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The Rome I Regulation on the Law Applicable to Contractual Obligations by McParland, Michael (19th March 2015)

1 All Roads Lead to Rome

From: The Rome I Regulation on the Law Applicable to Contractual Obligations

Michael McParland

Subject(s):
Choice of law clauses — Rome Convention — Rome I Regulation and choice of law — Validity of contract

(p. 1) All Roads Lead to Rome

Commerce is now so absolutely universal among all countries; the inhabitants of all have such a free intercourse with each other; contracts…are so common among persons, whose domicils are in different countries, having different and even opposite laws on the same subjects; that without some common principles adopted by all nations in this regard there would be an utter confusion of all rights and remedies; and intolerable grievances would grow up to weaken all the sanctity of contracts and the security of property.

Joseph Story (1834).1

The question is: pursuant to which legal norms is the judge of our state to decide the legal relationship brought before him, which either was formed abroad, or in which foreigners are involved, or which otherwise has some connection with another country?

Carl Georg von Wächter (1841).2

(p. 2) A.  A New Roman World

1.01  The Rome I Regulation (593/2008)3 (‘Rome I’) is a current solution to some very old questions. It contains a set of harmonized conflict-of-laws rules (règles de conflit)4 that are to be applied by the courts and tribunals of all but one of the Member States of the European Union (‘EU’).5 These rules determine the laws that are ‘applicable’ in situations that involve ‘a conflict of laws’ in most contractual obligations in civil and commercial matters.6 Those situations involve ‘one or more elements that are alien to the domestic social life of a country’,7 and therefore require a decision as to which system of law should define, shape, and control the duties, rights, and remedies of the parties to the contract in dispute.

1.02  The questions that Rome I seeks to answer first arose in Europe after the collapse of the Roman Empire.8 With the end of a universal empire governed by a common legal system, conflicts between foreign and local laws inevitably arose in transactions involving persons owing allegiance to different rulers. It was with the revival of interest in Roman law in the 12th century, when Justinian’s Code was studied and taught among the independent city-states of Northern Italy, that possible answers to these problems began to appear. Aldricus of Bologna first suggested in about 1200 ad that in cases where courts had to choose between different competing laws a judge had a discretion to apply the better and most useful law.9 From the Middle Ages onwards, the evolution of solutions to the conflict-of-laws problem grew in practical importance for both individuals and States as travel, commerce, and trade across national borders increased. The Industrial Revolution gave this process greater impetus. By 1834, Professor Story would observe:

A person sometimes contracts in one country, and is domiciled in another, and is to pay in a third; and sometimes the property, which is the subject of the contract, is situate in a fourth; and each of these countries may have different, and even opposite laws. What this is to be done in this conflict of laws? What law is to regulate the contract, either to determine the rights, the actions, and the defences growing out of it; or the consequences flowing from it; or to interpret its terms, and ascertain its stipulations? Boullenois10 has very justly said, that these are questions of great importance, and embrace a wide extent of objects.11

(p. 3) 1.03  In Europe, the idea of unifying conflicts rules is often attributed to the work of the German scholar, Friedrich Carl von Savigny,12 and contemporaries influenced by his work.13 Von Savigny’s method involved the determination of the proper law of any legal relationship, and fixing its ‘seat’ based on certain factual criteria.14 The domicile of a person generally controlled issues of capacity, succession and family relationships. The location of a thing (such as an item of property) that was the subject of the relationship between the parties determined all rights in that thing, save for questions of capacity and procedure. The location of a legal transaction, which had occurred or was to occur, governed obligations arising out of contracts, but not questions of capacity or torts or delicts. The location of a forum court controlled procedural as opposed to substantive matters. Von Savigny recognized that this method had a number of difficulties in relation to contractual obligations, because they necessarily involved at least two parties who frequently were performing reciprocal obligations, and many contracts involve objects that are difficult to geographically locate. Von Savigny suggested these problems could be overcome by recognizing that (i) for voluntary transactions the expectations of the parties should control; (ii) that the essence of an obligation is its fulfillment, not its origin; (iii) that an obligation relates essentially to the debtor rather than the creditor; (iv) that reciprocal obligations were to be governed by their own law.15 With those matters in mind, obligations were to be located at the place of performance, when expressly stipulated or, in default of an express provision, according to appropriate circumstances from which the parties’ tacit intention may be inferred, such as the debtor’s place of business, the place of contracting (if this was the debtor’s domicile or suggested by other circumstances), or, failing any other indications, at the debtor’s domicile.16

1.04  The Rome I Regulation owes much to the residual legacy of von Savigny’s ideas. It applies to contracts concluded on, or after, 17 December 2009. Rome I has been described by the European Commission as ‘a central element of the Community acquis in the area of civil justice’ within the EU.17 Rome I is the successor to the Rome Convention of June 1980 (‘the Rome Convention’),18 an international convention which has not been denounced and remains in force. The conflict-of-laws rules found in the Rome Convention will continue to apply to all contracts concluded up to 16 December 2009, and to contracts in cases before the courts and tribunals of Denmark and in a tiny number of non-European territories of Member States.

(p. 4) 1.05  Rome I has a sister Regulation, the Rome II Regulation (864/2007) for non-contractual obligations (‘Rome II’).19 This is not a book about Rome II, but together the Rome I and Rome II Regulations have created a new ‘Rome Regime’ for determining the applicable law in civil and commercial obligations in Europe. Along with the Brussels I Regulation (44/2001/EC) and its successor, the Brussels I Recast (1215/2012/EU), on jurisdiction and enforcement of judgments in civil and commercial matters (‘the Brussels Regime’),20 the Rome Regime is at the heart of a rapidly developing EU private international law, that has evolved to replace much of the national private international laws of Member States.21

1.06  Beginning tentatively with the Maastricht Treaty (1992), before gathering speed after the Treaties of Amsterdam (1997) and Nice (2001) came into force, the EU has promoted the progressive establishment of an ‘Area of Freedom, Security and Justice’,22 which includes adopting ‘measures relating to judicial cooperation in civil matters with a cross-border impact to the extent necessary for the proper functioning of the internal market’.23

1.07  Both Rome Regulations are the product of work to develop harmonized conflict rules that was started in the 1960s by the original Six Member States of the then European Economic Community (‘EEC’). The plan was to iron out the differences in pre-existing national laws to enhance the functioning of the fledgling European Common Market. This work of reform (p. 5) commenced in 1968, and resulted in a preliminary draft convention in 1972 for both contractual and non-contractual obligations (‘the 1972 Draft Convention’).24 Further negotiations involving the new 1973 intake of Member States, (Denmark, Ireland, and the United Kingdom), eventually produced an intergovernmental convention, the Rome Convention in 1980, that was limited solely to contractual obligations in civil and commercial matters. This Rome Convention finally came into force in April 1991, with the protocols giving the Court of Justice of the then European Union jurisdiction to interpret it finally coming into effect in 2004.

1.08  The history and background to the development of Rome I is an important interpretative tool. Rome I inherits much of its content, structure, and legislative intent from the solutions and compromises reached in the 1970s that were reflected in the Rome Convention. As times passes, it is easy to forget why these compromise solutions were reached and what their intended limitations were.

1.09  But while preserving much of the past, Rome I also contains much that has been changed. Those changes represent amendments to both the form, and sometimes, the substance of the inherited Rome Convention text. They are the product of the negotiations and compromises reached by the institutions of the EU legislature between 2003 and 2008 as the Rome Convention was converted into a Union instrument. This book looks at those developments in detail and identifies those matters and materials which may well be relevant in practice to the interpretation of the Regulation using the methods adopted by the Court of Justice.

1.10  This chapter summarizes the road from, and back to, Rome, that produced both the Rome Convention and the Rome I Regulation. It marks out the major steps in the development of both, setting them in context with wider developments in EU private international law. It asks the essential questions of how, when and why did we get where we are? It is a story that is rich in topics for discussion that cover the whole spectrum of attitudes to the EU, the growth of its legislative powers and the nature of private international law within the European Internal Market. At one end of the opinion spectrum, there are some who believe that Rome I, like the Rome Convention before it, is an example of cooperation between Member States that works to the good of all. At the other end, there are some who see it as the product of law-making by small committees, imposed by Brussels with little regard for its actual or potential impact on national legal systems and legal and business practice. Given the nature of the debate, we should begin by investigating why we need such rules in the first place.

B.  What is an ‘Applicable Law’ of a Contract?

1.11  Contracts, like the people who make them, are incapable of independent existence in a vacuum. Unless made by reference to some system of private law contracts are ‘mere pieces of paper devoid of all legal effect’.25 The law that gives them life, which defines the obligations assumed by the parties and prescribes the remedies that a court will enforce for a failure to perform them, is described in various interchangeable terms as ‘the proper law of the contract’ or its ‘governing law’; but the modern phrase adopted in the new European regimes is that of the ‘applicable law’.

