Convention on the law applicable to contractual obligations

Outline of the Community (European Union) legislation about Convention on the law applicable to contractual obligations

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Justice freedom and security > Judicial cooperation in civil matters

Convention on the law applicable to contractual obligations (Rome Convention)

The Convention establishes uniform rules concerning the law applicable to contractual obligations in the European Union (EU).

Document or Iniciative

Convention 80/934/ECC on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980.

Summary

The Convention on the law applicable to contractual obligations was opened for signature in Rome on 19 June 1980 for the then nine European Community (EC) Member States. It entered into force on 1 April 1991. In due course, all the new members of the EC signed the Convention. When the Convention was signed by Austria, Finland and Sweden, a consolidated version was drawn up and published in the Official Journal in 1998. A further consolidated version was published in the Official Journal in 2005, following the accession of 10 new Member States to the Convention.

The Convention applies to contractual obligations in situations involving a choice of laws – even where the law it designates is that of a non-contracting State – with the exception of:

• questions involving the status or legal capacity of natural persons;
• contractual obligations relating to wills, matrimonial property rights or other family relationships;
• obligations arising under negotiable instruments (bills of exchange, cheques, promissory notes, etc.);
• arbitration agreements and agreements on the choice of court;
• questions governed by the law of companies and other corporate and unincorporated bodies;
• the question of whether an agent is able to bind a principal to a third party (or an organ to bind a company, or a corporate or unincorporated body);
• the constitution of trusts and questions relating to their organisation;
• evidence and procedure;
• contracts of insurance that cover risks situated in the territories of the Member States (excluding reinsurance contracts).

The signatories to a contract may choose the law applicable to the whole or a part of the contract, and select the court that will have jurisdiction over disputes. By mutual agreement they may change the law applicable to the contract at any time (principle of freedom of choice).

If the parties have not made an explicit choice of applicable law, the contract is governed by the law of the country with which it is most closely connected, according to the principle of the proper law (place of habitual residence or place of central administration of the party performing the contract, principal place of business or other place of business of the party responsible for performing the contract). However, specific rules apply in two cases:

• where the contract concerns immovable property, the law applicable by default is that of the country in which the property is situated;
• where the contract concerns the transport of goods, the applicable law is determined according to the place of loading or unloading, or the principal place of business of the consignor.

To protect the rights of the consumer, the supply of goods or services to a person is covered by special provisions, according to the principle of the protection of the weaker party. Unless the parties decide otherwise, such contracts are governed by the law of the country in which the consumer has his habitual residence. In no circumstances may the choice of law work to the disadvantage of the consumer or deprive him of the protection afforded by the law of his country of residence where it is more favourable. These rules do not apply to contracts of carriage or contracts for the supply of services in a country other than that in which the consumer has his habitual residence.

In the case of employment contracts, one of the following will apply:

• the law of the country in which the employee habitually carries out his work;
• the law of the country in which the company that employed the worker has its place of business;
• the law of the country with which the employment contract is most closely associated.

If the parties decide to select another law to apply to the contract, this choice may not be at the expense of the protection of the worker.

Present or future provisions of Community law will take precedence over the terms of the Convention, in particular as regards the choice of law relating to contractual obligations concerning particular matters.

If, once the Convention has entered into force, any Member State wishes to adopt new rules on the choice of law for a particular category of contracts within the scope of the Convention, or become a party to an international convention in this field, it must inform the other signatories. Each of these States has six months to respond and, if it so wishes, ask for consultations. If no reply has been received within six months or if no agreement has been reached in consultations within two years (one year in the case of a multilateral convention), the requesting State may amend its law or accede to the Convention.

The Convention will remain in force for 10 years. It will then be tacitly renewed every five years, and may be denounced by one of the signatory States.

Two Protocols on the interpretation of the Convention by the Court of Justice of the European Communities were signed in 1988. A third Protocol, signed in 1980 and supplemented in 1996, authorises Denmark, Sweden and Finland to retain their national provisions concerning the law applicable to the carriage of goods by sea.

Four joint declarations were appended to the Convention:

• in 1980, a number of Member States stressed the importance of measures adopted by the Community on choice-of-law rules being consistent with the terms of the Convention;
• they also raised the possibility of conferring jurisdiction for interpreting the Convention on the Court of Justice;
• in 1988, after the two Protocols had been signed, an exchange of information between the Member States and the Court of Justice on judgments relating to contractual obligations was proposed.

A call was also made for all new Member States of the Community when signing the Rome Convention, to accede to the Protocol on the interpretation of the Convention by the Court of Justice.

References

Related Acts

Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) [Official Journal L 177 of 4.7.2008].
This Regulation replaces the Rome Convention, transforming it into a Community instrument and, at the same time, modernising it. Thus, together with Brussels I and Rome II it establishes a set of binding rules of private international law for contractual and non-contractual obligations in civil and commercial matters.

Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation [COM(2002) 654 final – not published in the Official Journal].
Through this Green Paper, formulated as a questionnaire, the European Commission was looking at the possibility of converting the Convention into a Community instrument and modernising it.
Converting the Rome Convention into a Community instrument would, by establishing uniform private international law within the Member States, accord the Court of Justice jurisdiction over interpretation, and facilitate the application of standardised conflict rules in the new Member States. The instrument chosen by the Commission is the regulation, which is binding and directly applicable, and does not tolerate the uncertainties and delays inherent in the transposition of directives.
The question of modernising the Convention applies in particular to the protection of consumers and workers (known as the “weaker parties”). One solution proposed by the Commission was the introduction of a general clause guaranteeing the application of a minimum standard of Community protection when all, or just some particularly significant, elements of the contract are located within the Community. This solution would remedy the current lack of protection for the “mobile consumer” (i.e. someone who has gone to a country other than his or her country of habitual residence to make a purchase or obtain a service).