Encyclopedia of Private International Law
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Encyclopedia of Private International Law

Edited by Jürgen Basedow, Giesela Rühl, Franco Ferrari and Pedro de Miguel Asensio

The role and character of Private International Law has changed tremendously over the past decades. With the steady increase of global and regional inter-connectedness the practical significance of the discipline has grown. Equally, so has the number of legislative activities on the national, international and, most importantly, the European level. With a world-class editor team, 500 content items and authorship from almost 200 of the world’s foremost scholars, the Encyclopedia of Private International Law is the definitive reference work in the field. 57 different countries are represented by authors who shed light on the current state of Private International Law around the globe, providing unique insights into the discipline and how it is affected by globalization and increased regional integration. The Encyclopedia consists of three inter-linked pillars, enhanced by sophisticated search and cross-linking functionality. The first pillar consists of A-Z coverage of the scope and substance of Private International Law in the form of 247 entries. The second pillar comprises detailed overviews of the Private International Law regimes of 80 countries. The third pillar presents valuable, and often unique, English language translations of the national codifications and Private International Law provisions of those countries. This invaluable combination represents a powerful research tool and an indispensable reference resource.
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Chapter R.13: Rome Convention and Rome I Regulation (contractual obligations)

Francisco Garcimartín Alférez

I. Introduction

The Rome I Regulation (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), [2008] OJ L 177/6) lays down a uniform framework of choice-of-law rules on →contractual obligations within the EU. This instrument has general application, and is fully binding and directly applicable in all Member States (art 288 TFEU (Treaty on the Functioning of the European Union (consolidated version), [2012] OJ C 326/47)). It therefore ensures that the same law will be applied to any contract irrespective of the court hearing the case. Its economic rationale is linked to the proper functioning of the EU market. A set of uniform choice-of-law rules ensures the cross-border protection of property rights (→Property and proprietary rights) and the enforcement of contracts, which in turn facilitates the voluntary exchange of goods and services and therefore the proper functioning of the European market. In addition, it discourages ex post opportunistic behaviours, in particular forum shopping (see, with further references, Gralf-Peter Calliess, in Gralf-Peter Calliess (ed), Rome Regulations: Commentary on the European Rules of the Conflict of Laws (Kluwer Law International 2011) 3–6).

The Rome I Regulation has its predecessor in the Rome Convention, which was opened for signature in Rome on 19 June 1980 and entered into force on 1 April 1991 (Rome Convention on the law applicable to contractual obligations (consolidated version), [1998] OJ C 27/34). The Convention established a common system of choice-of-law rules on →contractual obligations, which was applied by EU Member States until 17 December 2009, when it was replaced by the Rome I Regulation. Beyond the change of legal nature, the Regulation introduced important amendments to the provisions of the Convention. As the legal basis is found in arts 61 and 65 TEC (Consolidated version of the Treaty establishing the European Community (2002) [2002] OJ C 325/33) (art 81 TFEU), the positions of the UK and Ireland, on the one hand, and Denmark on the other, are subject p. 1554to special rules (see art 69 TEC, and currently Protocols nos 21 and 22 TFEU). The UK and Ireland have exercised their right to opt-in, and are therefore bound by the Regulation. Denmark has no opt-in right. The Regulation does not apply to this Member State, and therefore Danish courts continue to apply the Rome Convention. In the same way, the Convention remains in force in the Member State overseas territories referred to in art 349 TFEU.

