Once more Rome I

Lorenzo Litta

Following my post of yesterday I would like to analyse the main articles of the Rome I Regulation comparing such points with the Rome Convention to try to understand the scope of this new EU Regulation.

Article 1: Point (e) confirms the exclusion of arbitration agreements and agreements on the choice of court as the majority of the european lawyers felt that the former was already covered by satisfactory international regulations and that the question of the law applicable to the choice-of-forum clause should ultimately be settled by the Brussels I Regulation.
Point (f) combines the rules of point (e) and the company-law aspects of point (f) of the Convention.
Point (i) proposes a specific rule for pre-contractual obligations which, according to the contributions, confirms the analysis of the majority of legal systems in the Union and the restrictive concept of the contract adopted by the Court of Justice in its judgments concerning Article 5(1) of the Brussels I Regulation: for the purposes of private international law, they would be treated as a matter of tort/delict and governed by the future Rome II instrument.

Article 3: The Regulation require the courts to ascertain the true tacit will of the parties rather than a purely hypothetical will: they suggest that the parties’ conduct be taken into account and seek to clarify the impact of the choice of court, so as to reinforce the foreseeability of the law. To further boost the impact of the parties’ will authorises the parties to choose as the applicable law a non-State body of law. The form of words used would authorise the choice of the UNIDROIT principles, the Principles of European Contract Law or a possible future optional Community instrument, while excluding the lex mercatoria, which is not precise enough, or private codifications not adequately recognised by the international community. Like the Vienna Convention on the international sale of goods, the text shows what action should be taken when certain aspects of the law of contract are not expressly settled by the relevant body of non-State law.

Article 4: The rule in the Convention, whereby the applicable law is the law of the place where the party performing the service characterising the contract has his habitual residence, is preserved, but the proposed changes seek to enhance certainty as to the law by converting mere presumptions into fixed rules and abolishing the exception clause. Since the cornerstone of the instrument is freedom of choice, the rules applicable in the absence of a choice should be as precise and foreseeable as possible so that the parties can decide whether or not to exercise their choice. Regarding the solutions for the different categories of contracts, they are based on the fact that Community law seeks to protect the franchisee and the distributor as the weaker parties.

Article 5: The Regulation tries to propose a new, simple and foreseeable conflict rule consisting of applying only the law of the place of the consumer’s habitual residence, without affecting the substance of the professional’s room for manoeuvre in drawing up his contracts. This solution would be truly compatible with the high level of protection for the consumer demanded by the Treaty. It also seems fair in economic terms: a consumer will make cross-border purchases only occasionally whereas most traders operating across borders will be able to spread the cost of learning about one or more legal systems over a large range of transactions. Finally, in practice this solution does not substantially modify the situation of the professionals. Regarding other clauses, which the parties are free to draft as they wish, the freedom of the parties to draft their own contract is the rule that continues to prevail; it therefore matters little whether they are governed by the law of one or other party. Paragraph 2 specifies the conditions for applying the special rule. The first subparagraph now recalls that the consumer’s contracting partner, a concept defined in some detail by the Court of Justice, is a professional.

Article 6: The basic rules on individual employment contracts are defined by this article in connection with Article 3 of Rome I Regulation. However the content has been amplified and the reference is now to the “country in or from which…carries out...” to take account of the law as stated by the Court of Justice and its broad interpretation of the habitual place of work. This change will make it possible to apply the rule to personnel working on board aircraft.

Article 7: The Regulation introduces a specific rule for contracts concluded by an agent, affirming that a contract between principal and agent shall be governed by the law of the country in which the agent has his habitual residence, unless the agent exercises or is to exercise his main activity in the country in which the principal has his habitual residence, in which case the law of that country shall apply. The relationship between the principal and third parties arising out of the fact that the agent has acted in the exercise of his powers, in excess of his powers or without power, shall be governed by the law of the country in which the agent had his habitual residence when he acted. However, the applicable law shall be the law of the country in which the agent acted if either the principal on whose behalf he acted or the third party has his habitual residence in that country or the agent acted at an exchange or auction.

Article 8: Concerning mandatory rules, rules the respect for which is regarded as crucial by a country for safeguarding its political, social or economic organisation to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation. Nothing in this Regulation shall restrict the application of the rules of the law of the forum in a situation where they are mandatory. Effect may be given to the mandatory rules of the law of another country with which the situation has a close connection.

Article 9: The existence and validity of a contract, or of any term of a contract, shall be determined by the law which would govern it under this Regulation if the contract or term were valid. Nevertheless a party may rely upon the law of the country in which he has his habitual residence to establish that he did not consent if it appears from the circumstances that it would not be reasonable to determine the effect of his conduct in accordance with the law specified in the preceding paragraph.

Article 10: On the formal validity of a contract, the Regulation states that a contract is formally valid if it satisfies the formal requirements of the law which governs it in substance under this Regulation or the law of the country in which one or other of the parties or his agent is when it is concluded or the law of the country in which one or other of the parties has his habitual residence at that time. A unilateral act intended to have legal effect relating to an existing or contemplated contract is formally valid if it satisfies the formal requirements of the law which governs or would govern the contract in substance under this Regulation or of the law of the country in which the act is performed or the law of the country in which the person who drafted it has his habitual residence at that time.

Article 11: On the scope of the applicable law to a contract by virtue of this Regulation, it shall govern in particular: (a) interpretation; (b) performance; (c) the consequences of the total or partial breach of obligations, including the assessment of damages; (d) the various ways of extinguishing obligations, and prescription and limitation of actions; (e) the consequences of nullity of the contract.