(p. 6) 1.12  What law should be the applicable law? When all the elements of a contractual relationship arise in one country there is no difficulty in applying that country’s laws. But when a contract forms part of the stream of commerce and trade that flows across national borders—involving parties located in different countries who share neither a common language nor common laws—how should a forum court determine whose law should apply to a contract? Should it automatically apply its own law (the lex fori), or should it adopt different rules to reflect the international elements involved?

1.13  In 1929, in the Payment of Various Serbian Loans Issued In France case, the Permanent Court of International Justice (‘PCIJ’) answered that question in the following terms:

Any contract which is not a contract between States in their capacity as subjects of international law is based on the municipal law of some country. The question as to which this law is forms the subject of that branch of the law which is at the present day usually described as private international law or the doctrine of the conflict of laws. The rules thereof may be common to several States and may even be established by international conventions or customs, and in the latter case may possess the character of true international law governing the relations between States. But apart from this, it has to be considered that these rules form part of municipal law.26

1.14  Neither the term ‘conflict of laws’ nor the PCIJ’s alternative label of ‘private international law’ is consistently applied even within the Member States.27 In its broadest sense, private international law comprises mechanisms to facilitate the settlement of cross-border, private law disputes that answer three questions: firstly, which country’s courts have jurisdiction over the parties and their dispute? Secondly, which country’s substantive law is to be applied by the court hearing the case? Thirdly, will a decision given in a court which has declared it has jurisdiction ultimately be recognized and/or enforced in another country?

1.15  It is the second of those questions that the Rome I Regulation and this book is concerned with. It is an issue known in most (but not all) Member States as the ‘conflict of laws’ (‘conflit des lois’ or ‘Kollisionsrecht’), which is the term adopted in this book. It describes the process whereby the applicable law of a contractual obligation is identified and selected. It is often referred to in the common law as the ‘choice of law’, though often the only person doing the choosing is the court itself.

1.16  But why do we need a common European set of conflict-of-laws rules, and how did they come about?

C.  A New Age of International Cooperation (1945–1968)

1.17  The historical background to the Rome I Regulation, like everything else associated with the EU, is rooted in the post-1945 desire to cooperate; both within Europe and in the wider world. It was a new age, that saw the emergence of a positive ‘international law of cooperation’, replacing previous principles that had focused on rules of coexistence.28 This new age was reflected in the creation of international organizations such as the United Nations, the 1947 General Agreement on Tariffs and Trade (‘GATT’) and its subsequent negotiations,29 new (p. 7) international conventions on international arbitration,30and revised international transport conventions,31 all of which sought to promote trade, commerce, and prosperity.

1.18  In the aftermath of the Second World War, efforts by Nation States to harmonize both rules of private international law and substantive contract law also increased. The Hague Conference on Private International Law (‘the Hague Conference’)32 had resumed its pre-war activities. A 1954 convention on civil procedure33 was followed by the Hague Convention of 15 June 1955 on the Law Applicable to International Sales of Goods (‘the 1955 Hague International Sales Convention’). This Convention created its own set of conflict-of-laws rules for contracts that fell within its material scope.34 By the time it came into force in September 1964, it had been signed by five of the six of the original EEC Member States (the exception being West Germany), but had been ratified by only France, Italy, and Belgium.35

1.19  Other, mainly unsuccessful, civil and commercial law Hague Conference conventions followed: on the law governing the transfer of title in international sales of goods,36 on the jurisdiction of the selected forum in international sales of goods,37 on the settlement of the conflicts between the law of nationality and the law of domicile,38 and on the recognition of legal personality of foreign companies, associations, and institutions.39 In 1965, Hague Conventions were concluded relating to (i) the service abroad of judicial and extra-judicial documents in civil or commercial matters which did come into force,40 and (ii) on the effects of a contractual submission of disputes to a foreign court which did not.41

1.20  As for the harmonization of substantive contract law, the former Rome Institute had become the permanent Institutional Institute for the Unification of Private Law (‘UNIDROIT’), and UNIDROIT inspired the Netherlands in 1951 to call a diplomatic conference to discuss a pre-war draft of a uniform international law of the sale of goods. UNIDROIT directed work continued until an April 1964 Conference in the Netherlands,42 which (p. 8) produced two Conventions of 1 July 1964. These were (i) the Convention relating to a Uniform Law on the International Sale of Goods (‘ULIS’), and (ii) the Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (‘ULFC’).43

1.21  The United Nations Commission on International Trade Law (‘UNCITRAL’) was created in 1966. Its mandate was to ‘further the progressive harmonization and unification of the law of international trade’ by ‘preparing new international conventions, model laws and uniform laws’. UNCITRAL would decide in 1968 to give priority to the production of a uniform law on international sales.44

European cooperation: the new Supra-National creations

1.22  The most significant areas of international cooperation for present purposes are the developments that occurred within Western Europe.45 In 1951, the European Coal and Steel Community was established by the Treaty of Paris. This was signed by France, the West German Federal Republic, Italy, Belgium, The Netherlands, and Luxembourg (‘the Six’). This Treaty was based on the Schuman Declaration of 9 May 1950, which advocated the radical idea of a community where all national barriers preventing the free movement of coal and steel across borders should be dismantled, while seeking to move the wage scales of coal and steel workers in Member States towards a common level.46 To achieve this objective, the Treaty of Paris created a community with its own High Authority, a Special Council of Ministers, a Joint Assembly, a Court of Justice—which was charged with acting as the guardian of the ‘rule of law’ in the new community47—and a consultative committee. Contemporaries recognized that: ‘[i]ts supranational powers mark a basic departure from the conception of all previous international organizations’.48 Indeed:

Although it is scarcely possible to give an exact definition of the community, it has one conspicuous feature. It is super-national…the community is in effect more federal than international, and that it represents a real transfer of sovereignty such as none of the member States has ever accepted before. The community is a new structure in the marches between internal law and international law.49

1.23  While many agreed the community was new, the relationship between the new community laws and Member States’ national laws was seen as ‘unusually complex and (p. 9) hybrid’.50 Matters became even more complicated by the creation of two more European communities by the signing of two more treaties in Rome in March 1957. These treaties created both the European Economic Community (‘EEC’) and the European Atomic Energy Community (‘Euratom’).51 The following is concerned with the first and most important of those treaties.

D.  From Rome to Brussels (1957–1968)

The Treaty of Rome (1957)

1.24  The 1957 Treaty of Rome created a European Economic Community comprising the same Six Member States of the Coal and Steel Community.52 For some, it was a major step towards a ‘United States of Europe’; for others it was a journey towards an unknown destination. The EEC’s objectives were bold. It was to promote ‘a harmonious development of economic activities, a continuous and balanced expansion, an increase in stability, an accelerated raising of the standard of living and closer relations between the States belonging to it’. These objectives required establishing a customs union and a common market among the Six Member States, and by progressively approximating their economic policies.53 To achieve these goals, the EEC’s activities were to include ‘the approximation of the laws of Member States to the extent required for the proper functioning of the common market’.54 The cornerstones of the common market were to be the ‘four freedoms’, the free movement of people, goods, services and capital across the national boundaries of Member States.

1.25  But again, as with the Coal and Steel Community, what was the nature of the relationship between the rules and laws created by the EEC and the national laws of Member States? Starting in 1963, the European Court of Justice (‘the Court’), in a series of landmark decisions, established four doctrines that, in the eyes of some, rendered the relationship between EEC law and national laws ‘indistinguishable from analogous legal relationships in constitutional federal states’.55 These were the doctrines of (i) the supremacy of community law, (ii) direct effect, (iii) implied powers, and (iv) human rights.56

A new ‘European’ private international law?

1.26  The creation of the EEC gave rise to questions among scholars about what role private international law would play within this new Supra-National structure.57 It had been emphasized in 1957, the same year the Treaty of Rome was signed, that private international law was concerned with ‘questions that arise in the course of private commerce (p. 10) across state lines’, and its principal objective is achieving legal ‘security’ or ‘certainty’. This involves maximizing ‘uniformity in defining the legal and socio-economic consequences of transactions and events by the selection and application of the corresponding law’, a process impeded ‘by variations in the conflicts rules in different jurisdictions and in the conceptions they connote’.58 Given the principal objectives of the EEC centred on the promotion of such cross-border commerce, the potential for engagement with private international law in promoting the functioning of the Common Market was significant.