Uniform rules must be uniformly interpreted. The ECJ provides an institutional guarantee for this objective, since it has jurisdiction to give preliminary rulings concerning the validity and interpretation of the Regulation pursuant to art 267 TFEU. Furthermore, the Rome I Regulation is subject to the general principles of interpretation applicable to secondary law. The Rome I Regulation is part of the EU private international law system, and this system provides the ‘hermeneutic circle’ within which the Regulation must be understood (see, for example, Recital (7)). The provisions of the Rome I Regulation must be interpreted and construed in a way consistent with the Brussels I Regulation (Regulation (EC) No 1215/2012 on 12 December 2012 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, [2012] OJ L 351); →Brussels I (Convention and Regulation)), and the →Rome II Regulation (Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II), [2007] OJ L 199/40). These three instruments are complementary and together form a systematic unity. This means, for example, that when a legal concept is used by more than one instrument, it is in principle presumed to have the same meaning in all of them (this is, however, an ‘in principle’ argument, see Francisco Garcimartín, ‘Hermeneutic Dialogue between Rome I and Rome II: General Principles and Argumentative Rules’, in A Commitment to Private International Law. Essays in Honour of Hans Van Loon (Intersentia 2013) 169 et seq, with further references). In addition, the Rome Convention provides the genetic criteria of interpretation, which means the Explanatory Report of the Convention (also known as Giuliano-Lagarde Report (Report on the Convention on the law applicable to contractual obligations by Mario Giuliano, Professor, University of Milan, and Paul Lagarde, Professor, University of Paris I, [1980] OJ C 282/1)), alongside the Commission’s Proposal of 15 December 2005 (Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), COM(2005) 650 final) and the Green Paper on the Conversion of the Rome Convention into a Community instrument (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) remain highly useful documents for interpreting the Regulation (on the interpretation of the Rome I Regulation, see in general Gralf-Peter Calliess (ed), Rome Regulations: Commentary on the European Rules of the Conflict of Laws (Kluwer Law International 2011) 11–14; Dieter Martiny, ‘Vor Art 1 Rom I-VO’ in J Säcker, R Rixecker and H Oetker (ed), Münchener Kommentar zum Bürgerlichen Gesetzbuch (5th edn, CH Beck 2010) paras 14–15; Richard Plender and Michael Wilderspin, The European Private International Law of Obligations (3rd edn, Sweet & Maxwell 2009) 433–461).

II. Scope of application

The scope of application of the Rome I Regulation can be defined in the following terms. The Regulation determines the law applicable to contractual obligations in civil and commercial matters (see below 1.) with universal character (see below 2.). Furthermore, it applies only to situations involving a conflict of laws (see below 3.), but gives preference to existing international conventions and other EU instruments (see below 4.).

1. Sphere of substantive application

The Rome I Regulation determines the law applicable to contractual obligations in civil and commercial matters (art 1(1)). The concept of →civil and commercial matters is an autonomous concept, whose meaning must be uniform and independent of the national laws of Member States. In this regard, the ECJ has specified some of the aspects of that term in the context of the Brussels I Regulation, which must be taken into account when applying the Rome I Regulation. In particular, the Regulation does not apply when a public authority is acting in the exercise of its public powers and the case derives from that act (see eg Case C-49/12 The Commissioners for Her Majesty’s Revenue & Customs v Sunico ApS, M & p. 1555B Holding ApS, Sunil Kumar Harwani [2013] OJ C 325/6). Hence, public contracts that meet this condition are excluded from the scope of the Rome I Regulation.

The term ‘contractual obligations’ is also an autonomous concept, and the ECJ’s definition of this concept in the context of the Brussels I Regulation is equally relevant to the application of the Rome I Regulation. The ECJ has stated that contractual obligations, as opposed to non-contractual ones, are ‘obligations freely consented to by one party towards another’ (see eg Case C-147/12 Östergötlands Fastigheter AB v Frank Koot, Evergreen Investments BV [2013] OJ C 260/14). In other words, a contractual obligation arises where one party freely assumes towards another an obligation that otherwise would not exist (Ulrich Magnus, ‘Anmerkungen zum sachlichen Anwendungsbereich der Rom I Verordnung’ in Otto Sandrock and others (eds), Festschrift für Gunther Kühne zum 70. Geburtstag (Deutscher Fachverlag 2009) 779, 783). However, the Regulation contains a list of exclusions (art 1(2)). The Rome I Regulation does not apply, in particular: (i) to the status and legal capacity of natural persons (with the exception of art 13, which is aimed at protecting a party who believe in good faith believes himself to be making a contract with a person of full capacity in accordance to the local law; →Capacity and emancipation); (ii) to obligations arising from family relationships, →maintenance obligations, matrimonial property or wills and succession; (iii) to obligations arising from →bills of exchange, →cheques, promissory notes and other negotiable instruments to the extent that they arise out of their negotiable character (see also Recital (9)); (iv) to choice of law and arbitration agreements; (v) to questions governed by the law of →companies; (vi) to the external aspect of →agency contracts and representation; (vii) to the constitution of a →trust and the relationships between settlors, trustees and beneficiaries; and (viii) to certain collective →insurance contracts. →Culpa in contrahendo is also formally excluded. However, art 12 Rome II Regulation contains a cross-reference to the law governing the hypothetical contract, determined in accordance with the Rome I Regulation, as the relevant connecting factor for determining the law applicable to that issue.

