Rome Convention (contract)
Encyclopedia
The Convention on the Law Applicable to Contractual Obligations 1980 (the "Rome Convention") is a measure in private international law or conflict of laws
which aims to create at least a harmonised
, if not a unified, choice of law system in contracts within the European Union
. It was signed in Rome
, Italy
on 19 June 1980.
It has now been replaced by the Rome I Regulation
593/2008.
issues involving contractual obligations and, under Article 10, once selected, the lex causae
will govern: interpretation; performance but, in relation to the manner of performance and the steps to be taken in the event of defective performance, regard shall be had to the lex loci solutionis
, i.e. law of the place in which performance takes place; within the limits of the powers conferred on the forum court
by its procedural
law, the consequences of breach, including the assessment of damages
in so far as it is governed by rules of law; the various ways of extinguishing obligations, and the limitation
of actions; and the consequences of nullity of the contract.
Article 15 excludes the operation of renvoi
. In addition, a number of issues with a separate characterisation
are excluded, namely:
The law chosen may apply to the whole or only a part of the contract, and the choice is not irrevocable. The parties can at any time agree to change the applicable law and any such variation will not prejudice the formal validity of the agreement nor adversely affect the rights of third parties.
Where all the elements of a contract, at the time of its conclusion, are connected with only one country, Article 3 may not be used to evade
the mandatory provisions of the that state (Article 3(4)).
To establish a choice demonstrated with reasonable certainty, there must have been a "real choice". That the parties would have chosen a particular law is not sufficient. The court will take into account both the terms of the contract and the circumstances of the case.
The Guiliano-Lagarde Report gives three examples of situations where a real choice may be demonstrated with reasonable certainty:
of the person who is to perform, or, in the case of a body corporate or unincorporate, where its central administration is located. However, if it is a commercial or professional contract, the applicable law will be the law of the place in which the principal place of business is situated or, where under the terms of the contract the performance is to be effected through a place of business other than the principal place of business, the country in which that other place of business is situated except that there is a rebuttable presumption
:
for a non-commercial purpose, or to a contract for the provision of credit for that object. Although Article 3 gives the parties a free choice of law, this choice cannot deprive the consumer of any protections available under the mandatory law of the country in which he has his habitual residence if the consumer was responding to advertising material or a specific invitation and makes the agreement in that country, or if the other party or his agent received the consumer's order in that country, or if the contract is for the sale of goods and the consumer travelled from that country to another country and there gave his order, provided that the consumer's journey was arranged by the seller for the purpose of inducing the consumer to buy. For these purposes, Article 7 defines "mandatory rules" as rules that must be applied whatever the Applicable Law. In deciding whether rules are mandatory in the lex fori or a law with which the contract has a close connection, regard shall be had to their nature and purpose and to the consequences of their application or non-application.
If the contract is silent on the choice of law, it will be governed by the law of habitual residence if it is entered into in the circumstances described above. But this Article does not apply to:
a contract of carriage; a contract for the supply of services where the services are to be supplied to the consumer exclusively in a country other than that in which he has his habitual residence.
The Article does, however, apply to a contract which, for an inclusive price, provides for a combination of travel and accommodation.
can deprive the employee of the protection afforded to him by the mandatory laws which would be applicable in the absence of that choice. If there is no express selection, an employment contract is governed,
The provisions may only apply for the benefit of the employee.
or novation
. Whether the rights and/or obligations can be transferred, the nature of the relationship between the assignee and the debtor that results from a transfer, the conditions under which the assignment can be invoked against the debtor, and any question whether the debtor's obligations have been discharged, are determined by the Applicable Law of the original agreement. The Applicable Law of the transfer will determine the mutual obligations of assignor and assignee as against the third party, i.e. "the debtor". Article 13 deals with subrogation
so that whether a third person may enforce an existing liability owed to a "creditor" by a "debtor" is determined by reference to the law which governs the debtor's duty to satisfy the creditor.
as a justification for refusing to apply the lex causae.
