Karsten Thorn at The Hague Academy of International Law

Discovering the Best Rules to Protect Small and Medium sized Enterprises

Every year, The Hague Academy of International Law offers Summer Courses in Public as well as in Private International Law addressed to excellent students, young scientists, and experienced practitioners from all over the world who seek continued legal training on a high level. For this challenging program, only very experienced and well-known professors  are appointed, who must have their research focus on the same subject of the advanced courses.

This August, Karsten Thorn, Chair for Civil Law, Private International Law and International Commercial Law, and Comparative Law, lectured on the protection of small and medium-sized enterprises (SME) as the weaker party of contracts in Private International Law.

Speaking about the protection of structurally weaker parties in Private International Law normally refers to non-business parties such as consumers or employees. However, in many cases entrepreneurs are also protected. Well-known examples of this include the commercial agent under European law, the subcontractor in French law and the franchisee in many US jurisdictions.

Karsten Thorn systematized these cases, looking for underlying policies and developed a proposal for future Private International Law rules with regard to such SMEs. This looked at Private International Law in the broad French sense encompassing jurisdictional rules and even international commercial arbitration.

At first the interplay between substantive law, conflict of laws and jurisdictional rules in the protection of weaker parties was shown.

Then the different approaches taken with regard to conflict of law rules were analyzed. Concerning the choice of law by the parties, different models such as restricted choice of law, cherry picking theory and abuse of law were each described and evaluated. Subsequently, the same happened with regard to objective conflict rules supposed to protect structurally weaker parties. An emphasis was placed on internationally mandatory rules as a tool used by many jurisdictions to protect SMEs.

The jurisdictional rules were scrutinized and found that while there exist specific rules with regard to franchisees in many US jurisdictions, there are no equivalent rules in European Private International law. This leaves legal gaps sought to be closed in different ways and giving rise to a central question of which entrepreneurs need protection in international business. Based on the conclusions of an economic analysis a proposal for conflict of laws as well as jurisdictional rules was made.

Finally, international commercial arbitration was presented as an alternative method of dispute resolution. Whether it provides equivalent protective mechanisms or offers an opportunity to evade the relevant rules of Private International Law was investigated. After an analysis of the status quo, Karsten Thorn offered a new approach to resolve the problem.

In lively discussions, the 275 students coming from 68 different countries all over the world, mainly from China, Brazil, France, Spain, India and Iraq, could intensify their expertise and sharpen their argumentation skills. Some of them signed-up for the examination of the prestigious diploma of the Academy, achieved by only one student per year.


Monika Mohrdieck