2. Universal character

Like the Rome Convention, the Rome I Regulation has universal character (art 2). The law designated by its choice-of-law rules must be applied regardless of whether or not it is the law of a Member State. This means that the Regulation is applicable without any additional link to the EU if Member State courts are competent to hear a case. As a result, within its scope of application, the Regulation takes the place of the choice-of-law rules of the Member States.

3. International, European and domestic contracts

The Regulation applies to situations where there is a conflict of laws, ie contractual relationships that involve more than one legal system. While it does not define when a connection to a foreign legal system is sufficiently relevant to give rise to a conflict of laws, the Regulation nevertheless includes a rule specifically for those cases where the internationality of the relationship is purely based on the choice of the parties (art 3(3) and Recital (15)). The purpose of this provision is to prevent parties from internationalizing a domestic case merely by choosing a foreign law. Pursuant to that provision, where all other elements of the situation are located in one country other than the country whose law has been chosen, the choice is valid, but without prejudice to the application of the (internal) mandatory rules, ie the former country’s rules that cannot be derogated from by agreement. Furthermore, the Regulation extends the same principle to harmonized sectors of EU law (art 3(4)). Where all the elements of the cases are located in two or more different Member States, choice by the parties of the law of a third state will not debar the application of the mandatory rules laid down by EU law. This prevents parties from ‘evading’ common EU standards by choosing the law of a third country (see Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), COM(2005) 650 final, p 5). However, this provision has given rise to serious problems, since the application of EU mandatory rules does not usually require that all the elements be located within the EU (see Francisco Garcimartín, ‘The Rome I Regulation: Much Ado about Nothing?’ [2-2008] Eu.L.F. 1, 4). In addition, the Regulation expressly states that when the harmonized rules are contained in a Directive, which has no direct effect between private p. 1556parties, the provisions of the forum Member State implementing the Directive will apply.

4. Relationship with other instruments

In its relationship with other instruments which contain choice-of-law rules, the Rome I Regulation distinguishes between international conventions and other provisions of EU law. On the one hand, the Rome I Regulation respects the pre-existing international conventions between Member States and third countries, such as the Hague Sales Convention (Hague Convention of 15 June 1955 on the law applicable to international sales of goods, 510 UNTS 147), but prevails over any conventions concluded exclusively between two or more Member States (art 25). In relation to other EU instruments, the Regulation is based on the lex specialis principle (art 23 and Recital (40)). The Rome I Regulation has no detrimental effects on the application of other EU instruments which for particular matters lay down conflict rules relating to contractual obligations. Legal literature has nevertheless pointed out the problems that may derive from the interplay between the Rome I Regulation and the Directives on consumer protection or a future optional instrument on contractual obligation (see eg Francisco Garcimartín, ‘The Rome I Regulation: Much Ado about Nothing?’ [2-2008] Eu.L.F. 1, 5–6; Eva-Maria Kieninger, ‘Der grenzüberschreitende Verbrauchervertrag zwsichen Richtlinienkollisionsrecht und Rome I-Verordnung’ in Jan von Hein and others (eds), Die richtige Ordnung. Festschrift für Jan Kropholler zum 70. Geburtstag (Mohr Siebeck 2008) 499 et seq; Dieter Martiny, ‘Neuanfang im Europäischen Internationalen Vertragsrecht mit der Rom I-Verordnung’ [2010] ZEuP 747 et seq, 753 et seq; Sixto Sánchez-Lorenzo, ‘Common European Sales Law and Private International Law: Some Critical Remarks’ [2013] J.P.I.L. 191 et seq).

