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Rome Convention

In 2003 the Commission presented a Green Paper on the question of whether the Convention should be converted into a Community instrument. In December 2005 the Commission presented a draft proposal known as Rome I, setting out the rules for courts to apply when determining which country’s law applies to contractual obligations. The proposal is currently being negotiated and the Ministry of Justice leads on this issue in Whitehall.

Summary

• if you are concerned about applicable law or likely to be involved in a legal action with someone in another European country, seek legal advice. Go to your lawyer or contact the Community Legal Service (www.justask.org.uk);

• especially in Business to Business (b2b) cases it is advisable to say in your standard contract terms which country's law will apply in deciding the parties' rights and obligations in the event of a dispute;
if the parties to a b2b contract have not specified the law, it will normally be that of the supplier's country;
• in business to consumer (b2c) cases the applicable law will normally be:

- that of the consumer's country, if the supplier sells to consumers in other European countries and its website is geared to doing so;

- that of the supplier's country, if the supplier is only intending to sell in the UK and its website reflects this;

• your website might be seen as being intended for other EU consumers if, for example, it: offers a choice of languages or currencies, or gives product specifications or delivery times or costs for different countries;
Also remember:

• there are many other ways of resolving disputes: eg

- through discussion and negotiation with the consumer
- through alternative dispute resolution

• consider subscribing to an on-line code of practice which gives access to an alternative dispute resolution (ADR) scheme, for example run by a trade association or ombudsman.

Scope of the Rome Convention

2.1 It does not automatically follow that if a country has jurisdiction over a case, its law applies to the substance of a dispute. The 1980 Rome Convention, to which the EU Member States are signatories, deals with which country's law applies in contractual disputes. The Convention does not apply in cases where the law, including criminal law, is enforced by public authorities such as, in the UK, the Director General of Fair Trading and local authority trading standards departments.

2.2 Like the Brussels Convention, the Rome Convention is used mainly in the commercial field, in resolving disputes between businesses. It applies equally however to consumer contracts and contains special provisions about them. This note concerns the consumer provisions. The Lord Chancellor is the Minister responsible for the Convention as a whole .

Freedom of choice: Article 3

2.3 The general rule, set out in Article 3.1 of the Convention, is that:

A contract shall be governed by the law chosen by the parties. The choice must be express or demonstrated with reasonable certainty ….

2.4  It is therefore advisable to make a clear choice of law - usually a standard term written into the contract - in order to provide certainty for both parties. Suppliers usually favour the application of their own national law.

A choice of law will not be binding if it is not sufficiently clear. If it is clear, it will be binding in business to business contracts. It will also be binding in business to consumer contracts which are not covered by Article 5, except that it cannot be used to avoid the effect of "mandatory rules" of the law of another country if that is the only country with which the contract has any relevant connection. In business to consumer contracts which are covered by Article 5, the "mandatory rules" of the consumer's country of habitual residence will always apply whatever choice of law is made. (See paragraphs 2.7 and 2.8 on the consumer provisions and the "mandatory rules of the law".)

Applicable law in the absence of choice: Article 4

2.5 Article 4.1 of the Convention provides that if the applicable law has not been chosen in accordance with Article 3, the contract is to be governed by the law of the country with which it is most closely connected. Article 4.2 lays a presumption for the application of this test:

Subject to the provisions of paragraph 5, it shall be presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has … his habitual residence or … its central administration.

This presumption, which is based on the concept of characteristic performance of the contract, is designed to identify the country with which the contract is most closely connected. It does so by reference to the performance which constitutes the essence of the contract and is generally understood to mean the performance for which the payment is due: for example the delivery of goods or the provision of a service. It operates by reference to the country where the party who is to affect the characteristic performance has his habitual residence, or, in the case of a company, its central administration.

2.6 There are two special presumptions in relation to particular types of contract. As regards contracts relating to immovable property Article 4.3 provides that the presumption is that a contract of this kind is most closely connected with the country where the property is situated. In relation to contracts for the carriage of goods Article 4.4 provides a presumption which refers to the principal place of business of the carrier at the time the contract was concluded. Finally Article 4.5 provides that the presumptions in this Article should not apply either where the characteristic performance cannot be identified or where it appears from the circumstances as a whole that the contract is more closely connected with another country. In these situations the closet connection test in Article 4.1 is applied.

Consumer provisions: Article 5

2.7 The Convention contains in Article 5 provisions on consumer contracts which are similar, though not identical, to those in Article 13 of the Brussels Convention. Article 5.2 and 5.3 of the Convention says that:

2 Notwithstanding the provisions of Article 3, a choice of law made by the parties shall not have the result of depriving the consumer of the protection afforded to him by the mandatory rules of the law of the country in which he has his habitual residence:

- if in that country the conclusion of the contract was preceded by a specific invitation addressed to him or by advertising, and he had taken in that country all steps necessary on his part for the conclusion of the contract, or

- if the other party or his agent received the consumer's order in that country, or

- if the contract is for the sale of goods and the consumer travelled from that country to another country and there gave his order, provided that the consumer's journey was arranged by the seller for the purpose of inducing the consumer to buy.

3 Notwithstanding the provisions of Article 4, a contract to which this Article applies shall, in the absence of choice … be governed by the law of the country in which the consumer has his habitual residence if it is entered into in the circumstances described in paragraph of this Article.

2.8 The "mandatory rules of the law" cannot be limited or excluded by contractual agreement. They include the rights given to consumers by national legislation such as that in the UK on distance selling (eg rights to cooling off periods) and the sale of goods (eg the right to receive goods which are of satisfactory quality). Therefore if the contract meets one of the tests in Article 5.2, the court will apply the law of the consumer's country in deciding the parties' rights and obligations under the contract, regardless of any choice of law clause to the contrary.

Exceptions

2.9 Article 5 does not apply to contracts of carriage and contracts for the supply of services which are to be supplied outside the consumer's country of residence. It does however apply to contracts for a combination of travel and accommodation for an inclusive price (e.g. package holidays).

Interpretation of "preceded by a specific invitation addressed to him or by advertising"

2.10 Article 5 raises the same question as Article 13 of the Brussels Convention: whether an internet website constitutes advertising in the state of the consumer's domicile. It has not been tested in the courts. The following guidance from the Report on the Rome Convention is available on the position regarding traditional media:

Thus the trader must have done certain acts such as advertising in the press, or on radio or television, or in the cinema or by catalogues aimed specifically at that country, or he must have made business proposals individually through a middleman or by canvassing. If, for example a German makes a contract in response to an advertisement published by a French company in a German publication, the contract is covered by the special rule. If, on the other hand, the German replies to an advertisement in American publications, even if they are sold in Germany, the rule does not apply unless the advertisement appeared in special editions of the publication intended for European countries. In the latter case the seller will have made a special advertisement intended for the country of the purchaser.

2.11 As this note says in relation to the Brussels Convention, it might be necessary to look at the nature of any given website in considering whether it fulfilled criteria which might be analogous to those above. For example websites giving information in different Community languages and currencies and offering to deliver to EU countries might well be covered by Article 13. Other websites, however (eg a site in English with prices in pounds and confining orders to UK customers) might be hard to describe as advertising outside the UK. According to the example of the advert placed in an American publication which does not have a special European edition, being able to access the information is not by itself enough to trigger Article 13.