Conflict of laws
Conflict of laws is a set of procedural rules that determines which legal system and which jurisdiction's applies to a given dispute...
which aims to create at least a harmonised
Harmonisation
Harmonisation may refer to:* In music, the implementation of harmony, usually by using chords, including harmonized scales* Harmonisation of law, the process of establishing common laws and standards across the European Union...
, if not a unified, choice of law system in contracts within the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
. It was signed in Rome
Rome
Rome is the capital of Italy and the country's largest and most populated city and comune, with over 2.7 million residents in . The city is located in the central-western portion of the Italian Peninsula, on the Tiber River within the Lazio region of Italy.Rome's history spans two and a half...
, Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
on 19 June 1980.
It has now been replaced by the Rome I Regulation
Rome I Regulation
The Rome I Regulation is a regulation which governs the choice of law in the European Union. It is based upon and replaces the Convention on the Law Applicable to Contractual Obligations 1980...
593/2008.
Scope of the convention
Under Article 1, the Convention's rules are to apply to all choice of lawChoice of law
Choice of law is a procedural stage in the litigation of a case involving the conflict of laws when it is necessary to reconcile the differences between the laws of different legal jurisdictions, such as sovereign states, federated states , or provinces...
issues involving contractual obligations and, under Article 10, once selected, the lex causae
Lex causae
In the conflict of laws, lex causae is the law or laws chosen by the forum court from among the relevant legal systems to arrive at its judgement of an international or interjurisdictional case....
will govern: interpretation; performance but, in relation to the manner of performance and the steps to be taken in the event of defective performance, regard shall be had to the lex loci solutionis
Lex loci solutionis
The lex loci solutionis is the Latin term for "law of the place where relevant performance occurs" in the conflict of laws. Conflict is the branch of public law regulating all lawsuits involving a "foreign" law element where a difference in result will occur depending on which laws are...
, i.e. law of the place in which performance takes place; within the limits of the powers conferred on the forum court
Court
A court is a form of tribunal, often a governmental institution, with the authority to adjudicate legal disputes between parties and carry out the administration of justice in civil, criminal, and administrative matters in accordance with the rule of law...
by its procedural
Procedure (conflict)
In all lawsuits involving conflict of laws, questions of procedure as opposed to substance are always determined by the lex fori, i.e. the law of the state in which the case is being litigated.-What issues are procedural?:...
law, the consequences of breach, including the assessment of damages
Damages
In law, damages is an award, typically of money, to be paid to a person as compensation for loss or injury; grammatically, it is a singular noun, not plural.- Compensatory damages :...
in so far as it is governed by rules of law; the various ways of extinguishing obligations, and the limitation
Statute of limitations
A statute of limitations is an enactment in a common law legal system that sets the maximum time after an event that legal proceedings based on that event may be initiated...
of actions; and the consequences of nullity of the contract.
Article 15 excludes the operation of renvoi
Renvoi
In conflict of laws, renvoi is a subset of the choice of law rules and it may be applied whenever a forum court is directed to consider the law of another state.-The procedure for conflict cases:...
. In addition, a number of issues with a separate characterisation
Characterisation (conflict)
In conflict of laws, characterisation is the second stage in the procedure to resolve a lawsuit involving a foreign law element. This process is described in English law as classification and as qualification in French law...
are excluded, namely:
- the statusStatus (law)A person's status is a set of social conditions or relationships created and vested in an individual by an act of law rather than by the consensual acts of the parties, and it is in rem, i.e. these conditions must be recognised by the world. It is the qualities of universality and permanence that...
or capacityCapacity (law)The capacity of both natural and legal persons determines whether they may make binding amendments to their rights, duties and obligations, such as getting married or merging, entering into contracts, making gifts, or writing a valid will...
of natural personNatural personVariously, in jurisprudence, a natural person is a human being, as opposed to an artificial, legal or juristic person, i.e., an organization that the law treats for some purposes as if it were a person distinct from its members or owner...
s. Article 11 covers the situation where two persons physically present in the same stateSovereign stateA sovereign state, or simply, state, is a state with a defined territory on which it exercises internal and external sovereignty, a permanent population, a government, and the capacity to enter into relations with other sovereign states. It is also normally understood to be a state which is neither...
make a contract, and both parties have capacity under the lex loci contractusLex loci contractusIn the conflict of laws, the lex loci contractus is the Latin term for "law of the place where the contract is made".-Explanation:When a case comes before a court and all the main features of the case are local, the court will apply the lex fori, the prevailing municipal law, to decide the case...