1.27  Questions over what role private international law might play fell into two categories. The first of these concerned the rules of private international law created by, and for, the EEC itself. These had originated in the Treaty of Rome, and were emerging in the EEC’s developing secondary legislation and the case law of the Court of Justice,59 and in the everyday functioning of the EEC and its agencies. The most obvious potential source was in the treaties concluded by Member States under the sponsorship of the EEC as directed by the Treaty of Rome itself.60 The second category of questions concerned how private international law was to deal with the fact that, within the EEC, citizens of Member States were entitled to exercise the four freedoms of movement across national borders, and therefore they, and their business activities, were less ‘foreign’ to each other than had previously been the case.

Article 220 of the Treaty of Rome (1957)

1.28  The history of a distinct private international law of the European Union begins on or about Monday 11 March 1957; some 14 days before the Treaty of Rome was signed in Michelangelo’s renovated Palazzo dei Conservatori on Rome’s Capitoline Hill.61 For it was at this time that a new, last-minute addition to the text of the draft Treaty of Rome was added. This was Article 220 that provided that:

Member States shall, so far as is necessary, enter into negotiations with each other with a view to securing for the benefit of their nationals:

  • –  the protection of persons and the enjoyment and protection of rights under the same conditions as those accorded by each State to its own nationals;

  • –  the abolition of double taxation within the Community;

  • –  the mutual recognition of companies or firms within the meaning of the second paragraph of Article 58, the retention of legal personality in the event of transfer of their seat (p. 11) from one country to another, and the possibility of mergers between companies or firms governed by the laws of different countries;

  • –  the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals and of arbitration awards.62

1.29  Article 220 was introduced as ‘a way to harmonize those differences in the national legislation, which are considered an obstacle to the real functioning of the EEC’.63 Member States were directed to negotiate international conventions to iron out those differences. Although Article 220 did not force all the Member States to participate in negotiations,64 the Commission’s view was that if the four freedoms guaranteed in the Treaty of Rome were to ‘be fully effective and [to] ensure equality of competitive conditions all member states have to participate’. Although no end-result of the negotiations referred to in Article 220 could be mandated, ‘[t]his negotiation is, however, assumed to result in conventions’.65 Article 220 produced two initial conventions.

1.30  The first convention resulting from Article 220 (third indent), dealing with issues relating to the mutual recognition of companies, was the Mutual Recognition of Companies and Bodies Corporate Convention, signed on 29 February 1968.66 But the second convention was to be the key foundation text for developing a distinctly European private international law.

Reciprocal recognition and enforcement of judgments and awards

1.31  Article 220 (fourth indent) of the Treaty provided, so far as was ‘necessary’, that Member States should enter into negotiations with each other to secure for their nationals ‘the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals and or arbitration awards’. This was intended to cause Member States to make the necessary changes to their own private international laws to give effect to the relative change in status between each of them arising out of their shared membership of the EEC. As a consequence, there were sound reasons for the judgments and arbitral awards of the courts and tribunals of a Member State A not being treated in the same way as other ‘foreign’ judgments or awards when it came to their recognition and enforcement in Member State B.

1.32  Article 220 was intended to plug something of a gap in the Treaty of Rome that reflected the hybrid nature of the EEC itself. The Treaty of Rome lacked any equivalent to the Full Faith and Credit Clause of the US Constitution. That clause required US States, as a matter of federal law, to recognize and enforce any valid judgment rendered in another State except in very limited circumstances.67 The Full Faith and Credit clause served important policy (p. 12) objectives in creating the USA, altering the status of the states from independent countries foreign to each other, into integral parts of a single, federal nation.68 That clause arguably also granted Congress the power to prescribe conflict-of-law rules regarding interstate relations to prevent intra-regional forum shopping.69

1.33  Understandably, given the earlier failure of initiatives advocating European political integration,70 the Treaty of Rome attempted nothing similar. The economic integration of the EEC Member States was to take priority. The 1956 Spaak report on ‘The General Common Market’71 emphasized there should be a distinction between matters which would affect the functioning of the common market, control of which might be entrusted to the new EEC institutions, and those matters of general policy which were to remain ‘the reserved domain of the [Member] governments’.72 However, even though the overriding federalizing, political imperative of the US Constitution was not present in the Treaty of Rome, the EEC still required some system to improve the free movement of persons, companies, and judgments. Accordingly, Article 220 directed the Member States towards negotiations to resolve these important issues at an intergovernmental level.

1.34  On 22 October 1959, the EEC Commission sent a note to Member States inviting them to commence negotiations. This note pointed out that a true Internal Market between the Member States would only be achieved ‘if adequate legal protection could be secured’. Legal protection and, hence, legal certainty in the common market depended on the adoption by the Member States of a satisfactory solution to the problem of recognition and enforcement of judgments.73

1.35  On 18 February 1960, the Committee of Permanent Representatives of the Member States (‘COREPER’)74 agreed to set up a committee of experts. This comprised delegates from the Six Member States, along with observers from the Benelux Committee on the unification of law, the Hague Conference on private international law, and representatives from the EEC Commission. The Brussels expert committee met for the first time in July 1960, appointed Professor Bülow as their chairman, and the Belgian official Mr Pierre Jenard as its rapporteur. In December 1964 the committee adopted a preliminary draft convention.75(p. 13) This draft, with an explanatory report,76 was submitted to the Member States for comment. After consultation, the draft jurisdiction convention was finally adopted by the experts at a meeting in July 1966.77

The 1968 Brussels Convention

1.36  On 27 September 1968, the six EEC Member States signed the Brussels Convention on Jurisdiction and the Enforcement of Civil and Commercial Judgments (the ‘1968 Brussels Convention’).78 This scope of this Convention went beyond the express requirements of Article 220. Member States had created a ‘double convention’, that dealt with questions of the exercise of jurisdiction by their courts and the recognition and enforcement of those courts’ judgments. This established a ‘new system based on direct jurisdiction’, with ‘the adoption of common rules of jurisdiction’ among the Member States. Subject to its provisions, persons domiciled in a Contracting State, ‘shall be answerable to the courts of that State, whatever their nationality’.79 ‘Special jurisdiction’ was provided, which allowed any defendant domiciled in a Contracting State, to be sued in another Contracting State, in specified circumstances. These included, ‘in matters’ of contract, ‘the court of the place where the obligation has been or is to be fulfilled’,80 and in matters of tort or quasi-tort, ‘the court of the place where the tortious act occurred’.81 Special rules were created for jurisdiction in matters of insurance,82 and for ‘matters of credit sales and hire purchase’, an early, limited form of consumer contract rules.83 Parties were allowed, within limits, to reach agreements on jurisdiction,84 subject, as in every other case, to the ‘sole jurisdiction’ provisions in Article 16, which restricted jurisdiction to certain courts ‘regardless of domicile’. The intention behind the 1968 Brussels Convention was that it ‘would allow harmonization of laws, provide greater legal certainty, avoid discrimination and facilitate the “free movement” of judgments, which is after all the ultimate objective’.85 Arbitration was excluded from the scope of the 1968 Brussels Convention despite the terms of Article 220. This was in deference to other international conventions, principally the 1958 New York Convention which had entered into force on 7 June 1959.

1.37  The 1968 Brussels Convention came into force on 1 February 1973.86 On 1 June 1971, a Protocol permitting the Court of Justice of the European Communities to interpret the Convention was concluded.87 This became binding on 1 September 1975, and the Court’s first judgments on the 1968 Brussels Convention were handed down on 6 October 1976.88 The 1968 Brussels Convention and its amending successors in the form of both Conventions and now EU Regulations, as well as the Court’s interpretative rulings on these jurisdictional (p. 14) provisions (‘the Brussels Regime’) both shaped the development of the common rules for the choice of applicable law in Europe, and have a crucial role in the interpretation of the rules now enshrined in the Rome I Regulation.

E.  Harmonizing the Conflict-of-Laws Rules of Member States

1.38  With 1968 Brussels Convention being negotiated, questions arose whether the harmonization of the laws of Member States was required because of ‘the indirect, secondary repercussions that the activities of the Community produce on the existing national conflicts rules’.89 Debate focused on contractual dealings, involving contracts with the EEC itself, and regarding cross-border contracts between nationals of different Member States.

