moulton, Jr., Federalism and Choice of Law in the Regulation of Legal Ethics, 82 Minn. L. Rev. 73, 165-170 (1997).

103 See supra III.A.3, p. 11.

104 See, e.g., Howard v. Ingersoll, 54 U.S. (13 How.) 381 (1851).

105 See the references supra note 54; and on implied federal powers under the US Constitution generally Tribe, supra note 94, § 5-3.

106 Baxter, supra note 15, at 25-42; Hart, supra note 44, 513-515; Horowitz, supra note 54, 1205-1209; Laycock, supra note 23, at 282; Daniel J. Meltzer, The Judiciary's Bicentennial, 56 U. Chi. L. Rev. 423, 438-439 (1989). Other authors, while vividly endorsing the call for federal choice-of-law rules, doubt the Supreme Court's capacity, or sufficient speed, to create choice-of-law rules, and argue for a federal choice-of-law code or statutes, e.g., Gottesmann, supra note 30; Kramer, Uniform Code, supra note 29; Shreve, supra note 94, 295-296. Cf. also Donald T. Trautman, Toward Federalizing Choice of Law, 70 Texas L. Rev. 1715, 1725-1734 (1992).

107 See, e.g., Cases C-323/95, Hayes ./. Kronenberger, (1997) E.C.R. I-1711; C-20/92, Hubbard ./. Hamburger, (1993) E.C.R. I-3777; C-398/92; Mund & Fester ./. Hatrex, (1994) E.C.R. I-467 (these decisions all concerned [substantive rules of] international civil procedure, rather than choice-of-law proper, though.)

108 Notorious in this respect was Art. 38 of the German Introductory Law to the Civil Code [EGBGB].

109 There were, and to some extent certainly still are, many more substantive provisions which discriminate(d) against citizens of other Member States in all the Member States' laws. Since any discrimination leads to the application of different rules to different people, and under certain circumstances one might say to the application of the rules of different states, one might want to call all these discriminatory rules choice-of-law problems. We will abstain from that here, since the problems raised by substantive provisions are amply addressed in the relevant literature.

110 E.g., Wulf-Henning Roth, Der Einfluß des Europäischen Gemeinschaftsrechts auf das Internationale Privatrecht, RabelsZ 55, 623, 662-664 (1991).

111 E.g., Stefan Grundmann, Binnenmarktkollisionsrecht - vom klassischen IPR zur Integrationsordnung, RabelsZ 64 (2000) 457, 471-476; but see, e.g., Roth, supra note 7, 32.

112 This is not to say that some scholars have not gone to great length to construct such requirements through a brilliant, although sometimes extremely dogmatic, intellectual theorizing effort, mainly around the Freedoms, e.g. Roth, supra note 110.

113 Convention on the law applicable to contractual obligations of 1980, 1998 O.J. C 27 (consolidated version). Unfortunately, this Convention still allows for a public policy exception, and does not mandate the application of other states' "lois de police" (cf. Art. 7 of the Convention). The reason for this deplorable imperfection (from a federalistic point of view) might be that the Convention was designed to govern not only intra-Community, but any choice-of-law issue in contract law.

114 E.g., Hans C. Taschner, note 34 on Art. 100, in: Kommentar zum EU-/EG-Vertrag vol. 2/II (Hans von der Groeben, Jochen Thiesing & Claus-Dieter Ehlermann eds., 5th ed. 1999), with further references.

115 Jürgen Basedow, (editorial:) Die Harmonisierung des Kollisionsrechts nach dem Vertrag von Amsterdam, Europäische Zeitschrift Für Wirtschaftsrecht [EuZW] 1997, 609; A Common Contract Law for the Common Market [hereinafter: Common Contract Law], 33 Common Mkt. L. Rev. 1169, 1176-1178 (1996).

116 Karl F. Kreuzer, Die Europäisierung des Internationalen Privatrechts - Vorgaben des Gemeinschaftsrechts, in Gemeinsames Privatrecht in der Europäischen Gemeinschaft 373, 432 (Peter-Christian Mueller-Graff ed. 1993).

117 See, e.g., Bernd von Hoffmann, Richtlinien der Europäischen Gemeinschaft und Internationales Privatrecht, Zeitschrift fuer Rechtsvergleichung [ZfRV] 1995, 45.

118 Cf. Jürgen Basedow, The Communitarization of the Conflict of Laws under the Treaty of Amsterdam, 37 Common Mkt. L. Rev. 687, 696-707 (2000); Dirk Besse, Die justitielle Zusammenarbeit in Zivilsachen nach dem Vertrag von Amsterdam und das EuGVÜ, ZEuP 7 (1999) 107, 114-122; Christian Kohler, Interrogation sur les sources du droit international privé européen après le traité d'Amsterdam, Rev. crit. dr. internat. privé 88, 1(1999).

119 Cf. Action Plan of the Council and the Commission 03/12/1998, 1999 O.J. C 19, 1 (10).




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