III. Choice-of-law rules: structure

The Regulation maintains the same structure for the rules on choice of laws as the Rome Convention. This structure is based on three elements. First, it establishes a general framework which combines the principle of freedom of choice and a set of choice-of-law rules applicable by default, rooted in the principle of the proper law of the contract (arts 3–4). Second, it adds four special rules for situations where there is a need to protect one of the parties to the contract (arts 5–8). Third, it guarantees the protection of general or public interests by safeguarding the application of →overriding mandatory provisions (art 9).

IV. General rule: autonomy of the parties

The Regulation is based on the principle of freedom of choice, ie a contract will be governed by the law chosen by the parties (art 3). According to Recital (11), the parties’ freedom to choose the applicable law is one of the cornerstones of the Regulation. It allows parties to select the legal system that is best tailored to their transactional needs (including a neutral law), promotes regulatory competition and also ensures certainty and predictability. The parties are absolutely free to choose any state law, so that no objective connection between the law chosen and their contractual relationship is required. The parties can also change the applicable law at any time (art 3(2)) and can choose different laws for different parts of the contract, ie depeçage is permitted (art 3(1) in fine). While they cannot choose a non-state law as lex contractus, the parties are allowed to incorporate by reference a non-state body of law or an international convention (see Recital (13)). This incorporation by reference is permissible within the limits of the domestic mandatory provisions of the state law applicable as lex contractus. It implies an exercise of substantive-law autonomy.

The regime applicable to the choice-of-law agreement is also flexible in a number of ways. No specific form is required. The choice of the parties can be either express or implied provided that the choice can be ‘clearly demonstrated by the terms of the contract or the circumstances of the case’ (art 3(1)). The court cannot decide on the basis of purely hypothetical or putative choices. Recital (12) specifies that an exclusive choice of court agreement is only one of the factors that the court must take into account when considering whether the parties have impliedly chosen the law governing their contract. Those aspects related to the validity of the consent of the parties to the choice-of-law agreement are to be determined by the national law designated by arts 10, 11 and 13 of the Regulation (art 3(5)).

V. p. 1557Default rules

1. Introduction

In the absence of a choice-of-law agreement, the Regulation establishes a catalogue of types of contracts and sets out the applicable law for each one. This solution is intended to dispel the ambiguities that emerged from the parallel provision of the Rome Convention, and instead of fixing the principle of the closest connection as a starting point, the Regulation establishes a contractual typology (art 4(1); on the problems raised by the Rome Convention, see the 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, 25–26; Peter Mankowski, ‘Die Ausweichklausel des Art. 4 V EVÜ und das System des EVÜ’ [2003] IPRax 464 et seq; Richard Plender and Michael Wilderspin, The European Private International Law of Obligations (3rd edn, Sweet & Maxwell 2009) 172–176). The Regulation then adds a solution for those contracts falling into none of the eight types of contract it identifies (art 4(2)). And finally the provision ends with an ‘escape clause’ based on the principle of closest connection (art 4(3)). This combination of rigid rules and escape clause seeks to achieve a balance between providing: (i) certainty and predictability to the parties; and (ii) the necessary discretion to adapt the solution to individual cases (see ECJ Case C-133/08 Intercontainer Interfrigo SC (ICF) v Balkenende Oosthuizen BV and MIC Operations BV [2009] ECR I-9687, para 59).

2. Contractual typology

The Regulation identifies the most common types of contract in practice and for each one designates the legal system in which it in principle has its ‘centre of gravity’ (though as regards franchise and distribution contracts, a particular policy of protection underlies the provision).

