Where foreign law governs international transactions: Key impact and considerations for Mauritian parties

Critical considerations for Mauritian parties

Whilst Mauritius is reckoned as a jurisdiction which values and upholds party autonomy in commercial matters, such freedom is not always absolute.  The choice of foreign governing law does not entirely displace the application of Mauritius law. The Mauritian party will have to consider the following:

• Public Policy as a Limitation

One of the principal limitations on the application of foreign law is public policy. Mauritian Courts would normally validate the choice of law of the foreign law agreements so long as they do not contravene the public policy in place in Mauritius. Our judicial system will first and foremost take into consideration the fundamental principles of justice and fairness, coupled with the mandatory statutory provisions currently operative. Should there be a conflict with the mandatory statutory provisions or fundamental principle of justice and fairness, the Mauritius Courts may refuse to apply the foreign law to the extent of the inconsistency. It should however be noted that the interpretation of “public policy” as an invalidating element which will be applied by the Courts is strictly interpreted as was explained in the JCPC judgment of Betamax Ltd v State Trading Corporation¹ which considered the question of whether public policy could be used to set aside an arbitral award.

The Court has a very limited supervisory role which requires the court to respect the finality of the award. It cannot, under the guise of public policy, reopen issues relating to the meaning and effect of the contract or whether it complies with a regulatory or legislative scheme.

Although the Board did not list exact items which would vitiate a contract or arbitral award, they stated that matters which may be considered in raising public policy as a point are the legality of the contract, fraud and a breach of natural justice. Employment matters provide a useful illustration of this principle. Certain rights conferred upon employees under Mauritian law are considered mandatory and cannot be contracted out by agreement. For instance, any dispute that arises in relation to employment contracts pertaining to payment of severance allowance, will have to be dealt with by the exclusive jurisdiction of the Industrial Court of Mauritius. The employer and employee cannot in such circumstances, agree to refer the dispute in question to a foreign jurisdiction. The rationale behind such approach is because employment contracts in their very nature are social contracts and are emanations of social policy.

This approach is consistent with broader international practice. For the very same reasons, the Brussel Convention 1968 within the European Union and Hague Convention on Choice of Court Agreements 2005 recognise that matters pertaining to employment contracts, consumer contracts and certain family law issues cannot be subjected to unrestricted contractual freedom but rather should be afforded jurisdictional protections designed to safeguard weaker parties.

Albeit Mauritius is not a party to the Brussels regime and the applicability of the Hague Convention instruments would depend on the jurisdictions involved, these conventions clearly depict that the internationally accepted principle of party autonomy will not always be blindly followed.

Taking the aforesaid into consideration, where the Supreme Court of Mauritius deem that a contractual provision governed by foreign law circumvents our statutory laws or somehow produces an outcome which violates the fundamental Mauritian principles, the Court will be reluctant to enforce same.

• Perfection Requirements

Very often in cross border transactions involving financing arrangements, lenders require a comprehensive security package securing the borrower’s obligations. Such security package may include fixed and floating charges over present and future assets, share pledges, assignment of receivables, security over bank accounts in the form of assignment over bank accounts or account charge and subordination agreements.

The main concern of the lenders would normally be that that their security interests are ranked first and take priority over any other charge. However, the effectiveness of security over assets situated in Mauritius can only be achieved following the specific requirements under the laws of Mauritius. For instance, in order for a fixed and floating charge to rank ahead of subsequent privileges, mortgages or other security interests, it has to be registered and inscribed with the Registrar General and Conservator of Mortgages in accordance with Article 2202-54 of the Civil Code. Likewise, a pledge over the shares of a Mauritian company must comply with the requirements of the Companies Act 2001 in relation to any contractual restrictions on share transfers, together with all related mandatory provisions for the share pledge to be effective.

Therefore, regardless of the choice of foreign law governing an agreement, where a party wishes to enforce its security interests in Mauritius, local perfection requirements remain critical against the Mauritian assets contemplated. Failure to incorporate and comply with such requirements could adversely affect the enforceability, priority and practical value of the chosen security package.

Enforcement of these foreign law governed agreements

Another important factor that a Mauritian party has to consider is practical enforceability of these foreign law governed agreements before a Mauritian Court.

In most of those foreign law governed agreements, the parties tend to include a clause to the effect that the foreign court, as the case may be, shall have exclusive jurisdiction in dispute resolution matters. When dealing with an exclusive jurisdiction clause, the universal principle is to give effect to the agreement of the parties on the choice of jurisdiction agreed in their contract. Thus, as a general rule, Mauritian courts do recognise the parties’ freedom to agree upon the forum in which disputes will be resolved and will normally give effect to such clause.

