Small steps

A decision of the Czech Constitutional Court on 3 November 2009 cleared the way, finally, for the Lisbon Treaty to enter into force. As a result, it comes into force on 1 December 2009, almost a year later than originally hoped. In the UK, the amendment takes effect by the European Union (Amendment) Act 2008.

The changes made by the Lisbon Treaty are principally of interest to constitutional lawyers; they include, in particular, an overhaul of the decision-making procedures of the union, especially in the council, but with revision of decision-making processes generally. The most public sign of this has been the publicity associated with the appointment of a 'president of the European Council' and a 'high representative for foreign affairs and security policy'.

From the point of view of daily life in practice, the most immediate effect of the Lisbon Treaty is that it creates a new round of renaming and renumbering. What used to be the 'Treaty Establishing the European Community' is now the 'Treaty on the Functioning of the European Union'. Institutions which were previously attached to a European Community are now brought under the umbrella of the Union '“ so the ECJ is now the Court of Justice of the European Union (and the CFI will now be called the 'General Court'). There is much renumbering. So, for instance, the prohibition on anticompetitive agreements and concerted practices, previously article 81 of the Treaty Establishing the European Community (and before that article 85 of the EEC Treaty) is now article 101 TFEU.

The Rome I Regulation

Regulation 593/2008 on the law applicable to contractual obligations comes into force on 17 December 2009 for contracts made on or after that date. The UK has 'opted in' to this measure, which is effectively a replacement for the Rome Convention of 1980, and is popularly known as 'Rome I'. This means that, for the most part, all our rules of choice of law for both contractual and non-contractual obligations are now found not just in legislation, but in EC legislation '“ either the Rome I Regulation (contract) or the Rome II Regulation (regulation 864/2007).

As might be expected, given that it is building on the existing text of the Rome Convention which has now been in force for more than a decade, Rome I is far less revolutionary than Rome II. Nevertheless, it contains some significant developments and changes.

The most significant probably lie in article 4, which deals with applicable law in the absence of choice. There, the Rome Convention had a general rule (the contract is governed by the law of the country with which it is most closely connected) which was then fleshed out by means of a number of presumptions. This was a source of uncertainty, as the courts of different member states gave these presumptions different amounts of weight. Some thought they were very hard to rebut, and would apply in all but exceptional cases. Others thought they were very easy to rebut, and were really little more than starting points or rules of thumb.

Article 4 has been comprehensively reworked. Instead of a general rule and a cascade of presumptions, it now takes the form of an ordered set of quite specific rules, with a 'default' rule to be applied only if they cannot operate. The rules are not absolutely fixed, because they can be displaced if the contract is 'manifestly more closely connected with a country other than that' which the rules would indicate. But as the use of the adverb 'manifestly' shows, this is supposed to displace the rules only in clear cases.

There is an irony here. Paradoxically, the ECJ has recently decided its first ever reference under the Rome Convention in case C-133/08 ICF (8 October 2009); in which it came down on the side of those who regarded the presumptions in article 4 as quite weak, and the general rule as dominant. The practical effect of the Rome I Regulation is to reverse this approach, and to put the interests of legal certainty over those of flexibility.

Another area of the regulation which involves significant change is the part dealing with consumer contracts. The Rome Convention contained some provisions which now speak to the age of the telex machine and the travelling salesman, rather than the internet. These have been comprehensively revamped '“ the watchword (as usual) being the maintenance of a high level of consumer protection (though whether consumer exploitation by choice of law has really been a major problem in practice is not clear).

Yet another area in which the regulation makes changes is by removing one of the more controversial provisions of the Rome Convention, which allowed for the application of 'mandatory rules' of law from a country which was neither the forum nor the applicable law. Many member states (including the UK) would have no truck with this, and the revised provisions are much narrower in scope; effectively applying only to cases where it would be illegal to perform the contract where it is to be performed.

In general, then, the position is one of reasonably modest development rather than revolution. Nevertheless, any lawyer who advises on international contracts will have to become familiar with these provisions. Meanwhile, work in the field continues: the commission has recently published proposals on legislation to adopt uniform choice of law rules in relation to wills and succession.