Specifically, the Regulation lays down a list of eight types of contract and the laws applicable to them, which can be summarized as follows: (i) contracts of sale of goods (→Sale contracts and sale of goods) and contracts for provision of services are to be governed by the law of the country where the seller or the service provider has his habitual residence (art 4(1)(a)–(b)). Recital (17) clarifies that those terms should be interpreted in the same way as in art 5(1) Brussels I Regulation; (ii) contracts relating to a right in rem in immovable property (→Property and proprietary rights) or to tenancy of immovable property (→Lease contracts and tenancies) are to be governed by the law of the country where the property is located, unless these are tenancies concluded for temporary private use, which are governed by the national law of the landlord’s habitual residence, provided that the tenant is a natural person and both parties have their habitual residence in the same country (art 4(1)(c)–(d); see art 22(1) Brussels I Regulation); (iii) franchise and distribution contracts are to be governed by the law of the country where the franchisee or the distributor have their habitual residence (art 4(1)(e)–(f)); and finally (iv) contracts of sale of goods by auction are to be governed by the law of the country where the action takes place and contracts concluded in organized financial markets, eg a stock exchange, by the law governing the market (art 4(1)(g)–(h); see also Recital (18)).

Contracts that fit into none of these categories, such as contracts relating to intellectual property rights, are to be governed by the law of the country where the party required to effect the characteristic performance of the contract has habitual residence. The same rule applies to contracts that are classifiable under more than one category (art 4(2)).

The Regulation includes a definition of the concept of habitual residence (→Domicile, habitual residence and establishment). For legal persons, the habitual residence is the place of central administration, and for natural persons acting in the course of their business activities, the principal place of business (art 19(1)). Nevertheless, if the contract is concluded in the course of operations of a secondary establishment or if under the contract the performance is the responsibility of that establishment, then this establishment is to be considered to be the place of habitual residence (art 19(2)). The relevant date for determining the habitual residence location is the time of conclusion of the contract (art 19(3)). This implies that a movement of the habitual residence after the conclusion of the contract does not entail a change in the applicable law.

3. The principle of closest connection

The Regulation includes an ‘escape clause’ similar to that in the Rome II Regulation, under which, where it is clear from all the circumstances of the case that the contract is manifestly more closely connected to a country other than that p. 1558indicated in any of the rules listed above, the law of that country will apply (art 4(3)). This escape clause provides the rule with some flexibility in order to avoid inappropriate results in particular cases from a conflict-of-laws perspective. However, the expressions ‘it is clear’ and ‘manifestly’ are intended to convey the idea that the application of this clause should be restricted to exceptional cases (see eg and with further references Martin Gebauer in Gralf-Peter Calliess (ed), Rome Regulations: Commentary on the European Rules of the Conflict of Laws (Kluwer Law International, 2011) 98–99; or Stefan Leible, ‘Artikel 4 Rom I’ in Rainer Hüβtege and Heinz-Peter Mansel, Rom-Verordnungen (Nomos 2014) paras 70–78). In practice, the provision should work as a rebuttable presumption in a strong sense, in that the law applicable to the contract is that designated by paragraphs 1 and 2 of art 4, unless the court is clearly convinced that the contract is manifestly more closely connected to a different country.

Furthermore, the Regulation also retains the closest connection principle to determine the law applicable to those contracts involving mutual performance by the parties in terms that qualify as characteristic on both sides, such as barter contracts (art 4(4)).

In both cases, the application of the closest connection principle calls for the court to: (i) take into account all the circumstances of the case; (ii) identify the connections of the contract with the different countries; and (iii) balance these connections under the general principles of contract law and, in particular, the parties’ reasonable expectations (see Dieter Martiny, ‘Art 4 Rom I-VO’ in J Säcker, R Rixecker and H Oetker (eds), Münchener Kommentar zum Bürgerlichen Gesetzbuch (5th edn, CH Beck 2010) paras 14–15, 245 et seq; Stefan Leible, ‘Artikel 4 Rom I’ in Rainer Hüβtege and Heinz-Peter Mansel, Rom-Verordnungen (Nomos 2014) paras 79–80; see also ECJ Case C-133/08 Intercontainer Interfrigo SC (ICF) v Balkenende Oosthuizen BV and MIC Operations BV [2009] ECR I-9687, paras 60–63). Recital (21) in fine clarifies that when applying this clause, courts shall, among other circumstances, take into account whether the contract in question has a close relationship with another contract or contracts.

