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Rome I

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Recent changes to the European Law on Legal Jurisdiction mean that some Pan-European Sellers based in the UK could inadvertently end up arguing their cases on the Continent. From the beginning of this year, those in the UK involved with selling their goods and services across the European Union have had to contend with new rules issued by the European Parliament on how to determine which legal system applies to their sales. The new framework is enshrined within EC Regulation 593/2008, or 'Rome I' as it is more commonly known. Whilst Rome I is more 'evolution' than 'revolution' of the existing legal selection framework, it has introduced some key changes. This article is aimed at introducing businesses involved in Pan-European sales to these key changes, whilst giving a brief overview of how the choice of law in a sale contract may be made. Applicable Law. Parties based in different Member States continue for the most part to be able to choose which legal regime applies to them. However, should they fail to make such a choice, then Rome I will make it for them. Where Rome I goes one step further than its predecessor is in actually establishing set hard and fast rules for determining which law applies, based on the nature of the contract. For example, contracts for the sale of goods or services will be governed by the law of the country where the Seller has his habitual residence. Modifying Express Choice Rome I has also tightened up the previous rules relating to when the agreement of the parties as to the applicable law will be overridden in the public interest. For example, consider a contract for the supply of goods which has been agreed as falling within under English Law, but where the majority of the work in connection with that contract is to be performed in Spain. Before Rome I, any UK Court hearing a dispute in connection with this contract would not have had to consider whether or not the contract could be lawfully performed in Spain. Under Rome I however, if there was some compelling public interest reason why the contract could not be performed in Spain (for example, because the product has been banned), then the UK court would have to take this into account. The impact of such a provision is potentially far reaching, as a Seller can now no longer solely simply rely on a 'choice of English Law clause' to create a binding contract, if the subject matter of that contract is at least partially unlawful in the country of the Buyer. Consumer Contracts Consumer contracts continue to be afforded special protection under Rome I. It is not possible for a consumer to contract out of the mandatory laws of the Member State in which he or she resides. An example of this in the UK would be the Sale of Goods Act 1979, which affords consumers minimum guarantees in respect of the satisfactory quality and fitness for purpose of the goods they are buying. Rome I does however go further in enhancing the protection afforded to consumers in one particularly significant way. Previously, consumers had to prove two things before they could rely on the law of Member State. Firstly, that the Seller had made a specific invitation addressed to them (as opposed to the world at large) to buy goods. Secondly, that the consumer had taken, in his Member State, all steps required on his part to have completed the contract (usually in the context of the sale of goods, this would simply mean paying for them). Previously, there was a sizeable gap in the law in relation to internet sales. In that context, specific invitations addressed to individual consumers are uncommon. The consumer typically completes an order form online, without the Seller ever have made an offer to the consumer on an individual basis. Rome I however does away with both stipulations, and replaces them with a more general test. The test is whether the Seller has, by any means, directed activities to the Member State where the consumer has his habitual residence. Arguably, simply making the website available in the consumers country would be enough. This new hurdle for consumers is therefore obviously significantly lower, and will likely cause most internet sale contracts with consumers to become subject to the minimum mandatory laws of the consumer's Member State. So what can Sellers do to improve their trading position in a post Rome I world? The answer lies in a carefully reviewing their terms of business to make sure that they offer sufficiently robust protection. Sellers should ensure that they have a carefully drafted choice of law clause, which is both clear and easy to follow and sets out in a rational manner why that particular legal system has been chosen by the parties. Sellers should also ensure that their terms and conditions have sufficient redundancy built in them so as to survive their choice of law clause being found by the Courts to be invalid. Finally, care should also be taken to make sure that their terms and conditions specifically contemplate what will happen in a conflict of laws scenario, e.g. where the Seller is selling goods that are legal in the country of origin but illegal in the country of destination. Sellers should not be afraid to invest in their terms and conditions by instructing a solicitor to ensure that they are both well drafted and compliant with Rome I. The consequences of not doing so are clear; a failure by Sellers to properly consider issues of legal jurisdiction at the beginning of any sales transaction could lead to potentially costly overseas litigation for them at the end of it. This is not legal advice; it is intended to provide information of general interest about current legal issues. • For additional information or comment please contact: David Springett of Gepp & Sons.