‘The law applicable to the contract in question’

1.39  The Treaty of Rome had declared that ‘[t]he contractual liability of the Community shall be governed by the law applicable to the contract in question’.90 But there was no guidance as to how that law was to be determined. Did it refer to the ordinary applicable law of the contract which depended on the national conflict-of-laws rules of the forum hearing the dispute,91 or was it a reference to some other, Community-based concept of the law applicable to the contract? It would take almost 30 years before the Court of Justice declared that the ‘law applicable to the contract in question’ in Article 215 of the Treaty was simply the national law that applied to the contract in question under ordinary conflict-of-laws rules, and was not a reference to some law derived from the general principles common to the legal systems of the Member States.92

Private contracts between nationals of different states

1.40  Several commentators considered there was a pressing need for harmonization of conflicts rules regarding private law contracts concluded between nationals of different EEC Member States. In 1964 Walter Hallstein advocated harmonizing of all national conflict-of-law rules among the Member States.93 Professor Zweigert’s 1966 review of the differing approaches founded in Member States concluded that harmonization or unification of national contractual conflicts rules was not only desirable but was required as a matter of necessity. Professor Zweigert even outlined basic rules that could be adopted by the Member States.94

1.41  But could a common approach to contractual conflict-of-law rules be deduced from existing national laws? Some French scholars argued that the only rule accepted by all Member States (p. 15) was that of party autonomy in choice of law.95 But what rule should be applied when the parties included no choice-of-law clause in their contract? Professor Drobnig argued:

The Court of Justice should be free to develop the best rule possible, using the most progressive methods available in Europe, whether derived from member states or not; particular attention should be paid to the Swiss formula based on the ‘characteristic performance’, i.e. to that particular place where obligations of a certain kind are most typically performed.96

1.42  In France, Professor Henri Batiffol had long believed that international trade had different needs from those of internal commerce.97 Professor Batiffol had hoped that the problems arising from the differences in national conflicts rules for international contracts of sale could be resolved by a general adoption by all Member States of the 1955 Hague International Sales Convention.98 But the April 1964 Hague Conference had seen considerable division of opinion among Member States on the use of conflicts rules to achieve harmonization and regarding the solutions adopted in the 1955 Convention.99 By 1967, while Belgium, France, and Italy had ratified the 1955 Hague International Sales Convention, it seemed very unlikely that the Netherlands and West Germany would follow their lead.100

1.43  Apart from contracts of sale, contracts of employment, and the need to protect workers, differences in applicable national laws also gave rise to several issues.101

1.44  Given the impending arrival of the common rules of jurisdiction agreed in the 1968 Brussels Convention, there were increasing concerns that something needed to be done to harmonize the conflicts rules of Member States to prevent outcomes differing by reason of a parties’ permitted choice of forum.

An age of codification

1.45  Some early commentators argued that the EEC should seek to harmonize its substantive laws, especially for contractual obligations.102 But harmonizing conflict-of-laws rules was seen as both the easier and quicker option.103 As Professor Drobnig observed, ‘[t]he ultimate (p. 16) superiority of a uniform substantive rule has to be balanced off against the greater price in terms of time and effort necessary for its development’.104

1.46  This debate was taking place in an era ‘characterized by a strong tendency towards codification’ of private international laws,105 even though problems with codification were recognized.106

1.47  In 1947 in France, the De Gaulle provisional government had appointed a Commission for a Revision of the 1804 Civil Code, which only had a few articles dealing with conflict-of-laws issues. By 1950, that revision commission had published a draft law of more than one hundred articles.107 A further draft was published by the French Civil Code Reform Commission in 1955.108 The Benelux countries also produced their own convention in 1951 which, as we shall see, proved to be highly influential in developing the choice-of-law rules in Europe.

1.48  In the United States, work on revising the First Restatement Conflict of Laws had begun in 1952.109 Codifications in Eastern Bloc countries such as Czechoslovakia110 and Poland111 revised earlier private international law statutes112 based on an Austrian draft statute of 1913.113 Hungary had prepared draft legislation in 1947.114 Work was continuing on a statute in East Germany which would be enacted in 1975.115 With a modest growth in east–west trade, the Eastern Bloc’s approach to private international law attracted greater attention in the west.116

(p. 17) 1.49  Comparative studies of both substantive and conflict-of-laws were also reinvigorated after the Second World War, not least because of the strong connections developed between the common law and émigré German scholars.117 Many had travelled to the United States and saw the developments that led to the Restatement (Second) Conflict of Laws. In 1950, the German Association of Comparative Law was refounded. Professor Dölle’s report on its objectives highlighted that the economic and political integration of Europe ‘must be supported and accompanied by a gradual approximation and finally unification of the domestic legal systems in Europe’.118 The post-war period also saw the second volume of Professor Rabel’s Foreign Corporations, Torts, and Contracts in General being the subject of a second edition.119 In 1953, the German Council for Private International law was formed, which included Professors Beitzke, Dölle, Ferid, Kegel, Raape, Rabel, and Zweigert among its leading members.120

The Benelux Committee and the Benelux Uniform Law

1.50  Concerns over the absence of a harmonized conflicts of law rules within the EEC were noted by the Benelux Committee on the unification of law (‘the Benelux Committee’). This body was a permanent committee of legal experts from Belgium, the Netherlands, and Luxembourg that had been set up in 1948,121 the same year that a customs union between these countries had entered into effect.122 The Benelux Committee had from 1960 been observers to the working party developing the 1968 Brussels Convention. The Benelux Committee had previously drafted harmonized private international rules for their own countries, namely the Benelux Convention on Private International Law (1951), which was accompanied by a supporting Joint Memorandum.123 This had proved to be a failure. Luxembourg ratified the 1951 Convention in 1954, but neither Belgium nor the Netherlands did because of disputes over its terms. In 1962 a special commission of the three countries had been set up to reconsider the text. A draft was completed and revised by March 1966, and the Benelux Ministers of Justice agreed on a new text in November 1966.124 This Uniform Law (‘the Benelux Uniform Law’) was broad in scope and included provisions relating to choice of law in both contractual and non-contractual obligations. It would subsequently be signed by the three Benelux countries on 3 July 1969 but was never ratified.125 The (p. 18) Benelux Uniform would prove influential in both initiating and shaping the development of the Rome Convention.126 The draft Benelux law was passed onto Brussels. Some have been sceptical on the motives involved.127

The Benelux Proposal (1967)

1.51  On 8 September 1967, Ambassador Joseph van der Meulen, Belgium’s Permanent Representative to the EEC, sent a letter on behalf of the Benelux countries to the newly unified European Commission.128 This letter invited the Commission to collaborate with experts from the Six Member States in the unification of private international law. Their proposed task was to attempt the codification of conflict-of-laws rules within the Community. The Benelux proposal called for a new convention ‘to eliminate the inconveniences arising from the diversity of the rules of conflict, notably in the field of contract law’. There was said to be ‘an element of urgency’, having regard to the reforms likely to be introduced in some Member States and the consequent ‘danger that the existing divergences would become more marked’.129 The Benelux countries’ primary fear was of ‘forum shopping’ arising out of the operation of the forthcoming Brussels Convention.130 The recently completed draft Benelux Uniform Law was proposed as a basis for discussion at EEC level.131

The reaction of the European Commission

1.52  This proposal from half of the EEC Member States was welcomed by the Commission, who accepted that, at least in some special fields of private international law, the harmonization of conflict-of-laws rules ‘would be likely to facilitate the workings of the common market’.132 This opinion reflected the EEC Commission’s October 1959 note that had begun the Brussels Convention’s negotiations. A proposed new conflicts of law convention would be seen by some as ‘a logical complement’,133 a ‘natural sequel’,134 and a ‘natural extension’135 to the 1968 Brussels Convention, which would turn the EEC into ‘one large law-district’ for the purpose of the rules of jurisdiction (p. 19) and recognition and enforcement of judgments. It was also defensible on general economic grounds.136

1.53  Economically and politically the Benelux letter had come at an opportune time. By January 1968, the Commission viewed the economic functioning of the common market with great satisfaction. It had produced a huge increase in internal trade among the Member States, that had grown at almost three-and-a-half times the rate of increase in world-trade over the same period.137 In almost every economic measure, the Six were outpacing the United States and the United Kingdom. All had happened before 1 July 1968, the date of completing the customs union, which was to see the abolition of all customs duties between the Member States, and implementing the Common Customs Tariff for external trade.138 However, political rows, including disputes over the enlargement of the Community, greatly concerned the Commission.139 Denmark, Ireland, Norway, and the United Kingdom had applied to join the three communities in 1961, but their applications had been suspended after France’s President de Gaulle had exercised his veto in 1963. The four countries had renewed their applications on 11 May 1967, and there appeared to be better prospects of their being accepted. Any suggested measures at the end of 1967 and early 1968 that could further improve the functioning of the Common Market and to promote its benefits to Member States were likely to be received by the Commission with a favourable response. This was a good time to be talking to the Commission about ways of improving a successful common market.

