Welcome to Rome I Regulation
17 December 2009
Regulation 593/2008 on the law applicable to contractual obligation ("Rome I Regulation") enters into force today in all Member State courts, excluding Denmark, and applies to all contracts concluded as from today.
What is the aim of the Rome I Regulation?
- to replace the Rome Convention on the law applicable to contractual obligations of 1980
- to make improvements to some of the rules: simplification and modernisation
- to bring them as a whole into the corpus of EU private international law instruments
- the cornerstone of the Regulation is still the freedom of choice of law governing a contract
What are the big changes?
- Absent any choice of law by the parties, Rome I Regulation sets out 8 more tailored rules that apply to specific contract types (such as those dealing with sale of goods, services, franchise arrangements and distribution agreements) (Art 4-1). Those provisions are not anymore treated as presumptions but as rules.
- If none of those rules fit, the governing law will be determined by reference to the law of the country "where the party required to effect the characteristic performance has its habitual residence" (art 4-2).
- Exception is made when it is clear from all the circumstances of the case that the contract is manifestly more closely connected with another country, then the law of that country shall apply" (Art 4-3). This provision is a useful tool in complex multi-parties contract or cross-border contracts that are all centred around a common transaction.
- Rome I Regulation also brings a greater clarification to the application of overriding mandatory rules.
- There are new rules or revised rules concerning particular contracts such as carriage, consumer contracts, insurance contract and individual employment contracts.
Please do not forget that Rome I Regulation does not deal with the law governing the negotiations. Breaking negotiations could under certain circumstances give rise to non-contractual liability. This field of law is regulated by Regulation 864/2007 on the law applicable to non-contractual obligations as from 11 January 2009. However, to avoid any doubt, it is still advisable to state expressly whenever possible f.i. in a letter of intent which governing law should apply in particular circumstances. During negotiations, also keep in mind that any mandatory rules of law of another country could have an impact on contractual relations in case of litigation.