. One party cannot invoke incapacity under another law unless the other party was aware of this incapacity at the time the contract was made or was not aware of the incapacity as a result of negligenceNegligenceNegligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
. - contractual obligations relating to successionSuccession (conflict)In the conflict of laws, the subject of succession deals with all procedural matters relevant to estates containing a "foreign element" whether that element consists of the identity of the deceased, those who may inherit or the location of property...
and all rights claimed in property in a marriageMarriage (conflict)In conflict of laws, the issue of marriage has assumed increasing public policy significance in a world of increasing multi-ethnic, multi-cultural and multi-national relationships...
or family relationship, particularly where the question of the entitlement of any childChildBiologically, a child is generally a human between the stages of birth and puberty. Some vernacular definitions of a child include the fetus, as being an unborn child. The legal definition of "child" generally refers to a minor, otherwise known as a person younger than the age of majority...
who is illegitimate is raised. - obligations arising under negotiable instrumentNegotiable instrumentA negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. According to the Section 13 of the Negotiable Instruments Act, 1881 in India, a negotiable instrument means a promissory note, bill of exchange or cheque payable either...
s including bills of exchange, chequeChequeA cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...
s, and promissory notePromissory noteA promissory note is a negotiable instrument, wherein one party makes an unconditional promise in writing to pay a determinate sum of money to the other , either at a fixed or determinable future time or on demand of the payee, under specific terms.Referred to as a note payable in accounting, or...
s and connected to their negotiable character; - arbitrationArbitrationArbitration, a form of alternative dispute resolution , is a legal technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to one or more persons , by whose decision they agree to be bound...
agreements and agreements on the choice of court (see arbitration clauseArbitration clauseAn arbitration clause is a commonly used clause in a contract that requires the parties to resolve their disputes through an arbitration process...
s and forum selection clauseForum selection clauseA forum selection clause in a contract with a conflict of laws element allows the parties to agree that any litigation resulting from that contract will be initiated in a specific forum...
s); - questions governed by the law of companies and other bodies corporateCorporationA corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
or unincorporate such as the creation, by registration or otherwise, legal capacity, internal organisation or winding up of companies and other bodies corporate or unincorporate, and the personal liability of officers and members for the obligations of the company or body; - the question whether an agent is able to bind a principalPrincipal (law)In commercial law, a principal is a person, legal or natural, who authorizes an agent to act to create one or more legal relationships with a third party...
, or an organ to bind a company or body corporate or unincorporate, to a third party; - the constitution of trusts and the relationship between settlors, trusteeTrusteeTrustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...
s and beneficiariesBeneficiaryA beneficiary in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor. For example: The beneficiary of a life insurance policy, is the person who receives the payment of the amount of insurance after the death of the insured...
(see trusts (conflict)Trusts (conflict)The Hague Convention on the Law Applicable to Trusts and on their Recognition, or Hague Trust Convention is a multilateral treaty developed by the Hague Conference on Private International Law on the Law Applicable to Trusts. It concluded on 1 July 1985, entered into force 1 January 1992, and is as...