However, a foreign judgment does not automatically have executory effect in Mauritius simply because it is valid and enforceable in the jurisdiction where it was rendered. Before a foreign party can enforce a foreign judgment in Mauritius, it must first obtain an order of exequatur from the Mauritian courts. Any judgment delivered by a superior court of a foreign country may be enforced under the Foreign Judgments (Reciprocal Enforcement) Act 1961 whilst any judgment obtained in the superior courts of England and Wales may be enforced under the Reciprocal Enforcement of Judgments Act 1923.

The landmark authority of D’Arifat², coupled with Article 546 of the Civil Procedure Code establishes the principal conditions for the grant of an exequatur, namely:

1. The judgment should be valid and capable of execution in the country where it was delivered at the application for exequatur;
2. The defendant must have been regularly summoned to attend the foreign proceedings;
3. The adjudicating court must have had jurisdiction to deal with the matter submitted to it; and
4. The judgment delivered was not contrary to any principle affecting public order.

Where the above conditions are met, the Mauritian courts would grant the enforcement of the foreign judgment. Once the order of exequatur is obtained, the foreign judgment may be enforced in the same manner as any judgment of the Mauritian courts. As a rule of thumb, parties should note that the Courts of Mauritius will not reconsider the merits of the foreign case but rather they will apply the aforementioned four conditions.

Thus, parties to a foreign law agreement should not solely focus on the choice of law and forum for dispute resolutions. But rather, they should also carefully consider how any resulting judgment may be enforced against the assets located in Mauritius.

Agreement to Arbitrate

Arbitration remains one of the most common dispute resolution mechanisms used in international transactions and very often in these foreign law governed agreements, the parties include an arbitration clause as a means to resolve any conflict arising out of the agreement.

Where such is the case, the Court must consider its duty to declare itself incompetent as set out in the landmark authority of Hewlett-Packard International Trade BV v Happy World Ltd [2017 SCJ 324] which was re-affirmed in the recent authority of Bissendary & Anor v D Balgobin [2026 SCJ 26] where the Court held –  “It is only when a dispute brought before the Court is one which is governed by a “convention  d’arbitrage”  referring  it  to  a  “tribunal  arbitral”  that  the  Court  must decline  jurisdiction.  In  our  view,  the  initial  decision  as  to  whether  there  is  an arbitration clause applicable to the dispute remains within the province of the Court. If it finds that a “tribunal  arbitral”  should  be  “saisi  en  vertu  d’une  convention d’arbitrage” which is not “manifestement nulle”, then the Court should declare itself incompetent.”

However, should the Defendant or Appellant fail to invoke the existing arbitration clause at the first available opportunity, the court would consider that the parties have subjected themselves to the jurisdiction of the national courts and have renounced to their right to resolve the dispute by way of arbitration. This principle was illustrated in the authority of  Airworld Limited v Malaysian Airline System Berhad [2012 SCJ 29] where the Court held “By failing to invoke the arbitration clause at the first available opportunity and by filing their  plea  and,  in  the  case  of  the  appellant  in  the  second  case,  a  counterclaim,  the appellants are deemed to have renounced the “clause compromissoire”, especially in the light of the authorities quoted by the learned Judge.” Likewise, relying on Clanbrassil Co Ltd & Anor v Copex Management Services Ltd & Ors [2012 SCJ 192] and the cases referred to therein, it clear that a challenge to the jurisdiction of the Court will as a rule not be allowed to be raised if it is not done at the first available opportunity and if it is raised after the plea on the merits has been given.

It can be gleaned from the above that arbitration clauses should not only be carefully drafted but must also be raised at the first available opportunity so as to uphold the validity of the arbitration clause.

Conclusion

Mauritius remains a jurisdiction which upholds the principle of party autonomy in international transactions and recognises foreign law governed agreements such that a Mauritian party may submit its contractual relationship to foreign laws and foreign dispute mechanisms without fear. However, the selection of a foreign governing law does not operate in isolation from the mandatory requirements of Mauritius law. In order to ensure effectiveness of such arrangement, the Mauritian party should be mindful of the localisation of the assets and applicable legal provisions which would render the agreement enforceable in Mauritius.

Similarly, parties should consider the practical aspects of enforcement. The successful enforcement of a foreign judgment is contingent upon obtaining an order of exequatur from Mauritian courts and satisfying the applicable conditions governing recognition and enforcement.

Accordingly, when entering into cross-border transactions, Mauritian parties should carefully assess not only the commercial implications of a foreign governing law clause, but also the practical consequences relating to enforcement, security interests and dispute resolution mechanism.

¹[2021] UKPC 14
²D’Arifat v. Lesueur 1949 MR 191