VI. Special rules: protection of the weaker party

The Rome I Regulation envisages special rules for certain categories of contracts: transport contracts (art 5), consumer contracts (art 6), insurance contracts (art 7) and employment contracts (art 8). Leaving aside contracts for the carriage of goods (art 5(1)), the rest of the provisions deal with situations characterized by an inequality of bargaining power between the parties. All the provisions have two features in common, in that, first, they limit albeit by different means the parties’ freedom to choose the applicable law and, second, they designate as the law applicable by default a law close to the weaker party. The first feature reduces the risk of abuse by the more sophisticated party at the expense of their counterparty, either by applying the principle of more favourable law (arts 6 and 8) or by limiting the menu of eligible laws (arts 5 and 7). Absent a →choice of law, the application of a law close to the weaker party protects his legitimate expectations and reduces their cost of access to justice. The economic rationale behind these rules is the existence of a market failure, in that due to the asymmetric position of the parties in certain categories of contract, the freedom of choice may not produce an efficient outcome (see Giesela Rühl, ‘Consumer Protection in Choice of Law’ (2011) 44 Cornell Int’l L.J. 569 et seq). This policy is particularly relevant in the areas of consumer and employment contracts.

1. Consumer contracts

The special rule for →consumer contracts is contained in art 6 of the Regulation. This provision is based on the ‘principle of most favourable law’, ie a choice of law in a consumer contract is valid, but may not deprive the consumer of the protection afforded to him by the law applicable by default. As regards the Rome Convention, the Regulation extends the material scope of application of the rule and clarifies the definition of ‘passive consumer’. These elements are taken from art 17 Brussels I Regulation.

The scope of application of this rule is defined by a material element in that it applies only to consumer contracts, and by a territorial element in that it protects only the so-called ‘passive or sedentary consumers’. Those consumer contracts that fail to meet these conditions are governed by the general rules, ie arts 3 and 4.

Article 6 applies to any contract regardless of its object. The only relevant element is subjective, in that one of the parties must be a professional and the other a ‘natural’ person acting p. 1559outside his trade or profession, ie a consumer. The provision therefore includes b2c and, arguably, c2b contracts, but not c2c contracts. The expression ‘for the purpose that can be regarded as being outside his trade or profession’ derives from the Rome Convention and is intended to protect the reasonable expectations of the professional. If a natural person, albeit acting for a private purpose, holds himself out as the professional, the good faith of the other party is protected and the case will not be governed by art 6 (see Report on the Convention on the law applicable to contractual obligations by Mario Giuliano, Professor, University of Milan, and Paul Lagarde, Professor, University of Paris I, [1980] OJ C 282/1, Commentary to art 5). However, the Regulation contains a list of exclusions (art 6(2)) related to contracts for the supply of services where a service is supplied exclusively in a country other than that in which the consumer has his habitual residence (typical examples, accommodation in a hotel or a language course), contracts of carriage, contracts for →immovable property, →financial instruments and financial markets.

