Public policy is the body of fundamental principles that underpin the operation of legal systems in each state. So, for example, one of the policies in Family Law is parens patriae, i.e. that the state is the default parent for all those children within its jurisdiction and that, if it is necessary to protect the interests of the child, the state will usurp the rights of the natural parents and assert its own rights as every child's guardian. Similarly, in Law of Contract, the autonomy of the parties to enter into whatever agreement they want is protected under the policy of freedom of contract.

The policies adopted by states have come into being for a number of reasons. Some are aspects of the concept of sovereignty and reflect the essence of territoriality. Thus, public laws which either define the constitution of the state or regulate its powers can only apply within the boundaries agreed as a part of the process of de jure recognition of statehood by the international community. Other policies are aspects of the social contract, and they define and regulate the relationship between a state and those citizens who owe it allegiance. To that extent, these policies interact with (and sometimes overlap) civil rights and human rights. A number of these rights are defined at a supranational level and it will necessary for states to consider the extent to which international principles of law are to be allowed to influence the operation of law within their own territories. Independently of the work of the international community to produce harmonised principles, the courts in one state may sometimes be faced with lawsuits which seek the enforcement of "foreign" laws. This is becoming increasingly common as people now move with reasonable freedom between states and international trade routinely services markets in many different states. Such lawsuits will not be troublesome if the "foreign" law is the same as the forum law. But serious difficulties will arise if the application of the "foreign" law would produce a different result. These "conflicts are resolved under the systems of law known as Conflict of Laws.

The general rule is that all higher courts have an "inherent jurisdiction" or "residual discretion" to apply the public policies of their state to clarify or more properly interpret the letter of their domestic laws. In Conflict cases, no court will apply a "foreign" law if the result of its application would be contrary to public policy. This is problematic because excluding the application of foreign laws would defeat the purpose of Conflict of Laws by giving automatic preference to the forum court's domestic law. Thus, for the most part, courts are slower to invoke public policy in cases involving a foreign element than when a domestic legal issue is involved. That said, in those countries that have adopted Treaty and Convention obligations involving human rights, (e.g. in the U.K. the Human Rights Act 1998 is now in operation) broader concepts of public policy may now apply. Thus, courts may have to consider the "justice" implicit in a law that allows a husband to divorce his wife, but not vice versa as an aspect of sexual discrimination. Similarly, it would be possible to question the propriety of polygamous marriages, the talaq system of divorce which is available in some Islamic states, and Jewish divorce known as the get, but it is likely that the courts would be cautious to avoid any implication that they were discriminating against religions. Equally difficult are the Family Laws which regulate incestuous relationships and capacity. For example, it is probable that one state should not be too quick to condemn another because it allows a marriage between an uncle and a niece, or allows a marriage with a girl of 13 (e.g. as in Northern Nigeria), particularly if the parties are not proposing residence in the forum state.

Less controversial is the exclusion of foreign laws that are penal or territorial because they seek to collect taxes due to another state, e.g. in English Law, if foreign exchange control legislation is used as "an instrument of oppression", it may be denied extraterritorial enforcement (Re Helbert Wagg & Co Ltd [1956] Ch 323, 351). Similarly, otherwise valid contracts may be denied enforcement if to do so would assist an enemy of the forum state or would damage the political relationship with a friendly state. When considering questions of status, English courts have held that incapacities imposed on account of slavery (Somersett's Case [1771] 20 St Tr 1), religion (Re Metcalf's Trusts [1864] 2 De G J & S 122), alien nationality (Re Helbert Wagg & Co Ltd [1956] Ch 323 at pp.345/46), race (Oppenheimer v Cattermole [1976] A C 249 at pp.265, 276/78, 282/83), divorce (Scott v Att-Gen [1886] 11 P D 128), physical incompetence (Re Langley's Settlement [1962] Ch 541 at pp.556/57) and prodigality (Worms v De Valdor [1880] 49L J Ch. 261 and Re Selot's Trusts [1902] 1 Ch. 488) will be disregarded.