Part of a draft EU Regulation called Rome I stipulates that whatever a contract says about the law governing it, the law to be applied to business to business contracts can be that “most closely connected with” the contract if any party is in an EU Member State. And whatever the choice of Courts set out in the contract, any EU Court can assume jurisdiction at is discretion. The provision would be retrospective.
This would have the result of introducing an unacceptable level of legal uncertainty into b to b international contracts if any party is in a Member State.
There is a somewhat similar provision in the long-standing Rome Convention, but the UK along with Germany, Portugal and Ireland had not adopted that section. So far the UK has said it will opt-out from the Regulation but that does not help if any other party is in another Member State which has not opted-out.
The costs of this uncertainty, if the draft is implemented, may make contracts more costly and time-consuming to enter into across borders. You will need to research the law and practice in any country which could be “most closely associated with the contract” and of any EU Member State which might assume jurisdiction. This may be an issue in companies’ general business. To the extent that it applies to financial services, we can presume that the costs will all be passed on to the customer
Perhaps because much of the draft Rome I Regulation deals with consumer protection aspects, there seems to be reluctance at the EU Commission and Parliament levels and in most other Member States to change the draft to respect freedom of contract between businesses including choice of law and forum for ruling on disputes. The Commission has decided not to undertake a regulatory impact assessment of this change in law. Business in continental Europe does not seem to be sufficiently alerted to this problem.
Here, the CBI, the various financial services lobbies, the (UK’s) Financial Services Law Committee and so on are seized of the matter. The UK government is aware and active, but only one voice in 27. The Department for Constitutional Affairs is the UK’s lead Government Department working with the Department of Trade and Industry and HM Treasury. They will undertake a regulatory impact assessment, but only for the UK, of course.
We don’t see useful progress on resolving the issue sensibly and respecting freedom of contract over law and forum. We seem to be in a state of relative blockage. Some key decisions on this topic are due to be made in mid April.
What can you do if your company is involved in international business or dealing with financial services firms abroad?
A CBI mini-site on the topic is available here and gives some information. The contact at the CBI is Charlotta Blomberg (cblomberg@cbi.org.uk) who can provide further information. Charlotta would also welcome companies’ examples of how Rome I would affect them in this and any other aspects of it, including B to C issues, which might concern them.