F.  Preliminary Work (1968–1972)

1.54  In February 1968, a group of government experts appointed by the Six Member States met to consider the Benelux proposals and conduct ‘the first survey of the situation’.140 This meeting was under the chairmanship of Mr T Vogelaar, then the European Commission’s Director-General for the Internal Market and Approximation of Legislation. In his opening address, Mr Vogelaar said:

This proposal should bring about a complete unification of the rules of conflict. Thus in each of our six countries, instead of the rules of conflict and apart from cases of application of international Agreements binding any Member States, identical rules of conflict would enter into force both in Member States’ relations inter se and in relations with non-Community States. The great advantage of this proposal is undoubtedly that the level of legal certainty would be raised, confidence in the stability of legal relationships fortified, agreements on jurisdiction according to the applicable law facilitated, and the protection of rights acquired over the whole field of private law augmented. Compared with the unification of substantive law, unification of the rules of conflict of laws is more practicable, especially in the field of property law, because the rules of conflict apply solely to legal relations involving an international element.141

(p. 20) 1.55  Mr Vogelaar then set out the grounds on which the Commission’s conclusions were founded. He observed that:

According to both the letter and spirit of the Treaty establishing the EEC, harmonization is recognized as fulfilling the function of permitting or facilitating the creation in the economic field of legal conditions similar to those governing an internal market. I appreciate that opinions may differ as to the precise delimitation of the inequalities which directly affect the functioning of the common market and those having only an indirect effect. Yet there are still legal fields in which the differences between national legal systems and the lack of unified rules of conflict definitely impede the free movement of persons, goods, services and capital among the Member States.

Some will give preference to the harmonization or unification of substantive law rather than the harmonization of rules of conflict. As we know, the former has already been achieved in various fields. However, harmonization of substantive law does not always contrive to keep pace with the dismantling of economic frontiers. The problem of the law to be applied will therefore continue to arise as long as substantive law is not unified. The number of cases in which the question of applicable law must be resolved increases with the growth of private law relationships across frontiers.

At the same time there will be a growing number of cases in which the courts have to apply a foreign-law. The Convention signed on 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters uniformly governs the international jurisdiction of the courts within the Community. It should help to facilitate and expedite many civil actions and enforcement proceedings. It also enables the parties, in many matters, to reach agreements assigning jurisdiction and to choose among several courts. The outcome may be that preference is given to the court of a State whose law seems to offer a better solution to the proceedings. To prevent this ‘forum shopping’, increase legal certainty, and anticipate more easily the law which will be applied, it would be advisable for the rules of conflict to be unified in fields of particular economic importance so that the same law is applied irrespective of the State in which the decision is given.

To sum up, there are three main considerations guiding our proposal for harmonizing the rules of conflict for a few well-defined types of legal relations. The first is dictated by the history of private international law: to try to unify everything is to attempt too much and would take too long. The second is the urgent necessity for greater legal certainty in some sectors of major economic importance; the third is the wish to forestall any aggravation of the differences between the rules of private international law of the various Member States.142

These were in fact the motives which prompted the Commission to convene a meeting of experts from the Member States in order to obtain a complete picture of the present state of the law and to decide whether and to what extent a harmonization or unification of private international law within the Community should be undertaken. The invitation was accompanied by a questionnaire designed to facilitate the discussion.143

1.56  Viewed as a manifesto for the next 40 years of developments in private international law within the EU, Mr Vogelaar’s speech reveals a consistency of purpose from which the Commission has barely wavered. The core objective was the ‘creation in the economic field of legal conditions similar to those governing an internal market’. The Community was to become effectively a ‘one law’ area: an idea that would continue to grow in importance throughout the expansion of legislative competence of the Community.

(p. 21) Vive la différence?

1.57  Did the differences between the national laws of the Six really require urgent harmonization to deal with the matters referred to by Mr Vogelaar? No formal study was conducted—this was not an age of ‘impact assessments’. With the benefit of hindsight, a case can be made that the differences between Member States did not require the imposition of a new, harmonized regime at all. There was more in common between the Six than not. But the mood of the age demanded the abolition of national differences to protect and enhance the functioning of the Common Market. This mood was captured in 1973 in the context of the harmonization of EEC company laws:

Differences in the Member State’s legislative and administrative provisions affect the establishment or functioning of the Common Market. They hamper the free circulation of goods, persons and capital, provoke distortion in competition making unequal the burdens on the competing national industries and are, therefore, obstacles for the development of the Common Market to the same extent as the maintenance of tariff borders or of different national policies in the various economic fields. Therefore, these differences have to be abolished.144

1.58  For some scholars, this argument was:

equally applicable to each and every aspect of the conflict of laws: to the extent that differences exist between the rules and practices prevalent in the respective Member States with regard to the assumption of jurisdiction, or once jurisdiction has been assumed, with regard to the choice of the applicable law, infinite possibilities arise for variations in the outcome of cases which are in principle similar, or even virtually identical, to each other, depending exclusively upon which of the Member States happens to be the forum for litigation.145

Work begins

1.59  At the second meeting of the appointed experts in October 1968, five delegations146 declared themselves to be ‘fundamentally in agreement on the value of the work in making the law more certain in the Community’. A start was recommended on ‘matters most closely involved in the proper functioning of the common market’.147 Work was to begin on the law applicable to (1) corporeal and incorporeal property, (2) contractual and non-contractual obligations, (3) the form of legal transactions and evidence, and (4) ‘general matters’ arising (ie renvoi, classification, the application of foreign law, acquired rights, public policy, capacity, and representation). The results of the meeting were submitted to the Commission with a proposal to seek the agreement of the Member States to continue the work, and for preparing a preliminary draft convention establishing the uniformity in certain relevant areas of private international law.148

The French contribution

1.60  In May 1969, the French Government forwarded a draft of their Law Completing the Civil Code in the Field of Private International law to the Commission for consideration as part of the proposal.149

(p. 22) The Expert Group

1.61  In January 1970, COREPER authorized these experts (‘the Expert Group’) to continue their work on the harmonization of the rules of private international law, with priority being given to their four identified categories.150 It was left to the Expert Group’s discretion whether to put their proposals in a single draft convention or in several separate drafts.151

1.62  In February 1970, the Expert Group met and elected as its chairman the Belgian official Mr Pierre Jenard, previously rapporteur for the 1968 Brussels Convention.152 For contractual and extra-contractual obligations, the work was to be led by the Italian delegation, and Professor Mario Giuliano153 of Milan University was appointed rapporteur. The French delegation were to review the law applicable to the form of legal transactions and evidence. Professor Paul Lagarde was appointed rapporteur. The Benelux countries were entrusted with the ‘general matters’ with Mr T van Sasse van Ysselt,154 appointed as rapporteur.155 At the same meeting, the great majority of experts favoured the creation of a universal convention not based upon reciprocity.156

1.63  The Expert Group was a small one.157 Only 34 representatives from the Six Member States attended any of its 11 meetings.158 The ‘core’ of the Expert Group was even smaller. Only 19 people attended five meetings or more. Those regular attendees comprised seven professors,159 four judicial officers,160 and eight government officials.

1.64  In June 1970, the Expert Group examined and discussed questionnaires prepared by the rapporteurs and agreed to set up meetings devoted to examining Professor Giuliano’s report on the law applicable to contractual and non-contractual obligations, and to the subject matter of Professor Lagarde’s161 and Mr van Sasse van Ysselt’s reports if this related to Professor Giuliano’s work. The Expert Group had ten further meetings162 before their meeting on 21–23 June 1972, at which they completed the preliminary draft convention on the law applicable to contractual and non-contractual obligations.

(p. 23) G.  The 1972 Draft Convention

1.65  The Preliminary Draft Convention on the Law Applicable to Contractual Obligations (XIV/398/72) (‘the 1972 Draft Convention’) proposed common rules of private international law to apply in situations of an international character, to contractual and non-contractual obligations.163 Although broadly stated, the draft was limited by exclusions of obligations arising under the law of succession, negotiable instruments, and various other matters.

1.66  In relation to the core aspects of contractual obligations under the 1972 Draft Convention, the right of parties to a contract to choose the applicable law was the key rule. The first sentence of draft article 2 declared that ‘[a] contract shall be governed by the law chosen by the parties’.164 That choice could be express or implied,165 and could be made by the parties either at the time of the conclusion of the contract or at a later date and could be changed by agreement between the parties. Any change would be without prejudice to the rights of third parties.166 ‘Conditions governing the validity of the consent’ of the parties to the applicable law were however, to be determined by the (putatively) applicable law.167 Two possible variants on the effect of silence on whether an agreement had been reached were discussed in an Annex to the text.

