erdam 2019 Concise Introduction to EU Private International Law Prof. Dr. Mich: mn & Prof. Dr. Marta Pertegis Sender7.1 The Scope and Other General Features of the Regulation cept Denmark, the In the PIL of the EU Member States except flict rules regarding contracts are found in Regulation No +2008 on the Law Applicable to Contractual Obligations ‘ laced the 1980 Rome Convention on (Regulation Rome I)" This Regulation repl : theeame subject which continues, however, to apply to contracts con cuded during the period between the entry im force ofthe Convention forthe Member State of the forum and 17 December 2009.* The legal writing on Regulation is voluminous, and to the extent the content of the Regulation cor- nds tt writing and the existing case responds to that of the Convention, even the legal writing an ve per apts tis Conenioa ta Provide guidance 3 the interpretation icular importance in this respect is the semi- ion as well. Of particular imp tama ‘One ofthe principal purposes of the Regulatio 2 some extent, the eects ofthe forum shopping tolerated by some ofthe Brus Ian ato. tep nnd! pr tron 8) upc a tiomales Vetragsrecht; in Cashin Rlne epuation: Bogdan, ipsootm abe tan ag CMR 3924659 cor p06 Pen Rolo aohoes tag age tut py po wk 20) 9.90 eee spin, The European Contracts Convention; Rammeloo, Das newe EG-Vertragskollisions- coareen7 rcutanion some sels rules on jurisdiction and recognition and enforcement of judgments} as the advantages of a tactical choice of court decrease when the choice is between courts using the same conflict rules. ‘The Regulation, according to its Article 1(), applies in the courts of the Member St conflict of laws, i.e. whenever a choice between the laws of different countries has to be made, with regard to contrac- tual ot in civil and commercial matters. When there ate several territorial units with own rules of law within the same state, such as Scotland 48 opposed to England within the United Kingdom, each unit is considered as a country, although the courts in such units are not bound to apply the Regulation to conflicts solely between the laws of the different units within their own state (Article 22) ‘The Regulation applies in principle even to contracts that do not have international character, i, acts where all elements are connected with one single country only, regardless of whether this is a foreign country or the country ofthe forum. Even such single-country contracts can sometimes take it necessary for the court to address issues of applicable law, for example ne of the parties to a purely domestic Mexican contract moves subsequently ‘to Germany and is sued in a German court by the other party for a claim based on that contract. The determination of the law applicable toa single-country contract might seem to be a very simple task, asa the same legal system, sot is deemed to be deci the parties to a single-country contract have agreed on. the application of the law of another country.* In contrast to the Brussels I and Brussels II Regulations, which divide iusisdiction between Member States only and deal only with the recognition and enforcement of judgments given in a Member State, the conflict rules in the Rome I Regulation apply, without any requirement of reciprocity, in relation to every legal system in the world, regardless of whether its the aw of a Member State or not (Article 2). The territorial limits of the scope of the Regulation are thus of importance merely for deci ther the courts ofthe forum country are obliged to apply the Regulation (ie, whether the forum country is a Member State other than Denmark), but not for deciding whether the Regulation must be applied in relation to a particular foreign legal system, There are, however, a few exceptions, for example some parts of Article 7, where the Regulation refers tothe laws of the Member States only. Within the scope of application ofits rules, the Regulation is comprehensive and does not eave any residual space for autonomous national conflict rules of the Member States, ‘As many cross-border commercial disputes are adjudicated by arbitrators, it {simportant to note that these are not formally bound to abide by the Regulacurren aeewiarion nome 1 o's rles, 5 an arial wibual is notan onan fay ofthe Member States however not usta hat the trun fen compe of arbitrators 5s decide to apply the “most cegulation asa source of inspira ive codification of what is deemed appropriate in modern of same-sex couples; whether their effects are comparable is decided by the law applicable to the relationshi checks, promissory notes and the negotiable character of other nege instruments (¢. bills fading) deserve as Negoti rrument toa person acting {in good faith passes a good title to the property ot value represented by the instrument, whatever the title ofthe transferor may have been. As far as bills ofexchange and checks are concerned, conflict rules are found in two Geneva Conventions from 1930 and 1931, which have been ratified by many, albeit not all, of the Member States. The underlying transaction, for