); - evidenceEvidence (law)The law of evidence encompasses the rules and legal principles that govern the proof of facts in a legal proceeding. These rules determine what evidence can be considered by the trier of fact in reaching its decision and, sometimes, the weight that may be given to that evidence...
and procedure save that, under Article 14, the Applicable Law applies to the extent that it contains, in the law of contract, rules which raise presumptions of law or determine the burden of proof. Thus, under Article 14 (2) a contract or an act intended to have legal effect may be proved by any mode of proof recognised by the lex foriLex foriLex fori is a legal term used in the conflict of laws used to refer to the laws of the jurisdiction in which a legal action is brought...
or by any of the laws referred to in Article 9 under which that contract or act is formally valid, provided that such mode of proof can be administered by the forum court. - the question of whether a contracts of insuranceInsuranceIn law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
covers a riskRiskRisk is the potential that a chosen action or activity will lead to a loss . The notion implies that a choice having an influence on the outcome exists . Potential losses themselves may also be called "risks"...
situated in the territories of one of the Member States is determined under the municipal law of the relevant states. This exclusion does not apply to contracts of reinsuranceReinsuranceReinsurance is insurance that is purchased by an insurance company from another insurance company as a means of risk management...
.
Express selection
Article 3 states the general rule that the parties to a contract have freedom of choice over the applicable law. To exercise this choice either express words may be used or the intention should be demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case.The law chosen may apply to the whole or only a part of the contract, and the choice is not irrevocable. The parties can at any time agree to change the applicable law and any such variation will not prejudice the formal validity of the agreement nor adversely affect the rights of third parties.
Where all the elements of a contract, at the time of its conclusion, are connected with only one country, Article 3 may not be used to evade
Evasion (law)
In law, the Doctrine of Evasion is a fundamental public policy. Whereas a person may legitimately plan his or her affairs so as to avoid the incidence of obligations or liabilities imposed by the law, no-one is allowed to evade the operation of otherwise mandatory provisions once duties and...
the mandatory provisions of the that state (Article 3(4)).
To establish a choice demonstrated with reasonable certainty, there must have been a "real choice". That the parties would have chosen a particular law is not sufficient. The court will take into account both the terms of the contract and the circumstances of the case.
The Guiliano-Lagarde Report gives three examples of situations where a real choice may be demonstrated with reasonable certainty:
- Standard form contracts The report gives as an example a Lloyd’s policy of marine insurance.
- Jurisdiction and arbitration agreements
- Course of dealing
Implied selection
If there is no express choice, Article 4 provides that the contract shall be governed by the law of the country with which it is most closely connected. If the agreement is severable, two applicable laws may be selected. For these purposes, it is presumed that the contract is most closely connected with the lex loci solutionis, i.e. the law of the place where the contract is to be performed, or the law of the habitual residenceHabitual residence
In conflict of laws, habitual residence is the standard used to determine the law which should be applied to determine a given legal dispute. It can be contrasted with the law on domicile, traditionally used in common law jurisdictions to do the same thing....
of the person who is to perform, or, in the case of a body corporate or unincorporate, where its central administration is located. However, if it is a commercial or professional contract, the applicable law will be the law of the place in which the principal place of business is situated or, where under the terms of the contract the performance is to be effected through a place of business other than the principal place of business, the country in which that other place of business is situated except that there is a rebuttable presumption
Rebuttable presumption
Both in common law and in civil law, a rebuttable presumption is an assumption made by a court, one that is taken to be true unless someone comes forward to contest it and prove otherwise. For example, a defendant in a criminal case is presumed innocent until proved guilty...
:
- where the subject matter of the agreement is immovable property, the lex situsLex situsThe term lex situs refers to the law of the place in which property is situated for the purposes of the conflict of laws. For example, property may subject to tax pursuant to the law of the place of the property or by virtue of the domicile of its owner...
will apply; and - contracts for the carriage of goods and charter-parties are governed by the law of the place in which, at the time the contract is concluded, the carrier has his principal place of business if that is also the place in which loading or discharge is to occur or the place where the consignor has his or her principal place of business.
Consumer contracts
Article 5 applies to contracts for the supply of goods or services to a consumerConsumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
for a non-commercial purpose, or to a contract for the provision of credit for that object. Although Article 3 gives the parties a free choice of law, this choice cannot deprive the consumer of any protections available under the mandatory law of the country in which he has his habitual residence if the consumer was responding to advertising material or a specific invitation and makes the agreement in that country, or if the other party or his agent received the consumer's order in that country, or if the contract is for the sale of goods and the consumer travelled from that country to another country and there gave his order, provided that the consumer's journey was arranged by the seller for the purpose of inducing the consumer to buy. For these purposes, Article 7 defines "mandatory rules" as rules that must be applied whatever the Applicable Law. In deciding whether rules are mandatory in the lex fori or a law with which the contract has a close connection, regard shall be had to their nature and purpose and to the consequences of their application or non-application.