Within that material scope, art 6 Rome I Regulation protects only the so-called ‘passive consumer’, ie those cases where rather than the consumer going to the professional’s market, the professional goes or directs his activities to the consumer’s market. The key element is the ‘targeted activity criterion’ (see elaborating this idea and with further references Peter Mankowski, ‘Consumer Contracts under Article 6 of the Rome I Regulation’ in Eleanor Cashin Ritaine and Andreas Bonomi (eds), Le nouveau règlement européen Rome I relatif à la loi applicable aux obligations contractuelles (Schulthess Verlag 2008) 121, 125–138). Following the formulation of art 17 Brussels I Regulation, the provision foresees two hypotheses. The first hypothesis is where the professional pursues his commercial or professional activities in the country of the consumer’s habitual residence and the contract falls within the scope of such activities (art 6(1)(a)). The residence condition is highly relevant to understand the precise scope of this provision (see Recital (25)). A typical case would be when the professional has a branch or establishment in the consumer’s country of habitual residence and the contract is concluded in or through this particular establishment. However, it does not hold where the contract is concluded in a different country, for instance, in the course of a journey by the consumer, even if the professional also has a branch in the country of the consumer’s habitual residence. In such a case, it cannot be said that the contract was concluded in the framework of the particular activities that the professional is carrying out in the consumer’s country. The second hypothesis is where the professional, by any means, directs such activities to the consumer’s country of habitual residence, or to several countries including that country, and the contract falls within the scope of such activities (art 6(1)(b)). The typical fact pattern here is that the professional has no branch in the consumer’s country, but directs his activities to that country and the contract is concluded at a distance or in person following a specific invitation addressed to the consumer or consumers of that country (ie under the framework of these activities). The concept of ‘directs its activities’ is defined in Recital (24) Rome I Regulation by a reference to the Brussels I Regulation. It states that ‘the mere fact that an internet site is accessible is not sufficient ... although a fact will be that this internet site solicits the conclusion of distance contracts and that a contract has actually been concluded at a distance, by whatever means. In this respect, the language or currency which a website uses does not constitute a relevant factor’ (for the application of this provision, ECJ case-law in the context of the Brussels I Regulation must be taken into account; see eg Joined Cases C-585/08 and C-144/09 Peter Pammer v Reederei Karl Schlüter GmbH & Co KG (C-585/08) and Hotel Alpenhof GesmbH v Oliver Heller (C-144/09) [2010] ECR I-12527; Case C-190/11 Daniela Mühlleitner v Ahmad Yusufi and Wadat Yusufi (6 September 2012); C-218/12 Lokman Emrek v Vlado Sabranovic [2013] OJ C 367/14).

Provided those circumstances are met, the law applicable absent a choice of law is the law of the country of the consumer’s habitual residence. Conversely, if the parties have included a choice-of-law clause, then the law applicable is that chosen by the parties, although this may not result in depriving the consumer of the protection afforded by such legal provisions applicable by default that cannot be derogated from by contract (art 6(2)). Thus, the law of the country of the consumer’s habitual residence sets the minimum protection standard.

2. p. 1560Employment contracts

For individual employment contracts, the Rome I Regulation follows the same approach as for consumer contracts, ie the most favourable law principle. The parties can choose the applicable law according to art 3. However, the application of the chosen law may not have the result of depriving the employee of the protection afforded by the mandatory rules of the law applicable by default, ie absent choice (art 8(1)). Party autonomy works only in favour of the weaker party. Naturally the comparison is made between the content of the law chosen by the parties and the mandatory rules, ie the rules that cannot be derogated from by contract, of the law applicable had the parties not made a choice.

The law applicable by default is the lex loci laboris, namely, the law of the country ‘in which’ or, failing that, ‘from which’ the employee habitually carries out their work in performance of the contract (art 8(2)). Following the ECJ case-law on art 21 Brussels I Regulation, the expression ‘from which’ has been introduced for employees who do not carry out their job in the territory of only one country, but where there is a country which constitutes a form of ‘base of operations’, such as in the case of employees who work on aircraft. Here, the law of the country which serves as a base for the worker is to be considered as lex loci laboris (see ECJ Case C-29/10 Heiko Koelzsch v État du Grand-Duché de Luxembourg [2011] ECR I-1595; Case C-384/10 Jan Voogsgeerd v Navimer SA [2012] OJ C 39/4). Furthermore, the provision clarifies that the country where the employee habitually works is not deemed to have changed merely because he (the employee) is temporarily posted to another country (art 8(2) in fine). This clarification also derives from ECJ case-law in the context of the Brussels I Regulation (Case C-437/00 Giulia Pugliese v Finmeccanica SpA, Betriebsteil Alenia Aerospazio [2003] ECR I-3573). Recital (36) points out that the concept of ‘temporarily posted’ has to be interpreted in a subjective ex ante manner (if the employee ‘is expected’ to resume working in the country of origin after carrying out his task abroad) and echoes the idea that the mere conclusion of a new contract with the original employer or with another employer belonging to the same group of companies should not mean that the employee is not temporarily posted to another country. The formula is sufficiently flexible to allow courts to adapt it to different work environments.