example a contract ‘ofsale stipulating that payment has to be made by a bill of exchange, is not ‘acluded from the scope of the Regulation steements and agreements on the choice of court ate excluded respective of whether they are embodied in separate instru- a larger contract. The validity and effects of such agreements are partly regulated by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, Article 25 ofthe Brussels I Regulation and the 2005 Hague Convention on Choice of Court Agreements. Questions governed by company law, such as the creation, legal capaci internal organization and winding up of companies and other similar entities, a well as the personal of their directors and members, ae excluded Pursuant to Article 1(2)(), while other company-related agreements (for exam- Ble, contracts on the sale of shares or contracts between future shareholders onthe founding of a company) are not excluded, unless the matter concerns Some issues very intimately connected with company law, such as the question ‘whether the company's shares are transferable." ‘The authority of agents to bind their principals, which is of great impor: {ance forthe validity of many commercial contracts, is excluded by Article 1(2) (@) and so is the authority of an organ of a company or other entity to represent itvis.d-vis third parties. Questions regarding the constitution of trusts and the relationship between settlors, trustees and beneficiaries of a trust are excluded by Article x sppropriae’ tho and an ator European PIL ‘The Regulation contains no definition of contractual ‘contractual obligations xelated questions and some types of contract ; are, furthermore, excluded from the scope of the Regulation by its Article 12). ‘To begin with, the exclusion applies to questions involving capacity of natural persons (with the exception of Article 13) ing out of matrimonial propery relationship or aher fami el ‘wills and successions (Article 1(2)(a-)).* This means, for exarpl venom pment comterncesbgonhe spe of teReglatn slates toa maintenance obligation based on family tes, whereas its within th scope ifit pertains to maintenance payments to a former employee or frien« contract of sale between husband and wife excluded othe exe : to special provisions of family law, but not with regard to the usual issues o {helaw onl such aa dispute about the quay ofthe objet sald ete-The exclusion of matrimonial an other family relationship is extended elation- ships having “comparable effects”, for example certain registered partnerships eating Art Rombonsertonen Dp. 3 pp.128129;Carcimfons arising out of dealings prior to the conclusion of a contract, such ind governed by Article Non-contractual obli insurance contracts in the event of death {questions regarding evidence and procedue, with .e exception of special presumptions of law and rules on the burden of proof, contract law (see Article 18), are in principle also excluded, as sues are normally governed by the le foi jon contains a couple of articles dealing with some of the general problems of PIL, in particular on the exclusion of ren znon-application of foreign law when its application in casu would be manifestly incompatible with the public policy (ordre the forum (Article 21). The non-acceptance of renvoi, expressed by the stipulation that the application of the law of any country specified by the Regulation means the application of the rules of law in force in that country other than its rules of PIL, makes no real diffe- rence when the applicable law is that of another Member State, as the relevant conflict rules in that state are in principle the same as those in the Memb State ofthe forum. ven though the Regulation is silent on this point, it can be assumed that swith the possible exception of Article 9” it deals in principle with private law ters only and does not prescribe the application of purely publ provisions such as exchange regulations or trade embargoes."® The matter is disputed but it is submitted that it would hardly be appropriate to treat quite gen- erally such publiclaw rules in the same way as rules of private law, for example by allowing the parties to avoid or opt in exchange regulations by exercising. their right to choose the law applicable to the contract.” This does not mean that foreign publiclaw measures should be ignored though. They must, for instance, be taken into account if and to the extent their factual consequences are relevant ‘0 the law governing the contract. Thus, a trade embargo may under cumstances constitute a force majeure that makes performance impos- ‘may pursuant to the law applicable to the contract y of its duty to perform. It should not matter, in sucha ‘case, whether the embargo was enacted by the country of the forum, the country uste's own estate, the anaer person on be see te manage, empl or depot ofthe a ues imposed upon him by aw ° Se section 8.4 ine iva gprs ele onarren7 whose oe ‘the contract, or a third count ce impossible that inposbiy bas cara ingtothelaw governing the coat in question means The Regulton des not anower the gu (and thu also the aw ap tepid atthe cout ow arped that this ques a8 long as it makes perfor. ive or only if invoked by a party. It could b be decided by the national law ofthe Mer national law ofthe Member ling reasons, such as re tes, speak in favour of appl other EU instruments, both nl ato those national ans ofthe Member Sates that ts in implementation of EU dizectives. There are several stn confit as hacimenzed by directs concerning. fr expe ensues contracts and indviual employment contracts.” Similar, the appl Sfiltion vs adopted isnot afte (tic 3 Fr example some Meter ark" Finland, France, Italy and Sweden) are parti Hague Convention onthe Law Applabetothe Sac coe ah oD ble to the Sale of Goods, which means some situation, the conic rules ofthe ke ten, net makes the CSG aplable gules he conf ue umf sale contract between partes whose lacs ob hess are in different states parties to the CISG. On the other hand, aa tion takes precedence over convent pe ker ice over conventions concluded exclusively between Member ® See section 9. ina7.2. Party Autonomy ‘The Regulation recognizes the well-established principle of the right of the parties to conclude a legally binding agree ‘ther on the legal system applicable to their contract (Article ‘The Regulation does not impose any particular requirements regarding the form of choice-of law agreements, but it accepts that such requirements can be imposed by the applicable national law (see the reference in Article to Art. 1), The national formal requirements must not, however, be contrar to Article 31), which stipulates thatthe choice can be ether explicit or clearly or other circumstances. Such other ) circumstance may, for example, b that are taken from a particular legal system or that it isa long-standing prac tice between the parties to use a particular legal system. The choice may be expressed indirectly and it may even depend on some future circumstance, for texample ifthe parties agree thatthe law ofthe country ofthe (future) defendant Shall be applied (such choice, which has the disadvantage of leaving the parties uncertain about which law they have to follow, is sometimes made in order to discourage future litigation), The choice of a court or of arbitration proceedings sna particular country does not, on the other hand, necessarily imply a choice of the substantive legal system to govern the contract, although it may in accord- lance with the Regulation’s Recital 12, constitute an indication which, ifconsid- ered together with other circumstances, can demonstrate a tacit choice of law. In se, the choice must be a real choice, so that a hypothetical reasoning about any cas ‘which law the parties would probably have chosen if they had made a choice, is : ‘exception of contracts for the carriage of passengers (Article 5(2) ‘nce contracts (Article 7(3))% the freedom of choice of the some natural connect ing legal system they wis ed situation. The parties. cuareen 7 ecutaTiON roME instance asystem with widely known and own and particularly developed rls forthe ‘ype of contract iad chs Engh ow far comets oars ogo by sea), a legal system they perceive as “neutral” (for example, Swedish I semaines chosen i contracts within th Amer Rastn tad, oe eee they both happen to be familiar with. On the other hand, oan mot dente sing essen, rd neon ni vee nciding changes and developmen chosen legal system's own tran 190" or various private (he Lando Commissions Principles of ota the common Fame of eens peared the Stuy ro om suropea serve mere nc as an incorporation of contractual terms that iva onl tothe extent the p freedom of contract pursuant gl system governing the the extent the matter is not, regulated by mandatory rules of that legal system. The same seems tobe t sand agee io subject their - selF regulating contracts) Baa is probably valid only thin the famework ofthe freedom ct allowe bythe lw appli to the contract in question. There however, an increasing support for the opinion f n mee an favouring the right ofthe parties lechoose ey mongbth stead priate ets lsh ay ita 35 to their type." : vee {he Regulation allows the parties o subject diferent parts of theircotact ferent legal systems. The parties can achieve such dé hein set kl tens fr deent pts oh cota oy i choice of applicable law to a part only of th xt an be useful in particular in th "the conat scoped ular in those cases where the contr Pats that could survives separate agreement for example a ene contract Concerning copyright in several countries or acontract 7 whereby a client o fnterpretation, a third law for consequences of bre Parties have agreed on dépecage leading to the a ible rules, and no way can be found to reconcile their choice The choice of law the contract, butttoa law other than that which previously governed it, regardless of whether the previously governing law resulted from a choice-of law agreement or from the application of conflict rules used in the absence of choice.” Such subsequent ‘choice isin principle valid, but it cannot adversely affect the rights of smple of a guarantor) or