If the contract is silent on the choice of law, it will be governed by the law of habitual residence if it is entered into in the circumstances described above. But this Article does not apply to:
a contract of carriage; a contract for the supply of services where the services are to be supplied to the consumer exclusively in a country other than that in which he has his habitual residence.
The Article does, however, apply to a contract which, for an inclusive price, provides for a combination of travel and accommodation.
Contracts of employment
Under Article 6, no choice of law selection contained in a contract of employmentEmployment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...
can deprive the employee of the protection afforded to him by the mandatory laws which would be applicable in the absence of that choice. If there is no express selection, an employment contract is governed,
The provisions may only apply for the benefit of the employee.
Material validity
Under Article 8, the material validity of a contract, or of any term in a contract, shall be determined by the law which would govern it under the Convention if the contract or term were valid (i.e. the putative Applicable Law). But, if this would produce an obviously unfair result, a party may rely upon the law of the place of habitual residence to establish that he did not give a free consent.Formal validity
Under Article 9, a contract concluded between persons who are in the same country is formally valid if it satisfies the formal requirements of either the Applicable Law or the law of the country where it is concluded. A contract concluded between persons who are in different countries is formally valid if it satisfies the formal requirements of either the Applicable Law or the law of one of those countries. Where a contract is concluded by an agent, the country in which the agent acts is the relevant country for the purposes of the earlier tests. But a contract relating to immovable property is always subject to the mandatory provisions of the lex situs.Transfers of obligation
Article 12 deals with a voluntary assignmentAssignment (law)
An assignment is a term used with similar meanings in the law of contracts and in the law of real estate. In both instances, it encompasses the transfer of rights held by one party—the assignor—to another party—the assignee...
or novation
Novation
In contract law and business law, novation is the act of either replacing an obligation to perform with a new obligation, or replacing a party to an agreement with a new party...
. Whether the rights and/or obligations can be transferred, the nature of the relationship between the assignee and the debtor that results from a transfer, the conditions under which the assignment can be invoked against the debtor, and any question whether the debtor's obligations have been discharged, are determined by the Applicable Law of the original agreement. The Applicable Law of the transfer will determine the mutual obligations of assignor and assignee as against the third party, i.e. "the debtor". Article 13 deals with subrogation
Subrogation
Subrogation in its most common usage refers to circumstances in which an insurance company tries to recoup expenses for a claim it paid out when another party should have been responsible for paying at least a portion of that claim....
so that whether a third person may enforce an existing liability owed to a "creditor" by a "debtor" is determined by reference to the law which governs the debtor's duty to satisfy the creditor.
Ordre public
Under Article 16, the forum court may invoke its own public policyPublic policy (law)
In private international law, the public policy doctrine or ordre public concerns the body of principles that underpin the operation of legal systems in each state. This addresses the social, moral and economic values that tie a society together: values that vary in different cultures and change...
as a justification for refusing to apply the lex causae.
Composite or federated states
Under Article 19, where the choice of law rules point to a country with more than one legal system, the Convention selects the most appropriate municipal law (not the choice of law rules of that law given that renvoi is excluded).Text of the Convention
See also
- Contracts (Applicable Law) Act 1990, implementing the Convention in the United Kingdom
- Brussels RegimeBrussels RegimeThe Brussels Regime is a set of rules regulating which courts have jurisdiction in legal disputes of a civil or commercial nature between individuals resident in different member states of the European Union and the European Free Trade Association...
, regarding jurisdiction. - Rome II RegulationRome II RegulationThe Rome II Regulation No is an European Union Regulation regarding the conflict of laws on the law applicable to non-contractual obligations...
. The analogous EU regulation for torts and delicts arising from non-contractual obligations.