If according to these rules the employee cannot be considered as habitually carrying out his work in a country, then the contract is governed by the law of the country where the establishment through which the employee was engaged is situated (art 8(3)). Finally, the provision ends with an escape clause whereby if it appears from the circumstances as a whole that the contract is most closely connected to a country other than that indicated according to the above-mentioned rules, then the law of that country will apply. The wording of this clause is more flexible than for the escape clause contained in art 4(3) (above), as there is no repetition of the adverbs ‘clear’ and ‘manifestly’. The intention was to give the courts greater leeway in areas of employment contracts, where the interests at stake may be different than in those contracts subject to the general rule of art 4 (see ECJ Case C-64/12 Anton Schlecker v Melitta Josefa Boedeker (12 September 2013)).

VII. Overriding mandatory provisions

The protection of general or public interests is guaranteed by art 9 Rome I Regulation. This provision deals with →overriding mandatory provisions. Unlike the Rome Convention, the Regulation incorporates a definition of this concept, the purpose of which is to reduce the scope of art 9 and therefore to minimize the risks that courts could invoke this clause to frustrate the general application of the conflict-of-law rules of the Regulation. Article 9 Rome I Regulation encompasses only ‘ordo-political rules’ or Eingriffsrechte, ie it can only be invoked when ‘public policy interests’ are at stake. Hence, ‘overriding mandatory rules’ are defined as those provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organization, 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. This definition is inspired by the ECJ judgment in the Arblade case (see ECJ Joined Cases C-369/96 and C-376/96 Criminal Proceedings against Jean-Claude Arblade and Arblade & Fils SARL and Bernard Leloup, Serge Leloup and Sofrage SARL [1999] ECR I-8453; also Case C-184/12 United Antwerp Maritime Agencies (UNAMAR) p. 1561NV v Navigation Maritime Bulgare [2013] OJ C 367/12).

Following the scheme of the Convention, art 9 Rome I Regulation distinguishes between overriding mandatory rules of the forum and overriding mandatory rules of third countries. On the one hand, overriding mandatory rules of the forum state apply irrespective of the law governing the contract. According to art 9(1), ‘nothing in this Regulation shall restrict the application of the overriding mandatory provisions of the law of the forum’. On the other hand, the Regulation also foresees the possibility of giving effect to the overriding mandatory provisions of a third country as a faculty of the court (‘effects may be given’). Nevertheless, unlike the Convention, the new text limits the catalogue of mandatory rules that can be considered. First, not all rules can be considered, but only those of ‘the country where the obligations arising out of the contract have to be or have been performed’ and, second, only ‘insofar as these overriding mandatory provisions render the performance of the contract unlawful’. These two specifications were considered necessary to reduce the uncertainty associated with the formula adopted in the Rome Convention. The material criteria that a court has to take into account to make a decision on this issue is the same in both texts, whereby ‘regard shall be had to their nature and purpose and to the consequences of their application or non-application’.

VIII. Scope of the applicable law

The Regulation contains rules defining the scope of application of the lex contractus (art 12) and special connections for particular issues: the material validity of the contract or of any of its terms, including consent (art 10), formal validity (art 11), capacity (art 13) and →burden of proof (art 18). Furthermore, it clarifies the law applicable in tri-party situations: voluntary assignment and contractual subrogation (art 14), legal subrogation (art 15) and multiple debtors (art 16). It also contains a rule on the law applicable to →set-off rights (art 17).

IX. Final clauses

Finally, the Regulation includes three clauses on general problems for the application of conflict rules, namely the exception of public policy (art 21), the clarification of its application to multi-unit states (art 22) and the exclusion of →renvoi (art 20). In the provision on renvoi, a sentence has been added to ensure consistency with one of the choice-of-law rules on insurance contracts (art 7(3)).

X. Conclusion

The Rome I Regulation converted the Rome Convention on the law applicable to contractual obligations into an EU instrument. In addition to the change of legal nature, it introduced important amendments to the original text. Together with the Rome II Regulation and the Brussels I Regulation, this instrument constitutes the backbone of the EU private international law and therefore provides an effective legal framework to ensure the smooth functioning of the EU market.

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