prejudice the contract's formal validity invalid when itis concluded useful form of choice of law made after the conclusion ofthe contract for reasons of procedural convent: ence and economy and in view of a pending or imminent gree on the application of the lex fri. It happens in court proceedings that the question of applicable law is not raised at all but both parties refer to provisions of the lex fori in their pleadings. Such behaviour may under certain circumstances be interpreted as a tacit but conscious choice of law, which must be distinguished from the situation where the references to provisions of le fori reflect rather the ignorance ofthe parties about PIL. In the latter case, the court faces the question whether it should apply, upo ive, the Regulation's conflict rules con the determination of the law. [As has been pointed out aleeady,~ the Regulation applies in principle evento ‘contracts where all elements are connected with the same single country. This gives rise to the question whether the parties to such single-country contracts enjoy full party autonomy and are free to choose the law of another country. Article 3(3) provides that choice of law must not, in such cases, prejudice the nn of mandatory rules ofthe only country with witich the contract is appl ‘connected. This means that in such situations the choice of another law is given effect, but only within the framework of the freedom of contract allowed by the substantive law of that country, Pursuant to Recital 15, this is true even if, in ‘addition to choosing a foreign legal system, the parties have agreed to submit ‘their Future disputes toa foreign court, because such a choice of court does not by itself turn the contract into an international one. It has been asserted thet the freedom of choice in these cases does not constitute true party autonomy in the PIL sense, but merely an expression of the freedom of contract offered by the substantive law of the only country with which the contract is connected, and law of that country governs in fact the contract in spite of the choi Flaw clause. This is, however, oly partially correct, because it seems that the ‘mandatory rules of the legal system chosen by the parties must also be treated as mandatory, although only to the extent that they do not contradict the manda tory rules of the single country with which the contract is connected. As could be expected, there are borderline cases where itis difficult to decide whether the contract should be treated as a single-country contract or not. For example, there ‘ay be good practical reasons to permit an importer of goods to subject, by a sip and73 inf supra, courren7 xcuLATION Howe choic-of aw claus ‘oie ola clause. his purely domestic contacts with his domestic custom he same foreign law that governs his contracts with ie oeig supers deaf elated problem, concerning mandatory rule harmonized by EU ave deat within Artie) n purely tr contacts such ales anne be noided by choosing the law ofa non-member country, 2 tha dy et country. This means that inthis "spect the whole EUistreated as one country Some ot the BU een nal provisions sue protecting consumers agains pes adverse eet fhe choice of the lw ofa nner coun ag theconuact has cose connection wt the ters the Members or ae tice of Dec No Oy a A999 on Ute In EC] has held inthe case of Ingmar. Ea Technolgies tha itetve No 86/63 of 8 Decemee Naw cet tion ofthe Laws ofthe Member States Re Agents comprises autonomy. The consumer di autonomy even when the cont member co cestiction of party tives and he Ingmar gent estat pot ract has signieant connection with fon ou hh th they go rhs hat merely those cases wher al elevant element ae Infact one ofthe parties the contact nthe Ingmar acenee oo company, but the EC) held that the mandatory rules imposed by the Commer cial Agents Directive must be respected whenever the cnn rae ois activity na Member State een ih member ounty an a cause ofthe con putes thatthe contra it ‘member country. * cle, een mney ven ifit complies wth the ales Bi escribed above, can be challenged on the rounds of ste cert orexampleifitwas made under he infueneofesecon ee tees the same} in the Regulation for contracts in general Article iy ofa choje-oflaw clause with regi to concion or band some aud is governed by the lew chen by that very ste case andthe chore lw may even dee Hoge nal ality ofthat clase, This might theoretically appear to be an ines atious circle, bu does not seem to have given ret any difclties Heaaine rte Petmissibilty and validity ofthe choice-of aw clause from the tonital conection wiht ona: bao che ad ton self (rile 3) without recourse ony nana Ls 7 he Ree73. Applicable Law in the Absence of Choice .gly enough, the parties to contracts of international jomn use of their freedom to choose the applicable ld, ranging from ignorance of PIL to reluctance to cause of disagree: surps nature make relatively Jaw. The reasons are ms burden contractual negot ‘Whatever the reason, the limited use of pa prac portance of the Regulation's conflict rules designating the