1.67  The parties’ freedom of choice of law was broadly stated but was not unlimited. Only the rules of law in force in a country could be selected.168 Any choice was to be ‘without prejudice’ to the application of private international law rules contained ‘in normative acts of the institutions of the European Communities or in national laws which have been harmonized in implementation of such acts’.169 Any choice of law was subject to the possible operation of the public policy rules of the forum.170 A further possible provision limited the effects of party autonomy in employment contracts, by preventing a choice of law by the parties not prejudicing ‘the operation of mandatory rules for the protection of the employee which are in force in the country in which he habitually carries out his work’ was raised.171

1.68  Draft article 4 was perhaps the most controversial provision of the 1972 Draft Convention. This provided, absent express or implied choice of law by the parties, that the general rule was that a contract was to be governed ‘by the law of the country with which it is most closely connected’.172 This country was to be located, not by any of the methods in regular (p. 24) use in any of the Member States, but by a new technique borrowed from Swiss law. This required the identification of the performance which was ‘characteristic of the contract’ and the party who was to effect such performance.173 There was also an escape clause if, in all the circumstances, it was clear that the contract was more closely connected with another country.174 Contracts that did not fall within the general rule in draft article 4 were (i) contracts of employment for which a special rule in the absence of an express or implied choice of law was made in draft article 5, and (ii) contracts whose subject matter is immovable property under draft article 6.

1.69  Special provision was also made in draft article 7 for the possible application of ‘rules which govern the matter compulsorily in such a way that they exclude the application of every other law’, ie overriding mandatory rules, or lois de police. Conditions governing the validity of the consent of the parties to the contract was to be determined ‘according to the law which is applicable’ under article 7 of the Draft Convention. The law governing the obligation should also determine the ‘conditions of its performance, the various ways in which it may be extinguished and the consequences of its non-performance’.175

The 1972 Expert Group Report

1.70  The 1972 Draft Convention was explained in an expert report finalized at a September 1972 meeting, and then submitted to COREPER for transmission to the national governments (‘the 1972 Expert Group Report’).176 The Expert Group Report was primarily drafted by Professor Giuliano,177 with contributions from Professor Lagarde178 and Mr van Sasse van Ysselt.179 The text of the 1972 Draft Convention and the French text of the Expert Group Report, are most readily accessed in the Copenhagen Colloquium papers (discussed at para 1.73)180 and all references to that text refer to that publication.

A civil law creation

1.71  Unsurprisingly the 1972 Draft Convention was the product of the civil law experience of private international law. The position of the common law was sometimes noted but played little part in developing the 1972 Draft Convention,181 other than providing casual comparative assertions.182 The recent developments that provided most inspiration for the Expert Group were those observed in Switzerland, not the common law from either side of the Atlantic, including the new solutions found in the US 1971 Restatement (Second) Conflict of Laws.183

(p. 25) Reactions to the 1972 Draft Convention

1.72  A contemporary American observer described initial European reactions to the 1972 Draft Convention,184 as ‘[they] seem to be reserved if not entirely negative’.185

The 1974 Copenhagen Colloquium

1.73  The 1972 Draft Convention was discussed at a colloquium held in Copenhagen in April 1974 (‘the Copenhagen Colloquium’). Some 20 experts involved in the work and the subsequent development of the Rome Convention participated in the colloquium, and there were several special reports. The papers presented were collected and published.186 Besides a General Report on Contractual Obligations by Professor von Hoffmann, initial comments from Professor Lipstein,187 and other aspects from a British viewpoint from Professor Hartley,188 key topics also discussed included party autonomy,189 the possible effects of silence on party choice of law,190 exception clauses,191 the mandatory rules provision in draft article 7,192 and certain problems relating to the international maritime law.193 These materials, and other contemporary writings, highlight the controversies during this phase.194

(p. 26) The 1976 London Colloquium

1.74  A second major colloquium was held in London in 1976 (‘the 1976 London Colloquium’).195 This featured contributions from several scholars on controversial matters. Besides an introduction to the 1972 Draft Convention, from Professor Lipstein,196 key topics discussed included (i) an explanation of the Swiss concept of characteristic performance of contractual obligations from one of its chief proponents, Professor Vischer;197 (ii) a discussion of the rules relating to employment contracts;198 (iii) an analysis of restitution;199 (iv) a discussion of the proposed scope of the convention;200 and (v) the debate over the mandatory rules provision found in article 7 of the 1972 Draft Convention.201

H.  When Six became Nine (1973–1975)

1.75  Any further development of the 1972 Draft Convention had been complicated by the accession of Denmark, Ireland, and the United Kingdom to the EEC on 1 January 1973. Upon joining, the new Member States had to accede to those conventions created under Article 220 of the Treaty of Rome, and to the Protocols on their interpretation by the Court of Justice, ‘and to this end to enter into negotiations with the original Member States in order to make the necessary adjustments thereto’.202 The key convention was the 1968 Brussels Convention. The Commission provided an interim report on what revisions might be needed in November 1971, and a comprehensive report on 15 September 1972 after consultation with the new Member States. As a result, COREPER set up a working party, which met for the first time on 16 November 1972.203 In June 1973, COREPER appointed Mr P Jenard as the permanent chairman of the working party.204 Professor P Schlosser was appointed rapporteur.

1.76  No clear guidance had been given in either the Act of Accession or the terms of reference of the working party as to what was meant by ‘necessary adjustments’.205 As a consequence, (p. 27) achieving that objective proved to be a substantial task. Almost six years passed before the Council Convention on accession of Denmark, Ireland, and the UK to the Brussels Convention was signed on 7 October 1978 (‘the 1978 Accession Convention’).206 The text of the revised Brussels Convention was found in Schedule 1 to the Civil Jurisdiction and Judgments Act 1982 and entered into force in the United Kingdom on 1 January 1987.

The United Kingdom Law Commissions and the 1972 Draft Convention

1.77  The new Members had been invited to nominate experts to participate in the negotiations over the 1972 Draft Convention.207 In December 1972, the Lord Chancellor asked the Law Commission to consider how the 1972 Draft Convention ‘could best be subjected to a thorough examination’. The Lord Advocate made a similar request to the Scottish Law Commission. In February 1973, officers of the Law Commissions attended an Expert Group meeting, and raised some particularly pertinent queries.208 The new Member States naturally needed time for consultation.209 In April 1973, the English and Scottish Law Commissions recommended jointly reviewing the 1972 Draft Convention and other matters, and set up a joint working group on private international law (obligations) under the joint chairmanship of the Hon Mr Justice Cooke and Hon Lord Hunter, which also included Mr A E Anton, Dr F A Mann (who later became a severe critic of the Rome Convention), and other members of the Law Commissions and leading solicitors’ firms.210

1.78  The contemporary reaction to the 1972 Draft Convention from some scholars in the United Kingdom was mixed. Professor Kurt Lipstein gave an initial common law perspective at the Copenhagen Colloquium which was not unfavourable, drawing appropriate parallels with the common law.211 But on further reflection, Professor Lipstein doubted the official aim of the 1972 Draft Convention to prevent forum shopping which was alleged to require a uniform approach to private international law: indeed, ‘it may be doubted whether the assumption is true and whether drastic action is necessary…it remains doubtful whether the proposed Convention is needed to combat the evil which it seeks to eliminate’.212 Lord Collins of Mapesbury also questioned if there was any need for the proposed Convention, and argued that the limitation which it would place on the power of each contracting state to legislate its own domestic law could have important adverse consequences, restricting Member States from legislating in relation to legal relationships which the 1972 Draft Convention provided was to be governed by some other system of law: ‘Thus the loose rules of private international law become strict rules of public international law’.213 While Lord Collins accepted that the draft Convention (p. 28) reached results that were generally in line with international business practices, at least two provisions appeared to him to be defective: draft article 4 on the method to be applied in the absence of party choice in isolating the system of law with which the contract was most closely connected, and draft article 7 on applying foreign mandatory laws which had a connection with the contract.

Should the proper law of contract be abandoned?

1.79  The ultimate issue for the United Kingdom was whether to abandon the product of two centuries of judicial endeavour in favour of a proposed, harmonized, regime reflected in the 1972 Draft Convention. The pre-existing English conflict rules required the determination of the ‘proper law’ of a contract,214 ie the law or laws by which the parties intended, or might fairly be presumed to have intended, to govern the interpretation and the validity of the contract and the mode of performance and the consequences of breach.215 Wide party autonomy was respected, ‘provided the intention expressed is bona fide and legal, and provided there is no reason for avoiding the choice on the ground of public policy’.216 The concept of the English proper law of the contract was a highly flexible one. It represented a judge-led development of the common law based on the vast accumulated experience of international trade and commercial disputes that passed through United Kingdom courts. It was also reinforced by the experiences reflected in the persuasive authorities of major Commonwealth countries who adopted the same approach.217 Scots law (and Irish law) had adopted similar methods to determine the proper law of the contract.218 Was it really worth the United Kingdom abandoning all of this tradition, learning, and experience in favour of differing and indeed ‘novel’ solutions found in this proposed European codification?