applicable Jaw in the absence of choice by the parties. introduced by Article 4(1) of the Regulation is the replacement of generally formulated presumptions of the Rome Convention” with seemingly fixed conflict rules for some of the most common types of Contract ""Thus, to the extent that the applicable aw has not been chosen by , a contract for the sale of goods is governed by the law of the country ler has his habitual residence (the concept of habitual residence is governed contract relating to a right in rem in immovable property or to a tenancy of such property is governed by the law of the country where the property is Dut ‘a tenancy contract for not more than six consecutive months where both parties reside habitually in the same country is governed by the law of that country if the tenant isa natural person. Franchise contracts are governed by the law of the country of habitual residence of the franchisee and distribution contracts by the law of the country of habitual residence of the distributor. Sales of goods by auction are governed by the aw of the country where the auction takes places provided that this can be determined (the localization of an auction may, for be problematic in the case of an auction on the Internet) Finally, a ina multilateral system for trading with interests in financi governed by the law governing the system as such." 9 Philip, FUP pp 144149; Pender & Wikerspin, The Real, Das neve EC-Veriaslisionsecht, pp. 25533 cnneren 7 srcutarioN nose ‘This list of contracts in Article 4) tant and frequent contract is far from comprehensive. Many impor ranging from money loans to trademark licences support for the marketing of the ultimat. contracts that are not covered by Article cle 4(1) or are ‘ined ae governed by the lw ofthe country where the party required to eet ic performance” ofthe contract has his habitual The concept of charac _ tion itself, but the Giuliano/Lagarde Report on the Rome Convention explains ty stating the allowing” corracs By crs bted fcepoa dere mate cepea perfomance mance bon eth pris nredem cero ly ses is due, ic. depending on ight to make use insport, insurance, banking testhe cei of vy and he ‘Socio-economic function of the contractual transaction. “rviyandi such transactions performed by tie ofthe individual customer, and this “he aw 1 and this legal reas tthe county ofthat enterprise. On the ther hand the presumption he een titcized for favouring the a the developed co rather than ofthe laws ofthe lar drawbacks can, however, often ied to some extent by the use of party autonomy.* enters Article 4(3) provides that both Article wherery, in which case the law of that ‘more closely connected with some other country, country will apply. This means that the seemingly fixed confit rules described above are, in fact, similar to mere rebuttable presumptions, albeit very strong ny ‘mentioned in Article 4(t) and, at ‘There are some contracts which are not ment nd at not characterized by any single pei performance for mal barter contracts or collective labour agreements.” Purstat such a contract is subject to the law of the country with which it with which an individual contract is more or kinds of circum- parties, the place of juage and curtency ing, the agreed upon place of performance, age anc se contract. the agreement of the parties on judicial or arbitral proceed conflict rules for contracts of carriage of goods.** jot been chosen by the parties, and provided 10t manifestly more closely connected with a different coun- forthe cigs of goods are gnerned by he aw ofthe country otablal eideoe ofthe cars, but only be plac feet or the lace of delivery or the habitual residence of the consiga sited tat country. fer sno sich cumulation of connections, the aw ofthe county ofthe agreed place of delivery wll apy Article 5) coves lo single-oyg charter partis and aber contracts the main purpose of which she carsage af goods hus no fr example, are bat ake of ship) The reason behind the special ule for arige contracts ie the fit that many cases use ep tions (fags) of convenience, and have their registered principal place of busi county having no el eatonship wth hee a as ar ticles 4(t) and 4(2) inappropriate with regard to contracts on carriage i soe elt cag gn sep es ge lation by international conventions unifying or harmonizing substantive law, performance may performance should bea courren7 which makes the PIL issues le levant. Itcan be added that Article 51) applies ig the use of a negotiable bill of lading, even ns arising out ofthe Sle character of such documents are excluded from the scope of the Regulation, ‘The Regulation contains in Article 7 special confit rules for insurance (not insurance) contracts covering “large risks” of commercial nature (Article (2) and all other insurance contracts covering risks situated inside the territory of the Member States Insurance contracts {rveting large risks are inthe absence of choice of law by the paties governed where the insurer has his habitual residence, unless the contrac is manifestly more closely connected with another country. There is iso a special conflict rule for compulsory insurance (Article 71), Conflict ules for insurance contracts covering other risks wil be dealt with inthe section on weak party contracts. 