The Law Commissions’ 1974 Consultation

1.80  The Law Commission and the Scottish Law Commission (‘the Law Commissions’) published a detailed consultation paper in August 1974, which provides a valuable record of contemporary views and concerns over the proposal. This paper, which included the French text and Foreign Office-prepared English translation of the 1972 Draft Convention, adopted the approach of (i) analysing the proposed text of each provision, (ii) summarizing the explanations given for each provision contained in the Expert Group report, before (iii) providing the Law Commissions’ own, provisional commentary on the issues that might arise; particularly on ‘the concepts, many of them unfamiliar to British lawyers, that the drafters had had in mind’.219

(p. 29) Joining the Jeux Sans Frontières‎?

1.81  Given the scale of concerns raised by the Law Commissions in their paper, was it in the United Kingdom’s interests to join these entirely optional negotiations to change laws that few felt needed changing? The answer to that question had a political dimension. The Law Commissions noted that:

the United Kingdom is not under a formal obligation to become a party to any convention on the lines of the present preliminary draft, it seems possible that the original Member States, at least, will reach agreement on such a convention. If they do, the United Kingdom together with the other new Member States may be regarded as being under a moral obligation, and will probably come under pressure, to accede to it.220

1.82  Reading the Law Commissions’ 1974 paper there is an overriding air of wariness about this suggested new regime. Apart from the novelty of some of the concepts proposed, its pages show British lawyers still coming to terms with the practical difficulties of this new EEC world: one where the accents in their typewritten version of the French text of the 1972 Draft Convention had to be written in by hand.

1.83  No report on the Law Commissions’ consultation was ever published. The ultimate conclusion from the negotiating team sent by the United Kingdom was there were merits in harmonization, as long as differing traditions were respected and the whole process did not tackle too much.

Ireland

1.84  In Ireland, the Department of Justice (EEC Division) and the newly formed Law Reform Commission221 were given the task of considering the project. The latter noted in the first programme of reform222 there was ‘very little case law in Ireland in regard to private international law and little has been written on the subject’. The Law Reform Commission intended as a long-term project to prepare proposals for a statute codifying, reforming, and modernizing the rules of conflicts as they applied in Ireland.223

Denmark

1.85  In Denmark, Professor Lando, although not in agreement with all of the proposals contained in it, considered that the Expert Group ‘has achieved a remarkable piece of work which in many respects will bring about a much needed innovation in the conflict of laws of the EC countries, including the three newcomers’.224

(p. 30) I.  The Return to Rome (1975–1980)

The Rome Convention Working Group

1.86  Work on the draft choice-of-law convention resumed after the uncertainties over continued United Kingdom membership of the EEC were resolved by a substantial ‘yes’ vote in the June 1975 referendum. This enlarged body (the ‘Working Group’) started work in September 1975.225 The Working Group had grown to some 45 representatives from the Nine Member States.226 Interestingly, very few people participated in both the 1972 Expert Group and the Rome Convention Working Group. Some national delegations to the latter had a completely new membership.227 Only 11 people participated in both groups. Of those, five were professors: Belgium’s Professor R Vander Elst, West Germany’s Professor Dr K Arndt, Professors H Batiffol and P Lagarde from France, and Italy’s Professor M Giuliano.228

1.87  The United Kingdom delegation was led by The Hon Lord P Maxwell229 and comprised Professor Sir Peter M North,230 Professor A L Diamond,231 Mr A E Anton,232 Mr K M Newman,233 and Mr A Akbar.234

1.88  It soon became clear:

that quite a few of the decisions taken in preparing the 1972 preliminary draft convention would have to be reopened. This was partly because of the need to accommodate the different approaches of the common law and Scandinavian legal systems now represented in the Community; and partly because, with second thoughts, the Group as a whole found major improvements could be made.235

1.89  The task for the new Member States was two-fold: first, to convince the representatives of the Six they were different; that their legal systems, traditions and experiences, sometimes required different solutions than those in the 1972 Draft Convention. Second, to prevent the Convention attempting to do too much, and cover too many areas. For although the British negotiators thought that the 1972 Draft Convention had merits, some elements were just unacceptable. These would eventually result in the agreement to allow States to sign with reservations against the operation of certain provisions of the Rome Convention.

1.90  The method adopted by the United Kingdom to promote revision of those issues it particularly objected to was tactful and appropriate. Clarification would be sought from the (p. 31) representatives of the Six on the British analysis of the operation of a particular provision in the 1972 Draft Convention that produced a patently absurd result. The British would ask whether they had their analysis wrong. The Six would consider the matter, tell the British they had not got their analysis wrong, and then decide that the original provision needed to be reconsidered.

Limitation to Contractual Obligations

1.91  Between 17 December 1975 and 23 February 1977, the Rome Convention Working Group held ten plenary sessions.236 At their meeting in March 1978 it was decided to limit the proposed Convention to contractual obligations only. The provisions in the 1972 Draft Convention dealing with tort had been described as ‘naïve’, while those dealing with restitution (quasi-contract) as ‘obscure’.237 The biggest stumbling block to a combined Convention had been disputes over the basic rule to be applied for non-contractual obligations. As Professor North said, ‘[t]here was no uniformity of approach. Although support for the lex loci delicti was strong (though its definition was difficult), that was not the common law rule’.238 Negotiations for a second convention on non-contractual obligations were postponed, and would only begin after the first one had been completed.

1.92  Because of this decision, the contractual obligation elements of the 1972 Draft Convention were re-examined in 14 plenary sessions from 22 September 1975 to 23 February 1979. Three special meetings were also held on issues relating to transport and insurance contracts.239 These meetings took place in parallel with the continuing negotiations, which concluded in October 1978, on the accession of the new Member States to the 1968 Brussels Convention. There was sharing of ideas between the two Conventions, especially regarding developing weaker party protections, eg for consumers, something which had not featured in the 1972 Draft Convention or the 1968 Brussels Convention.240

Completing the Draft Convention (1979–1980)

1.93  By February 1979, the Working Group had finished a draft, and instructed Professors Giuliano and Lagarde to draw up a report. On the 18 May 1979, a draft convention was sent to the President of the Council and Member States. The Member States were asked to comment by the end of 1979 with a view to concluding the convention in 1980. In June 1979, the text of the draft convention was finalized at a meeting of rapporteurs in which one expert from each delegation participated.241The final text was then transmitted to the (p. 32) Council. On 20 July 1980, a draft of the Giuliano–Lagarde Report was also sent to the Council.242

The Commission’s 1980 Opinion

1.94  On 17 March 1980, the Commission’s opinion on the draft Rome Convention was published.243 The Commission saw the Rome Convention as:

the first step towards unification and codification of general rules of conflict in the field of civil law in Community. Unification will make it easier to determine the law applicable and will increase legal certainty. It should also ensure that all courts in the Community always apply the same substantive law to the same matter in dispute between the same parties. Where the parties are free to choose between courts in different Member States, their choice should not influence the law applicable to the action, and this should operate to prevent forum shopping.

1.95  The Commission regretted that it had not been possible for the Rome Convention to include non-contractual obligations, but did not regard that fact as one which would give rise to their opposing the signature of the Convention. The Commission was anxious that (i) the entry of force of the Rome Convention in all Member States was not guaranteed; (ii) it was not concluded for an unlimited period; and (iii) uniform interpretation could not be guaranteed without a comprehensive protocol conferring jurisdiction on the Court of Justice. The first two defects ‘might have the effect of preventing the creation and maintenance of a unified juridical area within the Community’, and be regarded as ‘fundamental defects’ by which the Convention ‘cannot contribute, or can contribute only temporarily, to the functioning of the common market’.244 The Commission regarded it as essential that not only should the Court of Justice be given jurisdiction over the Rome Convention, but that rules governing that jurisdiction be enacted in the body of the Convention by incorporating a provision based on Article 177 of the EEC Treaty. However, the Commission indicated that it would accept a Protocol like the 1971 Brussels Convention Protocol as an alternative.245 In taking this stance, the Commission merely reflected what Member States had previously promised to do in the ‘Solemn Declaration on European Union’ approved by the European Council in Stuttgart on 19 June 1983. Member States had agreed to consider, on a case-by-case basis, the inclusion in international Conventions between Member States, a clause conferring jurisdiction on the Court of Justice regarding the interpretation of the texts. This had been followed up by a strong recommendation of the Dooge Committee to adopt a standard clause to this effect.246

Conferring jurisdiction on the Court of Justice

1.96  Even before the Commission’s Opinion, on 16 January 1980 COREPER had set up an ad hoc working party on private international law to finalize the text in the light of Member State’s comments, and to consider whether, and if so within what, limits the Court of Justice should be given jurisdiction to interpret the Convention.247

(p. 33) The 19 June 1980 Joint Declarations

1.97  A special Council Meeting in Rome of Ministers of Justice was held to consider the points of disagreement raised by the Commission. A last-minute fudge was agreed, in the form of an insipid Joint Declaration on the interpretation of the Convention by the Court of Justice.248 This stated that the governments of the Contracting States ‘desiring to ensure that the Convention is applied as effectively as possible’, and ‘anxious to prevent differences of interpretation of the Convention from impairing its unifying effect’ declared themselves ready ‘to examine the possibility of conferring jurisdiction in certain matters on the Court of Justice…and, if necessary, to negotiate an agreement on this effect’, and to ‘arrange meetings at regular intervals between their representatives’. This Joint Declaration was adopted in ‘partial accommodation’ of the Commission’s concerns, but, as time would prove, merely ‘smoothed out the immediate difficulties but did not remove several Member States reservations’ about conferring jurisdiction on the Court.249 Another Joint Declaration of the same date sought to encourage the EEC to adopt choice-of-law rules which were as far as possible consistent with those of the Rome Convention, and expressing the view that any State becoming a member of the EEC should also accede to the Rome Convention.250

J.  The Rome Convention (1980)

1.98  The Rome Convention was signed on the 19 June 1980 by the Plenipotentiaries of the original Six Member States, plus Ireland.251 Denmark signed on 10 March 1981. The United Kingdom signed on 7 December 1981.252 The revised text of the Rome Convention 1980 (80/934/EEC) is at Appendix E.253 The differences between it and the 1972 Draft Convention will be discussed where appropriate throughout this volume.