7-4 Weak-Party Contracts The Regulation contains four special provisions on weak-paity Grmtracts, namely Article 5{2) on contracts forthe carriage of passengers, Article 6 on certain consumer contracts, Article (3) on so Atticle 8 on individual employment cont are found also in Ar a privileged treatment, atthe evel of PLL, forthe typ 4s the passenger, the consumer, the policy holder or the ¢ feature of the rules is that they restrict party autonomy or ipulates thatthe parties to a contract forthe carriage of passen- hhoose the law of the country where the passenger or the carrier has his habitual residence, or where the carrer has his place of central aris tration, or where the place of departure or destination is situated, In the absence e law of the country of the passenger's habitual residence ther the place of departure or of destination is also situ- these requirements are not met, the applicable law is the law of ‘he country of habitual residence of the carrier. All this presupposes, however, Journal PIL 3909, pp 49-67 two or more connecting i lace of depatae andthethat there is no other country with which the contract is manifestly more closely connected. Article 6 applies to contracts concluded by a natural person for a purpose outside his trade or profession (the consumer) with another person acting in the exercise of his trade or profession (the professio nevertheless, possible du: sional capacity, e.g by pretending to charge value-added tax. On the other hhand, Article 6 probably does not apply when the businessman, acting in good faith, had reasons to believe that he was supplying goods or services to another businessman, for instance when his counterpart, who was in fact a consumer, claimed to be a businessman in order to be allowed to make a purchase at a wholesale price.” Services to be supplied exclusively in a country other than. that of the consumer's habitual residence (e.g. direct booking of accommoda ina foreign hotel), carriage other than package tours, contracts re struments‘ are exchided by Article 6 in Article 7. If Article 6 is of no avail the law apy the contract has to be ascertained with the help of the general conflict rules in Articles 3 and 4 of the Regulation.° ‘The core of the special protection given to consumers follows from Article prescribing the application of the law of the country of habitual residence consumer, and Article 6(2), stipulating that a choice of law by the parties mice. Article 6(1) is not a mere presumpti conflict rule that cannot be set aside by showing that the cor connected with another country. Of course, law of the country of the consumer's habitual residence are not necessarily more ‘by analogy withthe interpretation given othe same concepts in conection with Artie von Brussels ee section 33.2 4p) Alle, JouralPL 3009, pp. 85325. procedures if they can iaposes binding Disp cusereny EcUIATION row advantageous for the consumer than the law of his cou n interpart, but it is usually an important advantage from the consumers point of view to be abl id legal system which he knows or which is easily accessible to him, "easonably be understood to hae in mi atthe time of the cor so that subsequent changes of his residence should be thisrespect. a Ttwould be obviously inappropriate to extend such far-reaching protection to ogusmer contracts, for example thos concluded by a Swedish oust when shopping in a regular supermarket in Spain, where the shopkeeper cannot even be expected to be aware of the consumer's we The tec presumably atthe time of contracting, the professional pursues his com © professional activites in the country where the consene as residence and when the professional, by any means, directs such activities to that country (or several countries including that country) In both situations it is {an additional requirement that the contract falls within the scope of such activi ties. These seemingly simple rules can give rise to some problems of interpreta. tion. For example, it appears that advertising on the borderless Internet cannot be considered as “directed” tothe consumer's country merely because the consumer can access it from there! The special rules on individual employment contracts in Article 8,9 designed to protect the employee who is normally the weaker pa Similar o Article 6. Thus, the choice oflaw made by the parties employment contract does not have the result of depriving the employee of the applicable in the absence of choice, On the other hand, the last mentioned law cle case C585/08, and Hotel Ape He ECR 13527, concerning an Hen ohliek, Rome Contention Rome | Regulation, p. 3392461 Bogan, Euro ‘the corresponding provision in the Rome Convention, see Kas : “ 8 ne ont 34385 Unthien, The leMone 4 CER» rin gpm 5395 Ns Ba a en Antone p96 Php. Coen. Lenosoen dh ner & Wilderspin, The Eurepsan Contracts Enforement, pp 525342 Rammelo, Des