1.99  The Rome Convention was concluded by its High Contracting Parties as an exercise in power of sovereign States to make treaties: ‘it ought to be regarded, not strictly speaking as an EEC Convention, but rather as a Convention between nine sovereign States who happened to be Member States of the EEC’.254 Although the Commission had serviced the Rome Convention negotiations, the delegates from the High Contracting Parties had insisted that negotiations be conducted in various cities in their own countries and not in Brussels.255

1.100  The Preamble to the Convention declared to be the work of the ‘High Contracting Parties to the Treaty establishing the European Economic Community’, who were ‘[a]nxious to continue in the field of private international law the work of unification of law which has already been done within the Community, in particular in the field of jurisdiction and enforcement (p. 34) of judgments’. As a consequence, they wished ‘to establish uniform rules concerning the law applicable to contractual obligations’.256 As the Court subsequently observed in its first ruling on the Convention in the case of ICF,257 the Rome Convention was borne of a wish to eliminate the inconveniences arising from the diversity of the conflict-of-law rules in the area of contracts. The function of the Convention was to raise the level of legal certainty by fortifying confidence in the stability of legal relationships and the protection of rights acquired over the whole field of private law.258

Reactions of United Kingdom Negotiators

1.101  Two UK negotiators wrote comments on the Rome Convention. Professor North was the more enthusiastic. He considered that the Rome Convention constituted ‘a major contribution to the codification and harmonization of the private international law of contract’, and would provide a model for, or assistance in future developments at national and international levels. Professor North concluded that:

At the end of the day, the result of the implementation of the Rome Convention in England will be that the choice of law rules in contract are put on a clear, firm, statutory basis. There will be no great substantial change in the rules which have worked well for a long period; but there will be the benefit of substantial harmonisation throughout the EEC in an area of law of real significance for the free provision of goods and services within the Community.259

1.102  Professor Diamond wrote that:

I think it is probable that we will sign it. Perhaps it is true that there is not much wrong with the present English rules of conflict of laws on contract, and I do not pretend that the new draft meets a current need for reform of the law. Much of it accords with our existing law; it clarifies some issues yet undecided; there is, I hope, nothing in it that is positively harmful to our law.260

The 1981 Newcastle Colloquium

1.103  In September 1981, the United Kingdom National Committee on Comparative Law devoted its annual colloquium at the University of Newcastle-upon-Tyne to an examination and discussion of the Rome Convention (‘the 1981 Newcastle Colloquium’). Valuable papers were presented and published that reflect the contemporary understanding of what had got negotiated and agreed.261 These included works from Professor Lagarde262 and Professor North.263(p. 35) Important contributions to the interpretation of the Convention included papers on the choice of law,264 the application of mandatory rules and ordre public,265 the consumer protection provisions,266 contracts of employment,267 the concept of characteristic performance in contracts for the carriage of goods,268 and the practical implications in England of the Convention.269 There were also assessments of the Rome Convention from German,270 Italian,271 Swiss,272 American,273 and Australian274 perspectives.

1.104  Other helpful British scholarship of the period following the signing of the Convention include works by Professors Diamond,275 Morse,276 and Jaffey,277 and from Mr P R Williams.278

(p. 36) No real change or ‘unnecessary, useless, and unfortunate?’

1.105  Among British scholars the majority reaction appeared to be that the basic rules found in the Rome Convention did not differ significantly from the existing rules and would consequently produce no fundamental changes in the existing law.279 Some scholars considered there were several important areas in practice (especially regarding distribution agreements, international loan agreements and mandatory rules, and employment contracts) in which the Convention would be difficult to apply.280

1.106  Dr F A Mann went further than most critics. In a review of the papers from the Newcastle Colloquium, Dr Mann attacked the Rome Convention as one of the ‘most unnecessary, useless and indeed, unfortunate attempts at unification or harmonization of the law that has ever been undertaken’ and he ‘fervently hoped no British Government will ratify [the Convention] and no British Parliament will be prepared to adopt [it]’. For Dr Mann, ‘the Convention results from a misconceived initiative, would be likely to corrupt our present law and should be rejected—the sooner the better if insecurity and irritation all over the world are to be avoided’.281

K.  Hurry Up and Wait

Delay in ratification

1.107  Despite the claim in the Convention’s Preamble that the High Contracting Parties were ‘anxious’ to continue the work of unification of private international law, their subsequent actions suggest the use of the phrase was more rhetorical than real.

1.108  Ratification of the Rome Convention by the original nine signatories took over eleven years to complete. The process began with France on 10 November 1983. Italy followed on 25 July 1985, and Luxembourg on 1 October 1986. Denmark ratified the Convention on 7 January 1987, followed a day later by Germany on 8 January 1987. There was then a four-year gap until the United Kingdom ratified it on 29 January 1991, followed on 21 June 1991 by the Netherlands. The process finally concluded with Ireland on 22 October 1991.282

1.109  The creation and subsequent ratification of the First and Second Protocols to confer interpretative jurisdiction on the Court of Justice took over a generation. Over eight years were spent negotiating their terms before the Protocols were opened for signature on the 19 December 1988.283 But the Protocols were structured so they only came into effect when they were both signed by the last contracting party. That process of ratification proceeded at the pace of a very tired snail with a tendency to dawdle. The United Kingdom ratified on 29 January 1991, followed by the Netherlands on 26 June 1991, and Ireland on 29 October 1991. (p. 37) There was some further progress in 1992 with Greece (8 May 1992), Luxembourg (13 August 1992), and Italy (9 December 1992), all taking the necessary steps that year. But it was 1994 before Portugal (30 June 1994) and Spain (14 September 1994) ratified, and even longer until France (on 1 December 1995) and Germany (on 26 March 1996) did so. There then followed five years of further delay before Denmark ratified on 7 March 2001, only for the Belgians to contribute another three years of delay entirely on their own before they eventually ratified the Protocols on 5 May 2004. Belgian ratification finally confirmed the jurisdiction of the Court of Justice to give interpretative rulings over the Convention. The first reference to the Court of Justice in Intercontainer Interfrigo SC (ICF) was duly lodged on 2 April 2008, only 28 years after the Rome Convention was signed.284

1.110  During the period from 1991 to 2008, the absence of any guidance from the Court of Justice allowed differences in interpretation of key provisions to arise among the courts of Member States. This would be a key justification in the subsequent conversion of the Rome Convention into a community instrument.

The perils of ‘DIY’

1.111  While awaiting the Rome Convention coming into force, a few countries enacted laws reflecting its contents into their own domestic laws.285 Some initial efforts were not successful. In 1985, Germany received a stern rebuke from the Commission about their intended draft law. The German text proposed excluding eight of the Rome Convention’s provisions, had redrafted or changed the substance of four others, and made comprehension and interpretation more difficult by dividing up the Convention among various sections of their statute. In the Commission’s eyes, the German approach would have prevented the proper application of the Rome Convention when it came into force. The Germans were told to correct it in no uncertain terms.286

L.  The Contracts (Applicable Law) Act 1990

1.112  In the United Kingdom, the Rome Convention was enacted into law by the Contracts (Applicable Law) Act 1990 (‘the 1990 Act’) subject to reservations in relation to Articles 7(1) and 10(1)(e). The 1990 Act came into force on 1 April 1991.287 It applied to contracts made after that date.288

1.113  Notwithstanding Article 19(2), the Convention was to apply in the case of conflicts between the laws of different parts of the United Kingdom.289 Power was also reserved to (p. 38) Her Majesty by Order in Council t